Toyota Allegedly Stressing Electrification Under New Leadership
With longtime CEO Akio Toyoda stepping down from Toyota Motor Corp, the business is reportedly about to shift targets and place a greater emphasis on battery-electric vehicles. However, there are a few caveats to that claim and the entire issue is mired in controversy, with entities clearly trying to pressure the Japanese automaker against doing things its own way.
Whereas Mr. Toyoda felt confident that the company should pursue an array of technologies (including hydrogen fuel cells, battery-electric propulsion, hybridization, and advancements of the tried-and-true combustion engine); it is starting to sound like his successor will be taking a different approach. Upon notifying the public of his departure, Akio mentioned that his replacement will be tasked with the automaker’s transition into the “mobility” era.
"The new team under upcoming President Sato has a mission to transform Toyota into a mobility company," Toyoda was quoted as saying by Automotive News. “He has youth and like-minded colleagues. I expect this new team to go beyond the limits that I can’t break through.”
For those of you that don’t know, the term mobility has become corporate jargon representing the industry’s desired transition away from gas-powered automobiles or private ownership and toward things like widespread electrification, customer data harvesting, over-the-air updates, software-defined vehicles, autonomous driving, and various subscription schemes.
Incoming president Koji Sato – who is scheduled to take over leadership on April Fools’ Day – has already said he’s committed himself to pivot Toyota toward battery electric vehicles.
"The first is business reform starting with next-generation BEVs," Sato said. "To deliver attractive BEVs to more customers, we must streamline the structure of the car and with a BEV-first mindset, we must drastically change the way we do business."
However, both the current and incoming CEO have noted that it remains wise for Toyota to take a mixed approach toward powertrain development. As a result, the brunt of the automaker’s electrification efforts will be directed at the Lexus luxury brand.
Sato has also stated that Toyota’s latest effort to focus on EVs has little to do with stringent government regulations and is not a reaction to rivals from Silicon Valley and China attempting to corner a vehicle segment vehicles legacy manufacturers are just beginning to pay serious attention to. But that’s a difficult premise to swallow when you consider the massive amount of lobbying that’s taking place to get pro-EV legislation passed – not to mention the constant media pressure trying to promote or vilify companies based on their alleged environmental impact.
Toyota knows this better than most.
The Japanese firm was criticized by global campaigning NGO Greenpeace in November of 2021 and ranked last by the group (out of the ten largest automakers) in terms of its "decarbonization efforts." But the condemnation seems to focus wholly on nebulous environmental claims hinging on it selling fewer battery-powered automobiles than its rivals and failing to totally rejigger its supply chain network during the pandemic. That same month, InfluenceMap (an EV-friendly and Euro-focused think tank) named Toyota as one of the world’s “most obstructive” companies on advancing climate policy – ranking it right behind names like Chevron, ExxonMobil, and BASF.
Keep in mind that this is the company that built the economical Prius hybrid when everyone else was leaning into SUVs and tends to make durable, small-engined automobiles sold to the masses. The reality of the situation is that it’s almost always more environmentally sound to maintain a functioning automobile than pay to have a new one manufactured. Furthermore, claims that EVs are generally better for the planet are starting to be challenged as we learn more about their mineral sourcing, battery construction, and the fact that modern-day energy grids aren’t really up to the task of mass adoption.
With the above in mind, it's a little hard for me to seriously believe Toyota is substantially less eco-friendly than a brand like Volkswagen Group. Though InfluenceMap basically made this very case based almost entirely around how intensely automakers' signified "support for Paris-aligned climate policy."
Tragically, a significant portion of the environmental debate is being undermined by lobbying efforts and (for lack of a nicer-sounding term) corporate warfare. To that effect, we've seen countless articles from websites that exist solely to promote electrification making statements about how the Japanese brand is "finally pulling [itself] out of the past and into the modern era.” But that likewise supposes launching headlong into electrification will be a winning strategy for the company when it has historically enjoyed success by remaining extremely cautious whenever new technologies are in play.
For example, when the industry started shifting toward direct injection, Toyota’s engineers correctly expressed concerns that the setup could accelerate carbon deposits. Their eventual solution was to offer direct and port fuel injection simultaneously. While this does require owners to replace a second set of fuel sprayers every so often, it also means reduced deposits on the intake valves – something that plagued early direct-injection engines seeing as few as 50,000 miles on the odometer. Loads of automotive brands are now copying this design.
The point here is that Toyota/Lexus has built its entire reputation on refining established technologies, remaining laser-focused on quality control, and trying to keep the general ownership experience pretty breezy. While increasingly strict government regulations in select markets may effectively force the automaker to build all-electric vehicles in order to maintain volume, we’ve already seen numerous brands damaging their image by delivering lackluster or recall-prone EVs.
Some of this is down to the limitations of a burgeoning technology, challenges working with new suppliers, or simply factories not yet having sufficient experience building battery-electric cars. However, as the company most synonymous with offering long-lived vehicles, the Japanese brand really has to tread carefully here. If Toyota doesn’t have mass appeal and a fleet of products boasting above-average reliability, then people will begin to wonder what exactly Toyota does have to offer as they migrate to different brands.
But it seems like Toyota’s new leadership is hip to that fact. Lexus already has a stated goal of going fully electric worldwide by 2035 and selling 1 million EVs globally in 2030. So saying that Lexus will be leading the all-electric charge for Toyota doesn’t really change much. Sato has also stated that he doesn’t think the “one-size-fits-all solution” actually works for any automaker hoping to sell globally. That sounds a lot like something Akio Toyoda might say.
Regardless of what’s being claimed today, Toyota still appears to be very suspicious of going all-in on electrification right now – and not without good reason. The technology currently appears to be a generation or two away from reaching a point where there are effectively no downsides (e.g. cost, maximum range, “refueling” times, etc.) vs traditional combustion vehicles. This, in addition to lagging infrastructure requirements, is assumed to keep some of the largest markets (including North America) from seeing mass adoption anytime soon. Despite increased advertising for EVs, surveys have suggested that EV owners are largely dissatisfied with public charging options and that even industry leaders could be losing interest in electrification.
You always have to read between the lines with this kind of stuff. From my perspective, Toyota doesn’t appear to be changing its strategy as much as some headlines would suggest. Instead, the company seems to be buying itself additional time to see how the market moves as it uses Lexus as a place to develop next-generation EVs that have the potential to appear within the Toyota brand later on. But this is only going to happen if management thinks there’s an appetite for them. In the interim, expect the Japanese brand to continue furnishing hybrid vehicles and dabbling with hydrogen technology.
We'll learn more after Sato takes the reigns, as he has promised to give a comprehensive update on Toyota's future once he's officially the chief executive.
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"...trying to keep the general ownership experience pretty breezy." Well, a "mobility company" probably doesn't sell anything, so there won't be any more ownership experience - just a "ridership experience". Mr. Toyoda's interview quote is super-polite, but it seems to me that he isn't sold on the new direction. If this leadership move is for the benefit of the stock price, it hasn't had any effect yet.
"allegedly" is the perfect word for it.
I will stay tuned, but TOyota has lost a valuable decade on BEVs.