By on June 14, 2017

Toyota Camry NYIAS 2017, Image: Toyota

Despite being Japan’s biggest automaker, Toyota has lagged behind many of its rivals in terms of cutting-edge technology. Most major car manufacturers have already begun developing self-driving vehicles, with some going so far as to make strategic partnerships with companies specializing in the applicable technologies. By contrast, Toyota has a strong R&D program but never saw fit to pursue autonomous development or battery-electric vehicles quite so aggressively as General Motors or Renault-Nissan, for example.

Toyota President Akio Toyoda has now admitted that may have been a mistake. At the company’s annual shareholders meeting on Wednesday, he promised the automaker would become more committed to achieving technical developments. Toyoda didn’t bring forward a concrete strategy but conceded the spending of additional capital would likely play a role — and an alliance or two isn’t out of the question.

“The auto industry is undergoing big changes, and issues and ideas which we may have thought were far off in the future could affect us tomorrow. That’s why we need to go on the offensive while also preserving our areas of strength,” Toyoda told investors. “We’ve been investing 1 trillion yen each year for R&D, expanding [capital expenditure] and buying back shares, but this may not be enough. We need to consider all our options, including M&A, to survive in the future.”

Toyota has good reason to want to change. While maintaining the status quo has worked well for the brand in the past, its 2016 operating profits slumped 30.1 percent year-over-year, with sales declining 2.8 percent. The automaker predicts more of the same for this year.

“We know that the company won’t be all right if it remains as it is,” Toyota Executive Vice President Osamu Nagata stressed at the meeting. “We will make every effort possible for a recovery.”

The brand as already accelerated some of its efforts to prioritize technological advancement. Last year, Toyota established an official division specifically for electric vehicle development. It has also invested $1 billion into an artificial intelligence research institute and has struck up moderately sized partnerships with Uber Technologies and Microsoft.

There have been other stirrings as of late, including the automaker wanting to form a partnership with Suzuki. While that strategy wouldn’t alleviate Toyota’s tech concerns, it would give it a foothold for selling smaller cars in other parts of Asia. There were also rumors of the company getting into bed with Mazda back in November, although what possible advantage that would give Toyota is unclear.

Either way, Akio Toyoda has previously admitted his company is “not really good” at creating alliances. That might have to change if the company is to adhere to its vow to reshape itself into a more modern manufacturer.

[Source: Reuters] [Image: Toyota]

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35 Comments on “Toyota Vows to Stop Being Such a Dinosaur, Muses Partnerships as a Shortcut...”


  • avatar
    JimC2

    Hmmm, kind of a strange thing to say. They’ve smoked the competition with their hybrid drivetrain technology. Granted, it’s been on the market for more than fifteen years, gone through a couple of major refinements, so it’s not really “cutting edge” anymore, but other than DARPA-like “pie in the sky” technology like self-driving cars and other gee whiz electronic stuff, I think Toyota might be being overly self-critical here.

    • 0 avatar
      whynot

      They have good hybrid tech, but that doesn’t have the same cachet anymore. They are behind the curve on EV tech.

      Even with the Prius Prime, for example, they can only get 25 mi of range on EV power alone, compared to 53 in the Volt. And of course Toyota has no pure EV.

      • 0 avatar
        JimZ

        that’s not really being “behind on tech,” though. if you can do a hybrid, you already have all of the tech you need to do an EV. Tesla shows you don’t need “tech” to make a long-range EV, you need to stuff as much battery into the car as possible.

      • 0 avatar
        bhtooefr

        That range deficit is due to simply having a smaller battery, though, and they’ve got significantly better efficiency than the Volt.

        Packaging, however, is awful on that setup, and that’s probably their biggest weakness.

        Also worth noting that the powertrains used in their hydrogen failures are even more relevant to EVs than a hybrid powertrain, though – the single motor is sized appropriately for the job, the power control electronics are similar, etc., etc.

  • avatar
    NoID

    Sergio, I think we found your dance partner.

    • 0 avatar
      whynot

      FCA does not have anything to offer. That is why all they do is continuously eek as much power as they can out of high displacement V8s and struggle to find a partner.

      If starting from scratch Toyota might as well do it alone, they can afford it. The reason Toyota is looking at partnerships is to find someone who already has tech/development to share to get started quicker and give them a bigger foundation to build upon.

      • 0 avatar
        NoID

        Yeah, it isn’t like we just launched a new small SUV or a groundbreaking, home-grown hybrid system. And we don’t have autonomous minivans running all over this state and California.

        I feel really triggered right now.

        • 0 avatar
          whynot

          Yay you launched a new small crossover. Too bad Toyota already has one too and knows how to make crossovers (it’s not like it’s that different than building any other car).

          Yay you now have a hybrid system. Which Toyota, and most other mainstream automakers, already have.

