Toyota a pioneer in hybrid vehicles struggles to master electric cars. Rachel Culin viewed herself as a Toyota loyalist, one of the millions who valued the company’s dependable and fuel-efficient hybrids. However, she recently purchased an electric Chevrolet Bolt to replace her Toyota Prius because the Japanese automaker was sluggish in the market of electric vehicles.
Where are the alternatives for those who adore Toyota? Mesa, Arizona resident Ms. Culin stated. It is incredibly upsetting.
Toyota needs to adapt to shifting consumer preferences and a push by governments around the globe to reduce the burning of fossil fuels, the primary cause of climate change.
Since becoming global giants in the 1980s, the company and the Japanese automobile industry are confronting their biggest business challenge. Their response could determine whether they remain at the summit of the automotive industry or fall to the bottom. Toyota, the largest automaker globally, is the driving force behind the country’s expansive auto industry. It has alliances with smaller automakers such as Subaru and Mazda and exerts tremendous sway over government officials and industry groups. With nearly 30,000 employees in Kentucky, Indiana, Texas, and other states, the company is also a significant employer in the United States.
Its business decisions may have extensive economic and environmental consequences. By inventing hybrid vehicles that combine a gasoline engine with a battery and an electric motor, Toyota may have done more than any other established automaker to increase fuel economy and reduce emissions. Having placed so much stock in hybrids, however, the company needs to be more active in adopting emission-free vehicles.
This has allowed Tesla and BYD, a Chinese automaker, to challenge Toyota’s dominance by offering alluring and inexpensive battery electric vehicles. Toyota’s market share in the United States and sales in China have decreased.
Japanese automobile manufacturers have been here before. However, they were the insurgents the last time.
As fuel prices skyrocketed in the 1970s, Americans started replacing gas-guzzlers with small, fuel-efficient Japanese models, thereby challenging the dominance of General Motors, Ford Motor, and Chrysler. Toyota’s manufacturing techniques became synonymous with manufacturing efficiency, and many factories adopted what became known as the “Toyota way” or “Toyota method.”
Today, Toyota is learning from its competitors. The company is employing Tesla’s techniques. It has partnered with BYD in China to incorporate its electric motor and battery technology.
Sanshiro Fukao, a senior research fellow at the Itochu Research Institute, stated, “The battle stage has changed,” and “the Japanese auto industry in particular, has been plodding to act.”
Toyota may no longer have the luxury of taking its time.
During the pandemic, the global automotive market reached a landmark that blindsided the world’s leading manufacturers. In 2022, sales of electric vehicles will increase by nearly 70 percent to 7.7 million, surpassing those of hybrid-electric cars for the first time, according to market research firm IDTechEx.
Toyota continues to be highly profitable, generating $8.9 billion in revenue for the quarter ending June 30. Last year, it sold eight times as many vehicles as Tesla, or 10,500,000. However, less than 1% of the cars it sold were purely electric. The absence of electric vehicles has been particularly costly in China, the largest auto market in the world. In July, Toyota’s sales in China decreased by more than 15 percent compared to the previous year.
Toyota’s sales in the United States have increased, but less than those of other manufacturers. According to market research firm Cox Automotive, the company’s proportion of the passenger car market decreased to 13.8% from June to August compared to 15.1% during the same period last year.
The situation is similar for other Japanese manufacturers, such as Honda, Mazda, and Subaru. Even Nissan, which began marketing the Leaf electric vehicle in 2010, needs to catch up, failing to produce a vehicle that could compete with the Tesla Model 3 in terms of range, performance, and design. In the first half of the year, Nissan accounted for less than 2% of the electric car market in the United States. It anticipates that sales in China will decline by nearly a quarter during the current fiscal year.
In May, the International Council on Clean Transportation, a non-profit organization, ranked the twenty largest manufacturers based on their progress toward zero emissions. Five of the bottom six companies were Japanese: Toyota, Honda, Nissan, Mazda, and Suzuki.
According to Christopher Richter, a senior research analyst at the investment firm CLSA, foreign automakers in China they have manufactured electric models designed to appease regulators rather than consumers. In July, the company stated that a new standard “underestimates key challenges including the scarcity of minerals to make batteries, the fact that these minerals are not mined or refined in the U.S., the inadequate infrastructure, and the high cost” of electric vehicles in Washington.
According to Jeffrey Liker, professor emeritus at the University of Michigan and author of several volumes on Toyota, hybrids have a far more significant environmental impact when analyzed mathematically. In addition, they earn significantly more money.
Sales of pure electric vehicles are increasing more rapidly than hybrid sales. However, some analysts predict that hybrid sales will increase as prospective buyers of electric cars fret that the public charging infrastructure is inadequate and unreliable. If this occurs, Toyota’s strategy may be validated. On a recent Sunday, prospective purchasers waited patiently to test-drive a BYD S.U.V. in the Ikebukuro neighborhood of Tokyo. The car is eligible for thousands of dollars in subsidies from the Japanese trade ministry, which has allocated $90 billion to promote battery electric vehicles.
Two Toyota showrooms nearby were nearly vacant.
According to Masaki Nagasawa, assistant manager of a Toyota dealership in Tokyo, customers are “satisfied” with the current options. “Subsidies are an incentive to purchase for those on the fence,” he said, but most customers are concerned about electric vehicles’ range and prefer hybrids.
Toyota has stated that it is developing new production techniques and innovative battery technology that will increase the range and decrease the charging time of its vehicles. The company has said that its lineup will include 10 new all-electric vehicles by 2026, to sell 3.5 million annually by 2030.
After unveiling a new luxury plug-in hybrid vehicle on Wednesday in Tokyo, Toyota’s director of branding and design, Simon Humphries, stated that the company was publishing new electric options “month by month, year by year.”
However, he added that while there is an “urgency” to introduce new battery-powered automobiles, “there is urgency in every segment.”
Electric vehicle manufacturers are advancing rapidly.
Tesla is on course to sell nearly two million electric cars this year and is constructing a factory in Mexico, where it plans to produce a vehicle that will sell for approximately $25,000. After federal and state incentives, the Model 3 sedan already sells for roughly the same price as a comparably equipped Toyota Camry in the United States.
BYD is swiftly expanding in Europe, Latin America, and Southeast Asia outside of China. Its extensive electric lineup includes less expensive models than Toyota’s most affordable sedans and a massive luxury SUV that retails for approximately $150,000.
Similarly to how Apple, Google, and Samsung rapidly supplanted Nokia and BlackBerry in the mobile phone industry, Tesla and BYD may be so far ahead in producing electric vehicles by 2026 that Toyota may struggle to catch up.
However, Japanese officials are more optimistic.
The transition will be slower than with cell phones, according to Naoki Kobayashi, deputy director of the automobile division of the commerce ministry.
He concedes that Toyota confronts a significant challenge, but “unlike with smartphones, we still have time.”