Is Toyota Circling the Drain? — 18 Months Later

Join daily news updates from CleanTechnica on electronic mail. Or follow us on Google News!

Yesterday, my morning information feed led with an article from Reuters declaring that “Toyota global output skids in June.” Reuters went on to say that Toyota’s manufacturing was down for the fifth month in a row. Reuters blames a “certification scandal” in Japan, and falling gross sales in China. “Output worldwide for Japan’s biggest automaker slid 12.9% to 795,862 vehicles, the sharpest decline since December 2022.”

Eighteen months in the past, Dr Paul Wildman collaborated with me on an article speculating about the future of Toyota and its affect on the Japanese financial system — are we seeing the beginnings of that Apocalyptic occasion? Is six months of knowledge sufficient to say we have been heading in the right direction? Our article actually provoked an prolonged dialogue. Among the extra attention-grabbing feedback are quoted beneath.

Why are Toyota’s gross sales falling in China? Toyota’s dependable, time confirmed hybrid electrical autos are doing very properly in lots of the world markets, together with right here in Australia. Actually, with many different automakers introducing a spread of HEVs, EREVs, and PHEVs, you’ll be tempted to suppose that Toyota obtained it proper and the copying by different automotive producers is the best praise.

For many who have simply joined us: HEVs are gentle/sealed hybrids that have to be fuelled by petroleum merchandise. Toyota’s profitable Prius is an instance. PHEVs are plug-in hybrids which have the potential to be solely electrical, but additionally have a petroleum or diesel engine. “Extended Range Electric Vehicles or EREVs are vehicles in which propulsion power is provided almost entirely by an electric unit. They are additionally equipped with a small internal combustion engine to generate additional energy. These types of cars are often seen as series hybrids with a much larger battery, the capacity of which is usually 10 to 20 kWh,” Knauf Industries summarizes. Sure, I’m nonetheless a little bit confused right here too.

So, this might be a part of Toyota’s drawback — its personal success in selling hybrids has led to elevated competitors. “Yes, plus lack of strategic nous,” provides Paul after I requested him to remark, “and stuck in previous horizontal integrate everything manufacturing model complicated by leader hubris!”

One other think about my thoughts is the rise of Chinese language auto manufacturing giants. It’s not a standing image in China to drive a automotive with a overseas model. The Chinese are intensely proud of their achievements and are now buying and driving “Made in China.” What a change, and in such a short while. It’s not hubris. They’re even exporting to Japan.

Having pushed the BYD Seal, the MG4, and likewise the Toyota BZ4X, I do know from personal experience that there is no such thing as a comparability. The Toyota is dearer, much less responsive, and consists of minimal tech. It isn’t a world success story — there can be some who will allege that Toyota by no means meant it to be. Paul thinks they have been pinning their hopes on hydrogen automobiles sweeping all earlier than them.

Again to Reuters for some extra onerous knowledge. Toyota’s manufacturing in China, the place there may be an aggressive worth battle, fell 21.7%. June is “the fifth month in a row where Toyota’s output has declined by 20% or more…. Toyota’s worldwide sales fell 5.1% during the month.” We should do not forget that China is the world’s largest automotive market and the second largest exporter of autos.

In our article 18 months in the past, we proposed that there have been a number of elements resulting in the creation of Japan’s present auto disaster. Have they clung too lengthy to the hydrogen dream? Can they handle their mountain of debt — and, certainly, can Japan? Toyota is important to the Japanese financial system. “Toyota is Japan’s largest company by sales ($230 billion last fiscal year) and in recent years has been its most profitable company and biggest taxpayer. Toyota has also been Japan’s largest ad buyer, making the major media here afraid to criticise it,” Paul and I wrote 18 months in the past.

“The automotive sector in Japan is the third-largest automotive producing industry in the world, with 78 factories in 22 prefectures. It employs over 5.5 million people and is a major pillar of the country’s economy. Currently, about half of domestically-produced Japanese vehicles are exported.” What if China takes these export markets from Toyota? And don’t be complacent — the auto producers within the USA might be subsequent.

