General Motors grabbed headlines (and provided a nice boost to renewables) this week with its proposed $US650 million investment and offtake deal for America’s first new lithium mine in years.
In stark contrast, we saw two announcements in the past week from Toyota that underline the continuing scepticism the world’s biggest carmaker holds for a battery-powered world.
In short, Toyota remains a committed believer in hybrid technologies with the future to be powered by hydrogen, as does fellow Japanese carmaker Honda.
Toyota’s problems with batteries were confirmed in the first bit of news which revealed a surprise change at the very top of the company’s management structure with Akio Toyoda to step down as CEO of Toyota on April 1. What was surprising was his age 66 – a young man by Japanese business standards.
More importantly, he is part of the dominant family at Toyota. He is the great-grandson of the industrialist, Sakich Toyoda, and the grandson of both the founder of Toyota Motors, Kiichiro Toyoda and the founder of the huge Takashimaya department store chain, Shinshichi Iida.
In other words, Akio Toyoda is Japanese business royalty. They do not depart their high positions except for special reasons which haven’t been suggested. He did tell a media conference he felt tired after 9 years at the top and especially after the past two years of dealing with the impact of the pandemic.
He will become chairman which in Japan is usually a non-management role.
The other statement from Toyota was the news that the company had retained the mantle of the world’s biggest carmaker for a third successive year.
A CEO is not replaced for that success, especially given the company has survived the ravages of the Covid years.
Toyota said it sold 10.5 million vehicles in 2022. Global sales for the group, including truck unit Hino Motors and small-car maker Daihatsu, eased just 0.1% as record overseas sales of 8.6 million vehicles helped offset a 9.6% dip in its home market to 1.9 million.
Second-ranked rival Volkswagen Group earlier this month reported its lowest sales in over a decade, of 8.3 million vehicles, as COVID-19 lockdowns in China and the war in Ukraine upended supply chains.
While some chip-related supply constraints remained for Toyota (and lengthy delays of two years in some cases, are reported in Australia), the giant carmaker said strong demand in Asia and an increase in the production capacity and optimisation in Asia and North America helped it boost global production by 5% in 2022.
Toyota in November revised its production forecast for the current Japanese financial year through the end of March, to 9.2 million vehicles from 9.7 million. That half a million unit fall might explain the change in CEOs
Akio Toyoda leaves behind a carmaker whose electrification strategy is in tatters – Toyota punted heavily on hybrids (it’s Prius was the first hybrid to go into mass production) instead of battery-powered vehicles and has been completely outplayed by Tesla and China’s BYD.
Toyoda persisted with the approach, despite announcing last October a $US93 billion multi-year approach to push deeper into electrification with a two-stream strategy – hybrids and B-EVs, with the emphasis on hybrids which have been added to every model range now produced by Toyota (and at fat profit margins). And there was hydrogen mentioned in the long term.
He and Toyota were criticised for that approach and accused of ignoring the obvious as battery-powered vehicles produced by Tesla moved from being an oddity and a luxury indulgence, to mainstream with a fleet of rivals in China (led by BYD) and the US (led by GM and Ford), Europe (BMW, VW and Mercedes) and South Korea ( Hyundai and LG Chemical) spending billions to build B-EVs, batteries, new factories, retraining employees, shutting facilities servicing ICE (internal combustion engines) vehicles.
Toyoda is being replaced by a man not that much younger- 56-year-old Koji Sato, who headed up the company’s luxury Lexus brand and before that was the company’s Chief Engineer.
While Sato has been building Toyota’s cars for three decades these include the Prius, Toyota’s flagship hybrid vehicle, and a Corolla racing car that runs on hydrogen. Under him Lexus has added hybrids to every product range (as has Toyota in other divisions).
Under Toyoda, Toyota has followed a go-slow approach to electric vehicles, arguing that the hybrid technology it pioneered with the Prius will remain important along with investments in hydrogen.
Toyota remains the leader in hybrid cars (which are rapidly being overtaken in the competitive Chinese market by battery powered cars.
Reuters reported that by calling himself a man of traditional car-making, Toyoda admitted at the press conference the difficulty of transforming the company in a new era given his age and his long managerial experience of making conventional cars running on fossil fuel.
Now the giant will be run by a man with a similar background in the same technologies – and not a battery or EV maker’s experience in sight.
That will be great for the palladium and platinum producers of the world and not so good news for the lithium and nickel producers.
That will be a costly and challenging approach and one that will draw significant opposition inside the company and across businesses where hybrid technology is seen as a unique product of Japanese technology.
Battery-powered EVs are rapidly becoming a commodity – BYD, the big Chinese carmaker, stopped making ICE powered vehicles last year and then invested more heavily in B-EVs as sales of those vehicles moved past hybrids. Price cutting in China is accelerating, forcing Tesla to cut its prices there and in the US.
Musk has recognised that and says Tesla has plans to meet that challenge. Toyota doesn’t.
BYD sold more than 1.8 million rechargeable vehicles in 2022, almost all in China and split evenly between BEVs and PHEVS (plug-in hybrids). It wants to sell a lot more this year.
Elon Musk hinted last week that Tesla is working on a new vehicle that could sell profitably for under $US30,000 – which would compete head-on with mass market models from Toyota, Volkswagen, Hyundai, Ford Motor Co and General Motors.
South Korea’s Hyundai last week reported better-than-expected results powered in part by strong sales of its new EV lineup. Hyundai reckons its EV sales would grow by 54% this year – a faster growth than Tesla has forecast (but from a much smaller base).
