Toyota held a press conference at the end of last year where it announced that it would stride into the EV era by investing 4 trillion yen in R&D to develop new EVs by 2030 while continuing to develop hydrogen fuel cell vehicles and other gasoline vehicles with the same amount of investment. Afterward, the Chinese EV market has leaped drastically in the past year and is about to drive the global sales volume of EVs to exceed 10 million units this year. Quite a lot of research institutes even point to 20 million EVs sale worldwide by 2025, and further, optimistic estimates go as high as 25 million, a figure that means one in four new vehicles will be electric (a BEV or PHEV). Evidently, the soaring growth of EVs has far exceeded Toyota's expectations a year ago (and certainly the expectations of most traditional automakers). So, as the world's dominant automaker, Toyota is pondering whether the e-TNGA platform technology, which has only underpinned two new models (bZ4X and bZ3), can meet the challenge of rivals that will continue to introduce new EVs in the future. The bZ4X, under the Toyota-FAW (China) joint venture, and the bZ3, jointly developed through the joint venture BTET (BYD Toyota EV Technology) with BYD, have just been launched in China, and Toyota still needs China to assist in many parts of the three musts: electric control, motor, and battery. So, it seems that Toyota is already at least two years behind independent Chinese brands in the commercialization of EVs. If Toyota decides to improve the e-TNGA platform or develop a new one now, the timetable will be the greatest challenge because in addition to the rise of independent Chinese brands, Toyota's most formidable competitor, the Volkswagen Group, will launch its new SSP EV platform by 2026. Plus, South Korea's Hyundai, ranking third in global sales, has been developing EVs tirelessly for a long time. What is the best way for Toyota to determine the right product strategy for the next decade before losing another day?
When Toyota was formulating its product strategy, one focal consideration back then was that it would be difficult to propel the development of EV ecosystem in a short period of time, except for advanced countries with sufficient economic strength, because power supply was not sufficient or prevalent in many countries around the world, and the construction of charging facilities was time-consuming. Secondly, Toyota's hydrogen fuel cell technology was not only world-leading but also aligned with the goal of net-zero emissions. True, it would not have made much sense for Toyota to give up its advantages to go after the development of EV technology, in which it was already lagging behind. However, if we look at the determination of German automakers to abandon the dominant position in gasoline engines and go all in to develop EV technology as well as the misjudgment of the progress in the EV market in recent years, Toyota's insistence on developing hydrogen fuel cell vehicles seems to be a matter not of technical feasibility, but of whether to operate against the odds or go with the flow in the face of the prevailing trend, i.e., auto electrification. I'm not part of the R&D personnel, and I don't know the technical advantages and disadvantages of the e-TNGA platform in detail, but from the perspective of Toyota's long-term business operations, I have a few thoughts…
- The North American market is Toyota's largest sales contribution at present. The slow pace of electrification in the U.S. may seem favorable to Toyota, but California became the first state that passed the 2035 zero-emissions law a while ago, and the other states will likely follow suit. Furthermore, Tesla is the hero of new energy vehicle development in the U.S. The U.S. will not abandon EVs in favor of hydrogen fuel cell vehicles, so with President Biden's policy pushing for the construction of charging stations, Toyota has to provide a full EV product line as soon as possible to hold on to its market share in North America.
- In China, the world's largest market, EVs account for nearly 30% this year, and I wouldn't be surprised to see nearly 50% by 2025. Toyota has finally freed itself from the nationalistic complex of Chinese consumers and started to see sales growing in recent years. If it doesn't start with EVs, where it outdoes independent Chinese brands, and compete hard with them in product competitiveness, manufacturing quality and value for money, the sales gains it has been working hard to accrue in the past few years will dry up in the next few years.
- Since appointing a new CEO in September, the Volkswagen Group has noticeably earmarked more resources for the China market. The Group's newly established EV company and autonomous driving R&D company will surely show sales results in a few years. If Toyota fails to carry out in-depth strategic planning in China, the auto market with a high level of electrification, in the near future like the Volkswagen Group, the global hegemony of auto sales will likely be someone else.
- Toyota's products have never been very popular in the European market. Now that independent Chinese EV brands are entering Europe and Southeast Asia, Toyota's supremacy in Southeast Asia is being challenged. It will be too late if Toyota does not cogitate over the European market and do something about it now. Western Europe has witnessed an EV penetration rate of 20% this year. With Tesla's Giga Berlin poised for continued capacity expansion, it is believed that the European EV market will see explosive growth next year. Independent Chinese brands can enter the European EV market. Any reason why Toyota and its vast resources can't?
Judging from the above points of view, EVs are no doubt the only answer if Toyota seeks to boost sales in the next decade. While the law that bans gasoline vehicles or stipulates net-zero emissions is generally scheduled to take effect after 2035 across the globe, faced with the sweeping EV frenzy, Toyota needs concrete results in product development within three years. Ergo, in my opinion, not only should Toyota continue to improve e-TNGA (short-term solution in 3 years, it can cooperate with other automakers), but it should also embark on the development of a new platform (long-term solution in 5 years). I believe we will see a clear direction from Toyota before long.