          Yay you have autonomous vans running around California. Except wait that is a partnership with Waymo…so why would a company interested in the tech partner with FCA and not Waymo?

    • 0 avatar
      FreedMike

      The merger will be with an Asian company, but not one in Japan. The merger will be with a Chinese company.

      If FCA and Toyota (or any established Japanese brand, for that matter) merged, there’d be a massive amount of manufacturing and dealer duplication. Besides, Toyota already has a large truck and a line of SUVs and CUVs, so it doesn’t need Ram or Jeep.

      In fact, I’d say a FCA merger with any brand that’s established in the U.S. or Europe would face the same problem. Even a more niche brand like VW or Mazda would have to close lots of factories and dealerships to make the merger work.

      FCA offers a perfect takeover target for a Chinese company with no U.S. or European manufacturing or dealer network. You heard it here first.

  • avatar
    gfurry

    They could start by offloading non-cutting edge tech by adopting CarPlay and Android Auto.

    It blows me away how they are so blind to how important the next generation of buyers feels about their phones. That is near the top of my list when buying a new car these days. I don’t want to have to buy a new car to upgrade my Navigation and audio technology.

    • 0 avatar
      JimZ

      CarPlay and AA don’t handle things like AM/FM radio or satellite.

    • 0 avatar
      mchan1

      Not everyone wants to stream music from their smartphone to the car’s stereo (as it does kill your monthly data allowance for the majority of people). Also, people do like listening to AM/FM radio or satellite radio which AA or Carplay does NOT have.

      You can always upgrade the stereo system instead of using the fallacy of buying a new car just to use your smartphone. Not all in-dash navigation systems work well and not everyone wants it.

      • 0 avatar
        SpinnyD

        Streaming from the smartphone doesn’t always use data, I can store music and podcasts on the phone. Plus just about all of the cell phone providers have gone back to unlimited plans. As far as upgrading the factory stereo, not all of the cars made today have upgradable stereos anymore, auto makers don’t want it to be that easy for you anymore, they would rather you spend 10x as much for 1/4 of the features on their systems. More money in their pockets.

    • 0 avatar
      newenthusiast

      Actually, the one thing I like about being given a Toyota rental is that the straightforward (if a bit old school) radio and climate controls. Knobs and buttons. Plug an aux jack into my mp3 player or load a USB stick with music before our trip, and I’m set. No distractions or touchscreen bullcrap.

  • avatar
    Whatnext

    Did a Baleen Whale mate with that Camry?

    • 0 avatar
      Lorenzo

      The worst is yet to come. Toyoda has a photo book of 1950s cars. That’s just the first take on a 1950 Imperial. Wait until Toyoda orders an interpretation of the ’58 Chrysler 300 and ’59 Buick!

    • 0 avatar
      Lorenzo

      BTW, a baleen whale has vertical baleen, not horizontal. The closest to baleen is the “waterfall” grilles of early ’50s Buicks and Mercurys. Toyoda’s book has pictures of those too, so stay tuned.

  • avatar
    Kyree S. Williams

    As long as I know I can still buy a Camry and get 300K miles out of it with minimal maintenance, I’m good. I will probably get distracted by something shinier / faster / pricier / more-fun and *not* buy that Camry, but I still want the option of an almost-unquestionably reliable car.

  • avatar
    stingray65

    Toyota just doesn’t know where to go from here. They could easily do a pure EV given their experience with hybrids and fuel cells, but so far EVs are a hugely unprofitable niche product so they won’t reverse Toyota’s dropping profits and sales. Self-driving technology will readily available off the shelf from Google, Apple, or Bosch, and so they doesn’t need a partner for that either, but it sure is scary to think about the bad things that self-driving might do to auto sales and profits. China is certainly interesting, but Japan is not a favorite outside partner due to lingering feelings about WWII, and a Chinese JV just means Toyota gives its technology and profits away to world class copiers. Sales growth in Japan, US, and Europe is likely to be negative due to rapidly aging/shrinking populations, and developing country sales are still pretty small (except China) and not very profitable. So what do they do? They haven’t a clue.

    • 0 avatar
      mcs

      @stingray65: but so far EVs are a hugely unprofitable niche product

      That’s not exactly true. You don’t have to lose money on EVs. You just sell them for more than they cost to make. A simple business principle. They could build a Lexus EV and just price it accordingly.

      • 0 avatar
        stingray65

        Sales figures and profit figures suggest that the market is willing to pay considerably less than EV cost to produce.

        • 0 avatar
          mcs

          @stingray: Don’t judge Toyota’s costs by Tesla. Tesla might not be turning a profit selling high-end $80+k EVs yet, but you can be damned sure Toyota could. It’s a safe bet that Porsche will turn a profit on the Mission-E as well. They’ll probably charge more for floor mats than Nissan charges for replacement Leaf batteries. Mercedes wouldn’t be bringing 10 EVs to the market by 2022 if they were going to lose money on every one of them.