Is the writing on the wall? I need to admit the state of affairs has gotten extra regarding and murky since our article 18 months in the past. It’s as we predicted/anticipated. We’d like somebody clever to learn the writing on the wall and promote motion on it. I’ve collated a number of the feedback on our earlier article, some are the phrases of the clever, some are the phrases of comedians, however all contribute to the controversy. Keep in mind that these phrases have been penned one and a half years in the past — it’s wonderful how a lot has modified:

“The bridge ahead is out Toyota!!! Take a different route!”

“If Toyota is not selling millions of BEVs by 2025, they’re in real trouble imo.”

(Most of the feedback pointed to 2025 because the make-or-break 12 months for Toyota — so we received’t have lengthy to attend to see if these predictions come true. A variety of commentators predicted the early demise of PHEVs as properly. Nevertheless, there appears to be an increase in PHEV gross sales pushed by individuals’s concern of change maybe.)

“Toyota is in the car business. EVs are vastly superior cars. Expect sales to follow the purchase of superior cars. Expect sales to follow the increasing production number of EVs. You can’t ignore a vastly superior product and survive.”

“Toyota can survive for a good while selling cars to elderly denialists in the US and Japan, but it will have to continue to support more and more ugly things politically to maintain solidarity with them. You think you own the mob; the mob owns you.”

“3rd-world countries are buying electric cars much faster than Westerners believe because the cars’ own storage is part of the solution to unreliable grids, and because these countries are urbanising at amazing speed and need the cars that China is building.”

(That is positively a pattern we’re seeing within the world south.)

“I’m by no means saying Toyota will fail completely but their days as the world’s largest automaker are limited. I’m guessing their sales will drop by 1/2 or so by 2030. If they can manage their debt and stay out of bankruptcy is an open question. I could see a bankruptcy and bailout by the Japanese government, which is also atm at risk of bankruptcy through its eye watering levels of debt, at some point I’m the next decade at which point they manage to restructure and limp along as an also ran in the global market.”

“PHEVs are just a band-aid. The longer it is stuck to the skin the more painful it becomes when it’s finally ripped off.”

“The only way Toyota is going to be able to produce a range of viable EVs that people will actually want to buy is to go into considerably more debt. But by then, the Chinese will have eaten their lunch anyway, as is already happening in Europe.”

(Paul expects that Toyota will proceed down the route of shopping for Chinese language EV platforms and componentry and rebadging them, as is going on with the BZ4X. Again to the feedback from my astute readers.)

“… their ICE manufacturing equipment and incarnating business models are stranded assets, a lot of it is useless for EV production (something Tesla learned early on when trying to convert the GM/Toyota Fremont factory).”

“The bZ4x and the MX-30 seem to seethe with resentment and poor design towards the people who want to buy EVs. Like the fossil-cult engineers held their noses while designing them out of hatred. ‘How dare you want a battery car with over 100 miles range! You hypocrite! THIS is what you deserve!’ Can a car be passive-aggressive? Some said the Vega and Pinto sucked because GM and Ford secretly wanted to teach people to hate small cars.”

“No one is arguing that Toyota is bad at manufacturing (most of my cars *used* to be Toyotas). The point is they are focused on the obsolete technology. If Toyota’s sole product was VHS tapes, they would still be making them and, you’d agree, going out of business. Well, that’s what they are doing as it relates to cars: they said they only care about making VHS (ICE), instead of the new technology (BEVs).”

“Only about 0.1% of their sales are BEVs. Last year, over 10% of the world’s new car sales were EVs. They are several orders of magnitude behind the rest of the world.”

“ICE sales have fallen off a cliff since 2017 (peak ICE sales). As they continue to lose economies of scale, and market share they will erode their profit margins. On the flip side, as BEVs gain scale, they get cheaper to make, and more profitable. This is an economics problem; NOT a manufacturing one.”

Most of the commentators predicted a battle between HEVs and BEVs — however it seems that a battle is shaping up between Toyota’s HEVs and Chinese language PHEVs. We must always word that Chinese language PHEVs have an inexpensive vary. In distinction to Toyota’s strategy, BMW, Volkswagen, Ford, and Basic Motors are making some effort to maneuver ahead within the electrification race. Nevertheless, it appears to have develop into extra of a dance than a race. And maybe they’re too late to the dance at that.

Total, the long run is brilliant, electrical, and related. Toyota continues to jot down itself out of this future by each fee and omission. It stays to be seen what Toyota’s future can be in an EV world.