Image courtesy of Kyle Field.

A Tale Of Two Toyotas: Doing More To Electrify America Than Anyone While Slowing Electrification

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In this article, I explain how Toyota is helping and hurting the electrification of vehicles in the US and around the world.

Speeding Electrification

  1. The Toyota Prius wasn’t just one of the first hybrids available, it became the preferred vehicle for those who wanted to virtue signal their interest in the environment. I’ve known many Prius owners and many just liked the great fuel mileage, reliability and decent room, while being willing to put up with its traditionally poor acceleration and handling.
  2. Toyota has long argued that given a fixed supply of batteries, they can put a small 1 kWh battery in many hybrid cars or put a larger 10 kWh battery in fewer plug-in hybrids, or put a much larger 80 kWh battery in even fewer 100% battery electric cars. While this is true in the short term, it doesn’t really make any sense in the longer term — we can build more batteries. But Toyota likes to do hand waving that we don’t have enough materials to build more batteries. That is also true in the short run, but not true over the next few years as the industry finds ways to scale.
  3. Toyota has been criticized for advertising “self-charging EVs” and making other misleading claims.

So, enough of the talking points, how about some data?

Toyota electrified vehicle sales (Source: Toyota)

As you can see, Toyota may be a laggard in EVs, but almost a third of its sales last month were hybrids. In November, Toyota announced that the 2025 Camry, its second best selling vehicle behind the RAV4, is going 100% hybrid. Assuming it is a successful launch, that alone will convert another ~270,000 cars to hybrid and drive their electrified share to the mid-40% arena. If this is successful, as each model is redesigned, they might all go hybrid over only the next few years. Now, I frequently get into arguments with my electric car loving friends about hybrids, but I’d like to make a few points that they may not realize.

  1. For millions of people, the choice isn’t between hybrids and EVs, the choice is between hybrids and gas cars. Now you may say that isn’t true, all these people buying hybrids could be buying EVs. That is technically true, but I’m talking about the psychology of many buyers. They have watched and read a lot of propaganda vilifying EVs. They don’t even know anyone in their family or friend circle that has bought an EV. They are just not going to buy an EV and learn about charging this year.
  2. Most people don’t got straight from a gas car to an EV, most take a baby step to a hybrid or a plug-in hybrid before going to a full EV. People are resistant to change and this is why even though it may be logical to buy an EV, most people (including myself) needed to try a hybrid to see if they liked it before buying an EV. I do think this will change when EV sales cross 50% of your local market. Once they are that popular, they aren’t a “risky” purchase, since everyone else is buying them. But that is how it is most places today. What did I learn from my hybrid Camry before I got my Nissan Leaf? I learned about regenerative braking (although it isn’t powerful enough to let you do one pedal driving), the quietness of electric motors, and the instant torque of electric motors. You don’t learn anything about charging stations and PlugShare. For that, you need an EV or a plug-in hybrid, but at least you learn something. The other thing is that you might even change your mind about EVs. It might help change you from believing the anti-EV propaganda to starting to like EVs. Why? Because the same people saying EVs are horrible were saying hybrids were horrible 10 years ago. And now you own a hybrid and find out they aren’t horrible, and you think, maybe if they were so wrong about hybrids, maybe they are just as wrong about EVs. But to be honest, it probably won’t matter because the wave of excellent electric cars available for $25,000 (or a lot less with tax credits) in a few years from Tesla and others will mean most people won’t be able to ignore them.
  3. This helps Toyota gradually move its suppliers to support electric components like electric power steering pumps. They will have more experience with electric motors and batteries. This means if and when Toyota finally figures out EVs are what people want, it will be easier to make the transition.
  4. People say this doesn’t matter because Toyota will go bankrupt when EVs get more popular and disrupt their sales. Although I agree they will likely go bankrupt, they are very politically connected and will undoubtedly get bailed out whether we want it or not. That being said, the restructuring will likely reduce Toyota’s size.

Next I want to give you an edited quote from one of my closest childhood friends (we met when we were 5 years old). He lives in Iowa. He is a successful electrician and has installed a few EV charging stations, but has long been skeptical of my enthusiasm for electric cars. Iowa has few electric car sales compared to many states. I was surprised when he texted me a month ago that he was buying a hybrid! “I do like the ride and it handles pretty good for being a van. The power is not as good as mom’s Sienna (a 2018 that has a V6). I drove it to Nashua and the computer said we got 38 mpg. I can’t wait to try the all wheel drive to see how it handles. ”

I wrote about the Sienna here when it was introduced 4 years ago, mostly because of my history with minivans and because it is hybrid only.

