We here at CleanTechnica have been saying for years that Toyota is risking a Nokia moment — that day when a once dominant corporation wakes to find it has become irrelevant and its business model is obsolete. Is it possible that Toyota, which consistently sells more new vehicles every year than any other company, could actually go out of business? Is such a thing actually possible? Ask someone who used to own shares of Kodak or Lucent.
According to Reuters, Toyota is considering a reboot of its electric car strategy and has halted work on some of its 30 existing electric car projects, according to four people with knowledge of the situation inside the company. They claim the company has created a new working group that has been tasked with deciding whether to continue moving forward with the existing e-TNGA platform or to develop an all new platform specifically for electric cars.
The problem is, the e-TNGA chassis was designed specifically to allow Toyota to manufacture electric cars on the same assembly lines used to make gasoline-powered and hybrid cars. The first model to use the e-TNGA platform was the bZ4X that was introduced earlier this year. Initial reviews suggested the car was mediocre at best, and that was before Toyota halted production because the wheels were falling off early examples. It was an inauspicious start, to say the least.
Recently the company announced the new Crown sedan, a plug-in hybrid that would have been a world-beater if it had come along in 2016. Toyota — largely due to the stubborn refusal of Akio Toyoda to wake up and smell the electric car coffee — has consistently been a day late and a dollar short when it comes to joining the EV revolution. Is it possible the message is finally starting to get through?
Toyota Falls Behind
The real issue, however, is that Tesla is teaching the legacy automakers a hard lesson about the costs of manufacturing cars. Most CleanTechnica readers remember well how Herbert Diess, former CEO of Volkswagen Group, kept hammering on the theme that Tesla was building cars for far less money than Volkswagen could and how VW needed to redesign its factories to compete. Now that same message is reverberating inside Toyota headquarters and the truth is that the e-TNGA platform is just not able to achieve the same production efficiencies as Tesla.
The proposals under review, Reuters says, would amount to a dramatic shift for Toyota and rewrite the $38 billion EV plan it announced just last year. In the meantime, the company has suspended work on EV projects such as the Toyota Compact Cruiser crossover and the battery-electric Crown.
The review was triggered in part by the realization by some Toyota engineers and executives that Toyota was losing the factory cost war to Tesla on EVs, the sources said. They claim the company assumed demand for EVs would not take off for several decades, the four people said. Too bad Toyoda-san did not require all his people to read CleanTechnica. We could have saved him a lot of time and embarrassment.
Toyota designed e-TNGA so that EVs could be produced on the same assembly line with gasoline cars and hybrids. That made sense based on the assumption that Toyota would need to sell about 3.5 million EVs a year — roughly one third of its current global volume — by 2030 to stay competitive, the sources said. But sales of EVs are growing faster than anticipated. Automakers globally now forecast plans for EVs to represent more than half of total vehicle production by 2030, part of a wave of industry-wide investment that now totals more than $1.2 trillion.
New Team, New Ideas
The person leading Toyota’s EV review is Shigeki Terashi, formerly the company’s chief competitive officer, according to six people with knowledge of the work, including two people close to Toyota. Terashi did not respond to a request for comment. The new team has been designated a “BR” or “business revolution” group within Toyota, a term used for major changes including a revamp of its development and production processes two decades ago.
“What’s driving Mr Terashi’s effort is the EV’s faster than anticipated takeoff and rapid fire adoptions of cutting edge innovations by Tesla and others,” one of the people said. Terashi’s team is considering an option to prolong e-TNGA’s usefulness by coupling it with new technologies, three of the sources said.
Terashi could also propose to retire e-TNGA more quickly and opt for an EV-dedicated platform engineered from the ground up. That could take roughly five years for new models, two of the sources said. “There is little time to waste,” said one.
Toyota is working with suppliers and considering factory innovations to bring down costs like Tesla’s Giga Press, a massive casting machine that has streamlined work in Tesla plants. One area under review is a more comprehensive approach to an EV’s thermal management — combining, for example, passenger air conditioning and electric powertrain temperature control, something Tesla has already accomplished.
This could allow Toyota to reduce the size and weight of an EV battery pack and cut costs by thousands of dollars per vehicle, making it a “top priority” for Toyota suppliers Denso and Aisin, one of the sources familiar with the matter said.
The recognition within Toyota, the world’s biggest automaker, that Tesla has set a new benchmark for EV manufacturing costs marks a major reversal in thinking within Toyota. A decade ago when Toyota took a stake in Tesla and the two collaborated to produce a battery electric version of the RAV4, many Toyota engineers believed Tesla’s technology was no threat, two of the sources said. “They concluded back then there wasn’t much to learn,” one of the sources said.
Toyota discontinued the electric RAV4 in 2014 and sold its stake in Tesla in 2017. By 2018, when Toyota finally set up a dedicated zero-emissions division and began building an e-platform, Tesla already had three models on the road.
The Takeaway
There is a very real possibility that Toyota has already left it too late. This giant corporation — once a juggernaut of innovation and profitability — could simply fade away just as Kodak and Nokia once did. Tesla started mass production of electric cars a decade ago. Volkswagen did an about face in 2016 after its diesel cheating scandal almost put it out of business. That leaves Toyota 5 years behind its closest rival and 10 years behind the industry leader.
Is there time for it to catch up or even retake the lead in the new car market as the world switches over to electric cars? The answer is a definite maybe, but only if the thinking within the company — which starts with the intransigent Akio Toyoda — undergoes a radical transformation. Things may not really turn around for Toyota so long as he remains its chief executive, and he shows no inclination to step down any time soon.
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