Toyota navigates the ‘pioneer’s trap’ for EVs


Toyota chairman Akio Toyoda. — AFP

TO get an idea of how Toyota Motor Corp views the electric vehicle (EV) business just take a look at how it reports car sales.

Prominent in its breakdown is the category of electrified vehicles, which is then divided into sub-categories: hybrids, plug-in hybrids, battery electric vehicles (BEVs) and fuel-cell models.

For most EV makers, battery-electric is the only one that matters.

Tesla Inc, for example, exclusively ships BEVs.

In its view, and for many acolytes, a vehicle must have a battery and be exclusively charged from an external electricity source to earn that “E” prefix.

Its nearest rival, BYD Co, exited the combustion-engine car market in 2022 and last year produced a roughly even split between battery and hybrid passenger cars.

For Toyota, the numbers are markedly different. Just 37% of the vehicles it sold last fiscal year were electrified, up from 30% the year prior.

But purists point to a stark fact: Only 1.1% of its retail car sales were battery electric. This large disconnect stems from Toyota’s decision to label even gasoline-powered EVs as “electric-powered.”

This can be confusing, but it’s not entirely false. Hybrids use a combustion engine to create electricity, which then powers the motors. Plug-in hybrids split the difference, offering both gasoline and mains-powered fuelling.

Toyota reasons that in selling millions of hybrids to date, which have been more-readily embraced by consumers than EVs, it has done as much as anyone to cut carbon dioxide.

“Some people criticise hybrids because they have engines, but the amount of CO2 emissions reduced by these hybrids is the equivalent of three million BEVs,” chairman Akio Toyoda said on a company podcast published in April.

Given that Japan, in particular, derives most of its electricity from fossil fuels, Toyoda argues that a direct switch to electric charging isn’t necessarily cleaner. It’s a valid point, albeit one that doesn’t sit well with EV purists.

Yet Toyota’s reason for pushing hybrids over pure electric models may be less about the dirty power generators that still populate the planet and more about the fundamentals of market forces.

Despite all the hype about EVs, especially in China, most consumers globally aren’t ready to make the shift.

Range anxiety is among the primary reasons, consumer reports found, because drivers are confident that there’s always a petrol station close at hand, but worry there’s a lack of charging bays.

They have reason for concern – there’s five times as many gas pumps as EV chargers in the United States, according to one study.

So rather than preach to unwilling customers, Toyota is letting car buyers dip their toe in greener waters via hybrid cars. But it still wants credit for selling electrified models.

Most people’s stance on this is more philosophical than environmental: Hybrids do burn fossil fuels, but they’re still better than full-combustion models, and produce lower emissions than battery-electric vehicles charged by coal-fired power stations.

The swing factor is the cleanliness of a region’s electricity supply.

Toyota’s strategy may end up being the wiser choice. At first it seems like the Japanese company is taking a wait-and-see approach, and there’s an element of that.

Yet executives will surely be aware that the road to an all-electric future is littered with failed EV startups as well as product delays and cancelled projects.

In the annals of automotive history, early names like Butler, Elmore, and Armstrong Electric – one of the original EV companies – are forgotten.

The founders of MySpace, Friendster and Pets.com will be aware that there’s little advantage in being first.

Equally, many will forlornly remember their Nokia Oyj cellphones and wonder why the Finnish giant wasn’t able to adapt to the smartphone era.

Toyota’s decades-long dominance of the global car industry doesn’t come from any first-mover advantage.

The company didn’t invent cars or internal-combustion engines, and it wasn’t the premier proponent of just-in-time manufacturing – Ford Motor Co was decades ahead on that.

Instead, the Japanese auto giant climbed to prominence through a methodical approach to vehicle and engine development, product-market fit, as well as efficient manufacturing and sales.

In moving slowly into EVs, Toyota may be taking a detour around the “Pioneer’s Trap.”

There’s a risk that a patient approach will see it miss out on some or all of the burgeoning market for EVs, especially after Tesla and BYD careened headlong into a product category even before consumers were ready.

If that happens, it could be caught short like a modern-day Nokia. Then again, going down in history as the MySpace of cars isn’t a place it wants to be either. — Bloomberg

Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. The views expressed here are the writer’s own.

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