Screenshot from fueleconomy.gov

As you can see, this car is expected to save $8,250 in fuel costs over 5 years and over $20,000 over the life of the vehicle!

TFL said it had great traction in the snow, but does have low ground clearance, so be aware it is somewhat limiting.

Slowing Electrification

Toyota has long held several views that are different than most of its competitors.

  1.  Toyota has long thought and continues to think that hydrogen fuel cells have a promising future. Back before electric cars proved they made sense at scale, this was somewhat excusable. Over the last 10 years, electric cars have made tremendous gains in range and initial costs, because volumes are about 30 times greater. 10 years ago, it was common for automakers to say they were researching electric cars and fuel cells and the industry was fairly split on which was going to be better. Both electric cars and hydrogen cars can be very clean or quite dirty, depending on how they are made and used, but that isn’t really where the battle was fought. On the hydrogen side the argument was that you could fill up quickly (just like gas cars) and the model was the same. Cars would go to stations and fill up, just like they do today. Just like stations added a few diesel pumps a few years ago, they would add a few hydrogen pumps. An added bonus was that you can make hydrogen from natural gas, so the whole oil industry was for it. Electric vehicles had and have two large advantages. First, they cost less to fuel than gas, diesel, or hydrogen vehicles, and probably always will. Second, even when there were no charging stations, everyone who could afford a car had electricity in their house. I realize that the Toyota is very much a Japanese company and the Japanese government has encouraged its companies to use hydrogen to decarbonize. Clearly, some of the engineers at Toyota are smart enough to figure out that hydrogen will never beat electric vehicles, but the company’s structure hasn’t allowed this message to get to the top of the company and its leaders are too stupid to do the minimal research required to figure it out themselves.
  2. Toyota has lobbied against laws that would speed up the move to electric vehicles, as we reported here and here. Now, I’m of the opinion that we don’t have to force people to buy them, they will do so voluntarily, but many say that is true but will take too long. This makes Toyota a villain to many progressives and a hero to many conservatives and libertarians.
  3. Toyota is infamous for saying every few years that they will have some great solid-state battery in a few years and it would be a waste to invest in present batteries, since these new ones will be far better if we just wait a bit. Six years ago, they claimed they would have these great batteries by the early 2020s (which didn’t happen). Last year, they made a similar claim. At this point, it doesn’t even matter if they meet their goals, the traditional lithium battery industry is improving so quickly that nobody will want to switch for a marginal improvement. Somehow, they think their lab with maybe 100 engineers is going to come up with better innovations than the rest of the world working on improving lithium-ion batteries.
  4. Toyota’s first electric car (the horribly named bZ4X) has been widely panned as underwhelming, a sharp contrast to their hybrids that have been consistently class leading.

Conclusion

Clearly, this is going to be an exciting company to watch over the next 10 years. Although the company is making many obvious mistakes, its cars are still loved in the US market and are selling very well. I’m convinced that when the US market gets to 50% EV market share in a few years, Toyota will only be selling a few percent EVs and still way behind. But its overall sales may still be be high because it will replace many Ford, GM, and Jeep gas vehicles with its hybrids. Why won’t those buyers go to their brands’ hybrids? Two reasons: either they don’t even make a hybrid, or if they do, it is a bad one. Another condition that happens is brands will make a gas version and a full electric version of a model but not a hybrid version. For example, Chevrolet makes a gas Blazer and an EV Blazer (that is getting horrible reviews) and doesn’t make a hybrid. Many people wanting to get better mileage will go to a Toyota RAV4 or Highlander Hybrid and save a lot on gas. They could buy the Blazer EV, but they may not be ready to make that large of a step, and from the early reviews, the Blazer EV isn’t ready for them either.

I’m convinced Toyota will manage the transition in the US, in Japan, and in emerging markets, but in the markets going to full EVs quickly, like China and Europe, it will have severe difficulties.

Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], Hertz [HTZ], NextEra Energy [NEP], and several ARK ETFs. But I offer no investment advice of any sort here. 


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Paul Fosse

I have been a software engineer for over 30 years, first developing EDI software, then developing data warehouse systems. Along the way, I've also had the chance to help start a software consulting firm and do portfolio management. In 2010, I took an interest in electric cars because gas was getting expensive. In 2015, I started reading CleanTechnica and took an interest in solar, mainly because it was a threat to my oil and gas investments. Follow me on Twitter @atj721 Tesla investor. Tesla referral code: https://ts.la/paul92237

Paul Fosse has 230 posts and counting. See all posts by Paul Fosse