Rapid adjustment of electric vehicle strategy, where is Toyota heading in the century?

 The global auto giant Toyota has one of the most conservative attitudes towards the electrification transition, and this conservatism has changed recently. Toyota is accelerating its U-turn, and the century-old traditional car company is eager to adjust its electric vehicle strategy.

At the end of 2021, Toyota announced that it will invest 70 billion US dollars in the development of electric vehicles, of which 35 billion US dollars will be used for pure electric vehicles; at the same time, it is expected that by 2030, it will launch 30 electric vehicles, and the global sales of electric vehicles will reach 3.5 million, accounting for one third of the total sales. This plan is regarded as the most aggressive electric plan in Toyota's history.

However, less than a year later, Toyota once again adjusted its electric vehicle strategy. According to Reuters, Toyota is considering cutting off some electric models according to market demand, starting to improve its existing electric vehicle platform or new architecture, and speeding up the implementation of electric vehicle products; The Wall Street Journal reported that Akio Toyoda recently appointed a consultant to listen to reporters and other influential people in the auto industry on Toyota's questioned strategy.

There are indications that Toyota is more eager to pursue electrification transformation.

In the Chinese market, Toyota recently officially launched its first pure electric model, the bZ4X, and unveiled the bZ3, the first pure electric sedan in cooperation with BYD. "The bZ4X is not competitive with domestic electric vehicles," a person familiar with Toyota told Jiemian News.

The newly unveiled bZ3 "BYD content" has exploded. The battery and motor are both from BYD. According to Caijing Auto, the electronic control system is also jointly developed by Toyota and BYD. The aforementioned person said that according to Toyota's previous style, it was impossible to use BYD's three-electric system. He believes that this is a manifestation of Toyota's accelerated transformation under pressure.

Despite releasing the most aggressive electric plan in history, Toyota's performance remains hesitant and conservative compared to its rivals. The Volkswagen Group and Toyota announced plans at about the same time that they will invest a huge budget of 180 billion US dollars in the next five years to maximize the competitiveness of electric vehicles, and achieve half of the total sales in 2030 as electric vehicles; Ford officially set up a separate electric in March this year. The Ford Model e, the smart vehicle business unit, is expected to invest more than 50 billion US dollars in electric vehicles by 2026, reach an annualized production capacity of 600,000 electric vehicles in 2023, and achieve 2 million electric vehicles by the end of 2026.

One of the reasons for Toyota's slow electrification transformation is that it has placed too much emphasis on hydrogen energy and hybrid, and early efforts have mainly focused on these two areas. Toyota launched the RAV4, an electric model equipped with nickel-metal hydride batteries, in 1996, and the market reaction was sluggish. In 2010, Toyota bought 2.4% of Tesla's shares for $50 million, and the two parties cooperated to produce the pure electric RAV4. The cooperation also did not deepen Toyota's confidence in electric vehicles. On the contrary, Toyota's engineers believe that Tesla's technology is not a threat. In 2014, Toyota discontinued the electric RAV4 and cashed out Tesla shares in 2017.

Toyota has become a stronger supporter of gasoline-electric hybrid vehicles (HEVs) and hydrogen fuel cell vehicles (FCEVs).

In 1997, Toyota launched the world's first mass-produced hybrid model "PRIUS Prius", and it has sold more than 20 million HEVs worldwide. In China, HEVs are not in the category of new energy vehicles.

In terms of hydrogen fuel cells, Toyota has applied for more than 5,000 patents, accounting for more than half of the patents in the field of hydrogen fuel cell vehicles. In 2014, Toyota launched the Toyota Mirai, the first commercial hydrogen-powered vehicle, and its global cumulative sales are about 20,000.

A person engaged in the research and development of power batteries told Interface News that he is optimistic about the future application of hydrogen fuel cells, especially in the field of commercial vehicles, but the higher cost will be an obstacle to its popularization.

The same thing happened with Nissan and Honda. "It has something to do with the route that Japanese brands choose, and Japanese brands have always chosen the route of HEV," said Zhang Yichao, a partner at Ernest & Young strategy consulting.

"Nissan is already at a disadvantage in this competition and doesn't know where its company will go in the future." In December, former Nissan chairperson Carlos Ghosn slammed the slow pace of Nissan's electrification transition.

In Honda's plan, hydrogen fuel cells remain an important part of making cars carbon-free. Honda believes that a multi-faceted and diversified solution is needed, rather than simply replacing the engine with batteries.

In addition, Japanese car brands represented by Toyota are vested interests in traditional fuel vehicles and will not give up fuel vehicles easily. Japanese car companies that have long mastered core technologies such as engines, transmissions and chassis need to turn around and make new attempts and explorations in the fields of electrification and intelligence, which will inevitably involve a choice between vested interests and future interests, which will also affect the determination and speed of electrification transformation. Toyota has become the global sales champion for three consecutive times in 2020, 2021 and the first half of 2022.