          Technology is changing fast. EV manufacturing costs in 5 years won’t be what they are now and will be even lower in ten years. Auto manufacturers don’t plan for today, they plan several years down the road. It takes years to design a car from scratch and get it into production.

          • 0 avatar
            stingray65

            Toyota can’t make profits on EVs unless they have high volume, and no EV has even close to Prius, Camry or Corolla volume (and the Prius is only mildly profitable at best). Premium brands such as Porsche might make money on lower volume because they can charge high prices, but Tesla is following that model and is still not profitable. EVs may eventually be profitable, but virtually all EV development now is driven by public relations needs (see how green we are) and/or fuel economy/emission regulation compliance.

          • 0 avatar
            mcs

            Toyota has Lexus. A Lexus could be profitable on an $80+ EV with lower volumes. However, they have to design for the future. You don’t base a car design on today’s EV costs. You have to base it on what the costs will be when it goes into production years from now.

            When it comes to costs in the future, auto manufacturers have information you don’t. They’re under non-disclosure for technology that will be available in the near future. I personally know about advances in battery electrode manufacturing technology. There are other improvements that reduce inert material in batteries that improve density and lighten the batteries. I’m sure there are plenty of other improvements I don’t know about. That’s the kind of information they consider when designing a new car.

            Maybe you can’t make a profit on a low volume 100 mile range $35k EV today, but what happens with technology and costs available in 2025? What happens to volume when 400 kWh super fast charging is available and lower cost 300+ mile range EVs are possible. They tie together technology projections and market projections and make a decision. You don’t have that information, but they do.

            Most engineers and marketers understand that it takes years to develop a car. You don’t base a design on today’s numbers. You make predictions on what the market and technology will be when the car is ready for production. Battery costs aren’t based on today’s battery costs. Projections for market demand aren’t based on today’s EV specs. They are based on the market demand for EVs with the specifications and price that will be typical in the future.

            “virtually all EV development now is driven by public relations needs”

            That’s changing. The green/economy reasons are on the surface with manufacturers and buyers, but I think what’s driving the EV market is that fact that they are absolutely wonderful to drive. If you can deal with the charging and range issues, they are clearly superior to any ICE. Talk to any EV owner and that’s what you’ll hear.

            Eventually, if EV ownership becomes associated with wealth, that will become a factor as well. In fact, I think status will ultimately be what drives EV sales in the future. Once ICE power becomes associated with the poor and elderly, it’s all over.

          • 0 avatar
            JimC2

            “auto manufacturers have information you don’t… what happens with technology and costs available in 2025?”

            Yes- need to look ahead and at least that far ahead for bringing innovative technology into the mainstream market.

            I’ve said it before, but look at the original Honda Insight as an example. Here was a car that was intended to appeal to the early adopters. Hybrid drivetrains were still a decade from being mainstream, the market wasn’t at all ready (cheap fuel in the late 1990s and the perception of being “green” wasn’t a primary consideration for most car buyers), and the technology was still very immature. But selling those oddball cars at a loss, Honda had a stepping stone between the laboratory and the average customer. Honda got a lot of fleet data out of them too- wheel skirts are a bad idea but aerodynamic undertrays are a good idea. Belt CVTs still needed work, manual transmissions and gas-electric propulsion are a so-so idea, lots of information about battery life and how much battery cooling is necessary, etc. The fact that Honda went kinda sideways with their hybrids in the mid-2000s, while Toyota ran away from the pack, is another discussion, but look at this from the perspective of the execs at Honda in the *early* 1990s. No hindsight allowed!

  • avatar
    Higheriq

    Partnership???

    How about putting some excitement back into the cars?

  • avatar
    SCE to AUX

    Toyota recently sold its TSLA holdings and ended their partnership, which had resulted in the low-volume RAV4 EV.

    Perhaps they’re seeing the light about “fool” cells and are about to embark on their own EV development, after disparaging EVs for so long?

    Of course, the trick with EVs is how to make money. Only Tesla has a chance at it* in the near term, and they’re years ahead of Toyota with the technology, production, supply chain, customer base, and infrastructure that is needed to make headway**.

    * Before challenging this statement, who else has a chance at actually being profitable with EVs? Tesla *must* become profitable; others don’t have to care so much. Tesla’s playing every card to do so, especially by operating the Gigafactory to reduce battery costs, which they have repeatedly said is the key for their future viability.

    ** Even Toyota – as big as they are – can’t become an EV powerhouse overnight. Volkswagen is trying, but it’s a long road.

    • 0 avatar
      28-Cars-Later

      I think the smarter move for Toyota is to focus on the hybrid market it created. This allows them to still develop battery technology but does not put them in a position to develop expensive EVs which will not sell.

  • avatar
    sooperedd

    Dear Toyota or whoever,
    I will never set foot in a self-driving vehicle. Ever.
    Thanks

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