Toyota Motor of Japan hoped that hybrids and fuel cells and a smattering of battery-only vehicles would meet its future technology needs, but toughening fuel consumption regulations in China and Europe, and worries about battery supply, have forced it to speed up its embrace of pure electric vehicles.
Analysts wondered if the change of heart might not be enough to keep up with the competition like Tesla and Volkswagen.
Toyota announced last week that it would bring forward by 5-years its plan for half of its vehicles to be electrified by 2025. It would also use Chinese battery makers as it sought to meet the world’s shift to electric vehicles.
Fitch Solutions Macro Research said this showed Toyota had been mistaken in its previous plans for electrification.
“This marks a strategic shift in the company’s previous preference for hybrid and fuel cell electric vehicles (FCEVs) as Toyota will add battery electric vehicles (BEVs) to its line-up and bring forward its sales target of 5.5 million electrified models from 2030 to 2025, composed of 4.5 million hybrids and 1 million FCEVs and BEVs,” Fitch Solutions said in a report.
Toyota had opposed battery only vehicles because of their limited range and long charging times compared with hybrids and fuel cell vehicles.
Investment researcher Evercore ISI said Toyota’s decision should be a wake-up call for large carmakers in Europe and China.
“Toyota is by far the closest to hitting their 2020/21 CO2 targets (in Europe) and yet they are still advancing their EV targets. As we have said before, companies without committed and sizeable electrification strategies will likely struggle to hit the EU CO2 targets, especially in 2025 and 2030,” Evercore ISI analyst Arndt Ellinghorst said.
Last week, Toyota conceded it faced higher than expected demand for cars that use batteries. It already makes batteries for hybrids – cars like the early Prius which combine gasoline engines and electricity but had very limited battery-only capability – and plug-in hybrids, which have much bigger batteries and can be recharged independently and have an electric-only range of up to 35 miles. Toyota said it will partner with China’s Contemporary Amperex Technology (CATL) and BYD for battery procurement.
Fitch Solutions said Toyota will unveil a solid-state electric vehicle battery, which it has developed with Panasonic, next year before the Tokyo Olympic Games. Toyota will also develop a common engineering “platform” for all its electric vehicles like Volkswagen of Germany has done, and partner with Subaru to build a four-wheel drive electric SUV.
“Adding BEVs to its line-up will benefit Toyota as it will enrich its electrified models’ portfolio and strengthen its position as a major EV player by addressing every vehicle segment. However, we believe that the limited number of models will not result in Toyota taking a significant market share in the EV space. We will continue to monitor the development as a few things are yet unclear, such as the BEV models’ specifications around range and cost, and the estimated production capacity,” Fitch Solutions said.
Evercore ISI’s Ellinghorst took note of Toyota’s solid state battery plans, and agreed its change of heart on battery only vehicles might still put it behind the competition.
“Solid state batteries are seen to have numerous advantages to current lithium batteries – safer, faster charging etc. We expect that the unveiling next year will be more of a demo, and that solid-state won’t be commercialized until 2023-25 at the very earliest. Nevertheless, more details of the technological advancements will be interesting,” Ellinghorst said.
“Importantly, we note that though this is an encouraging change in heart from Toyota, selling 1 million BEVs in 2025 is still far behind our estimated volumes for Tesla and Volkswagen. Toyota predicts that about 10% of its global vehicle sales in 2025 will be BEVs. We estimate this number needs to be closer to 20% in certain regions, such as Europe and China,” Ellinghorst said.