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Almost a year ago to the day, Toyota congratulated itself on the success of its hybrid cars. The Japanese giant wanted to mark a milestone, having hit worldwide sales of 15m vehicles with drivetrains that were either hybrid, plug-in hybrid, battery and fuel-cell electric systems.
Representing the vast bulk of the total was the Prius, the favourite of Uber drivers and Hollywood environmentalists, which made battery-powered cars mainstream. Toyota labelled the Prius a “technological leap forward which evolved into a global phenomenon”. It was the first mass-produced car that combined an internal combustion engine with an electric motor.
Launched in 1997, the Prius was not an all-electric vehicle with zero emissions. Instead, it had a battery that charged when the car braked, and its power helped the engine achieve better fuel economy and generate less pollution. It was a bold move from Toyota when the rest of the industry was still fuelled by petrol and diesel. Toyota added hybrids to other models, along with plug-in hybrids that charge from the mains and allow short journeys solely on battery power.
The company also championed hydrogen as a fuel source, in 2014 unveiling the Mirai, which converted the gas into electricity to power it. But Toyota never went all-electric. As rivals adopted hybrids and then powered forward into zero-emissions vehicles, Toyota seemed to have lost its former boldness, even as governments worldwide set increasingly tough limits on the pollution cars could pump out.
“Toyota backed hybrids in the short term and hydrogen in the long term to meet pollution controls,” says Prof David Bailey, an automotive expert at Birmingham University. “It did not see battery power alone as goer.”
But that stance was reversed last week when the company used the Shanghai motor show to unveil its first all-electric car, a mid-size SUV named the “bZ4X”.
The bZ part stands for “Beyond Zero” and the car goes on sale next year, with a further six all-electric cars added to the range by 2025, sharing the power system.
Toyota says it aims to electrify 70pc of its line-up by 2030. However, unlike rivals including GM, Jaguar Land Rover, Volvo and Volkswagen, it hasn’t given commitments to abandon internal combustion engines.
Sticking with hybrids and arriving late to the electric party has been a rare technological misstep for Toyota. It pioneered the modern production systems that carmakers depend on and is known as much for its stable management as its rock-solid engineering. How could it have happened?
“Toyota’s a massively competent company when it comes to engineering and production,” says Tim Urquhart, principal automotive analyst at IHS Markit. “But when you look at the big picture it’s clear they made the wrong decision at the wrong time.
“Governments are increasingly saying they are going to ban internal combustion engine cars. Britain’s one example with the 2030 ban [on selling new cars with ICE engines]. Hybrid is just a transitional technology.” Urquhart says it’s hard to say why Toyota has left it so late. It could have been inertia in a big company reluctant to move away from the formula it had found success with in the Prius, he thinks, or maybe the conservatism common in Japanese corporate life.
“That conservatism has served Toyota well in the past as it dots the i’s and crosses the t’s.” Urquhart adds. “But maybe it doesn’t transfer through to blue-sky thinking.”
Perhaps Toyota can’t be blamed for sticking with hybrids for so long. The investment in new propulsion systems is so massive – big manufacturers are each sinking tens of billions into them – that even a company of Toyota’s size balked at further investment when its system was working well.
“The costs are just huge,” says Bailey. “VW has put more than €30bn (£26bn) into it, and it’s having to work with Ford to recoup some of it. Even a company as large as Toyota couldn’t do it all and had to place bets.”
That potentially wrong bet and late move to electrification is going to cost Toyota. More than $350bn (£253bn) has been sunk into electrifying cars by global manufacturers and racing to catch up with rivals will be expensive. “Peers will be ahead in terms of sales and awareness. Toyota will need more time and resources to become one of the leaders in the electric vehicle market,” says Felipe Munoz, automotive analyst at JATO Dynamics.
There’s already a battle for materials. There are shortages of graphite, lithium and cobalt used in batteries. The price of copper, which electric cars use far more of than traditional vehicles, is near a 10-year high and climbing.
Analysts at Evercore warned “hope is not a strategy”, saying £100bn needed to be invested in mining to deliver materials. That’s bad news for Toyota, Urquhart believes. “Logic dictates if you have a supply chain focused on hybrids you are going to be rushing to catch up on components needed for electric cars.” he says.
“Other, more progressive manufacturers have made the contacts with miners to supply them and are going to be ahead in the queue for items that are going to be scarce as supplies are squeezed. Ultimately that may mean Toyota’s vehicles will be more costly.”
Munoz believes it’s definitely a case of better late than never. Toyota’s sheer size – it sells about 10m cars a year – means it has “such a strong structure it won’t be hard to surpass other mid-size manufacturers, which are struggling to sell their electric cars”, he says.
Electric cars are still taking off, making up less than 10pc of all global car sales. Munoz adds with many motorists worried about whether they will be able to charge an electric car if they buy one because of limited infrastructure to support them, there’s still time to carve out a strong position.
However, rather than a mistake, Toyota holding off might be a masterstroke. “In the early days of electric cars, battery technology was still evolving and Toyota could have thought it wasn’t ready,” says one person with knowledge of the company’s thinking, citing worries about range and the materials in batteries. “If there’s a leap in battery technology, Toyota could end up looking very cute.”
Despite the arrival of the bZ4X and the Beyond Zero range, Toyota continues to support hydrogen, flagging advantages such as refuelling in minutes rather than charging for hours. The infrastructure to support hydrogen may not yet exist, but the push into renewables may mean it one day overtakes electricity for certain types of vehicles, the type that need to be able to refuel fast.
If there was any doubt of Toyota’s support for hydrogen, the company’s announcement last week that it is testing an engine which burns the gas, rather than convert it into electricity, in a racing car was evidence enough. The car will compete in one of the toughest forms of motorsport, 24-hour endurance racing, possibly in a nod to Toyota boss and keen racing driver Akio Toyoda’s belief in hydrogen.
As global car companies battle the transition to electrification, maybe Toyota sees something others do not.
“On hydrogen Toyota may well prove to be right and it’s playing a long game,” notes one insider. “For a long time they got it right with the Prius hybrid before regulation changed. Who is to say they might not get it right on this?”