Why Toyota – the world’s largest automaker – isn’t all-in on EVs

on Sep14
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Roughly two decades ago, Toyota Motor became the preferred carmaker of U.S. environmentalists and eco-conscious consumers with its Prius hybrid, an “electrified” vehicle that was among the cleanest and most fuel-efficient vehicles ever produced.

Amid rising gas prices, demand for the vehicle grew and inspired other automakers to roll out a litany of hybrid models. Prius vehicles, including a plug-in hybrid electric model, remain among the most fuel-efficient, gas-powered cars in America.

But as the auto industry transitions to a battery-powered future, the Japanese automaker has fallen out of favor with some of its once-core supporters due, ironically, to the Prius and Toyota’s hesitancy to invest in all-electric vehicles.

“The fact is: a hybrid today is not green technology. The Prius hybrid runs on a pollution-emitting combustion engine found in any gas-powered car,” Katherine García, director of the Sierra Club’s Clean Transportation for All campaign, wrote in a recent blog post.

Greenpeace last week ranked Toyota at the bottom of a study of 10 automakers’ decarbonization efforts, citing slow progress in its supply chain and sales of zero-emission vehicles such as EVs that totaled less than 1% of its overall sales.

While automakers such as General Motors, Volkswagen and others vowed to invest billions of dollars in recent years to develop all-electric vehicles that don’t require gas-powered engines like the Prius, Toyota lagged, only more recently announcing similar investments. It also continues to invest in a portfolio of “electrified” vehicles – ranging from traditional hybrids like the Prius to its recently launched, yet underwhelming, bZ4X electric crossover.

Read more about electric vehicles from CNBC Pro

The strategy has pitted the world’s largest automaker in opposition to many of its rivals, and raised questions about its commitment to a sustainable path forward for the industry, despite company targets to be carbon neutral by 2050.

Toyota is not alone in such plans. Stellantis, Ford and the other Japanese automakers are similarly investing in electrified hybrid models. But in the hands of the patriarch of mainstream hybrid vehicles, a conservative approach to EVs is notable.

The rise and fall of the Toyota Prius

Toyota executives, while increasing investments in all-electric vehicles, argue the company’s strategy is justified — not all areas of the world will adopt EVs at the same pace due to the high cost of the vehicles as well as a lack of infrastructure, they say.

“For as much as people want to talk about EVs, the marketplace isn’t mature enough and ready enough … at the level we would need to have mass movement,” said Jack Hollis, executive vice president of sales at Toyota Motor North America, last month during a virtual Automotive Press Association meeting.

Hedging bets

Toyota Motor Corporation cars are seen at a briefing on the company’s strategies on battery EVs in Tokyo, Japan December 14, 2021.

Kim Kyung-hoon | Reuters

Paul Waatti, manager of industry analysis at AutoPacific, believes Toyota is “definitely on the conservative” side when it comes to electric vehicles, but that isn’t necessarily a bad thing for such a large automaker.

“I think they’re hedging their bets,” he said. “From a global perspective, a lot of markets are moving at different paces. U.S. is slower than Europe and China in EV adoption but there are other markets where there’s no infrastructure at all. To take a varied approach in powertrains makes sense for a global automaker.”

In 2021, Toyota sold 10.5 million vehicles in approximately 200 countries and regions, more than any other global automaker, including those by affiliates Daihatsu Motors and Hino Motors. Volkswagen – the world’s second-largest automaker – sold 8.9 million vehicles in 153 countries, and GM and its joint ventures sold 6.3 million vehicles, primarily in North America and Asia.

Just one solution

Toyota believes all-electric vehicles are one solution, not the solution, for the company’s goal to become carbon neutral.

“In the distant future, I’m not investing assuming that battery electrics are 100% of the market. I just don’t see it,” said Jim Adler, founding managing director Toyota Ventures, the automaker’s venture capital unit. “It really will be a mixed market.”

Toyota executives expect different areas of the world to adopt electric vehicles at varying rates, largely based on available energy, infrastructure and raw materials needed for the batteries to power the vehicles.

2022 Toyota Mirai hydrogen-powered fuel cell electric vehicle


Costs and materials

And middle-ground options tend to come with lower price tags.

For example, a 2022 Toyota Prius hybrid with an EPA rating of up to 56 mpg combined starts at about $25,000. That’s about $17,000 less than the carmaker’s all-electric bZ4X crossover.

A 2023 Toyota bZ4X electric vehicle (EV) during the Washington Auto Show in Washington, D.C., on Friday, Jan. 21, 2022.

Al Drago | Bloomberg | Getty Images

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