On the other hand, reality forced Toyota to make changes. In November last year, the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) concluded in Glasgow, England, and more than 100 governments, cities, states and auto companies signed the "Glasgow Declaration on Zero-Emission Vehicles and Vans", pledging to stop selling internal combustion engine vehicles in the world's "major markets" by 2035 and globally by 2040.

Toyota's own performance is also declining. According to Toyota's financial report for the first half of fiscal year 2022 (April to September) released on November 1, net profit decreased by 23.2% year over year. Recently, Toyota also lowered its global production plan for fiscal year 2022, from 9.7 million to 9.2 million. As a comparison, BYD, which has completely stopped the fuel vehicle business, sold 1.18 million vehicles in the first three quarters, an increase of about 2.5 times year over year, and its net profit exceeded the sum of the last three years; in the third quarter of this year, Tesla's net profit exceeded Toyota for the first time.

Toyota also needs to face pressure from capital markets. Tesla has become the most valuable company in the global auto industry, and BYD has also surpassed traditional car companies such as Volkswagen to become the third most valuable car company in the world after its full electrification transformation. In September, Porsche went public in Europe as the largest IPO in nearly a decade. Volkswagen also used it to cash in 19.5 billion euros and consider selling more Porsche shares in the future to accelerate its electrification transformation. As of November 13, Porsche's market value ranked fourth.

The time left for Toyota in the market is running out. In the eyes of many industry insiders, the hesitant attitude towards new energy vehicles has caused Toyota to lag behind in this field, and this will also become the biggest obstacle to Toyota's transformation.

The aforementioned person familiar with Toyota said that he is not optimistic about Toyota's rapid transformation. "From speech to execution to real product release, the cycle will be relatively long. For example, all-solid-state batteries have been delayed several times." At the same time, he believes that there are many issues to consider in Toyota's transformation, not only technical issues, but also industry chain costs and profits.

The transformation of traditional automakers to new energy will face the problem of production line transformation. "If it is fast, it will take two to three months, but it will be delayed by four to six months." For a large company like Toyota, it is even more difficult to complete the transformation.

One automotive supply chain person argued that Toyota's transformation should focus on certain market key breakthroughs rather than thinking too much about coverage. He stressed that Toyota must "speed up" more.

In the short term, he is not optimistic about Toyota's transformation, "But Toyota is the world's largest automaker after all, and it is still quite competitive in the long run." The R & D team, capital, and the industrial chain capabilities accumulated over the years are Toyota's advantages. "Toyota or Japanese brands are good at forming a whole with parts suppliers, and they will have overall combat capabilities."

Toyota's hesitant attitude towards electrification has also directly affected the market performance of joint venture brands in China. Japanese cars once occupied half of the Chinese market, but with the rapid rise of their own brands, the market share of joint venture brands has been repeatedly squeezed. According to the October sales data of the Federation of Passengers, Japanese brands have fallen the most in the joint venture, down 3.7 percentage points year over year to 18.9%. FAW Toyota has fallen 3.2% year over year and has fallen out of the top ten list of retail sales for two consecutive months.

In 2022, under the influence of the epidemic and local conflicts, the global automotive supply chain suffered severe fluctuations, and the lean production system pioneered by Toyota since the 1970s was challenged. More and more automakers began to seek safety from the pursuit of extreme cost and efficiency. And stability.

New energy vehicles are constantly impacting the market share of fuel vehicles, while Toyota's sales of pure electric vehicles in 2021 are only 14,000, accounting for a negligible proportion of the global pure electric market.

China is the world's largest market for new energy vehicle sales. Toyota, Honda and Nissan have all launched electric models this year, but sales and attention have always been weak. Under the circumstance of sluggish sales, the above-mentioned brands have carried out price cuts to varying degrees.

Toyota's bZ4X, which landed in the US in April before its launch in China, followed by a subscription model in Japan and Europe. The car's road to market was not smooth and was quickly recalled due to quality issues. GAC Toyota was scheduled to launch the bZ4X on June 17, but abruptly canceled it two hours before it went on sale.

After solving the recall problem and re-listing, the domestic price of bZ4X is 20,000 yuan cheaper than the previous reservation price; in Japan, the rental service of bZ4X has reopened recently, but the fee has been significantly reduced.

"Looking back, we think the price was a little too high," said Shinya Kotera, president of KINTO, Toyota's leasing service unit. Toyota itself has lost confidence in the electric car.

According to CleanTechnica data, in September this year, the global monthly registration of new energy vehicles increased by 51% year over year, exceeding 1 million for the first time. Among the top 20 models by sales, none of them came from Japanese brands.

The Toyota Camry recently celebrated its 40th birthday. This model has gone through eight generations since its launch in 1982, and the global user base has accumulated more than 23 million, making it an excellent example of crossing the cycle. In the era of electrification, can Toyota create more "Camry" blockbuster products again?