On December 14
th
, the president of Toyota Motor (NYSE: TM) Akio Toyoda committed to making 3.5 million EVs a year by 2030, only seven months after the Japanese giant set a target of selling only 2 million EVs by the end of the decade. Toyota felt compelled to update its plans for carbon neutrality after the November climate summit or more precisely, after seeing how serious countries are in making strict energy policies.
A new plan – all in on EVs
Toyota has boosted its planned spending on battery research and production from ¥1.5 trillion to ¥2 trillion, which is equivalent to $17.6 billion. Earlier in December, Toyota also announced its plans to build an EV battery plant in the US. It committed $1.25 billion to the North Carolina plant that will create 1,750 jobs, with production expected to kick off in 2025. Overall, Toyota’s EV bet adds up to $35 billion to be spent over the next decade.
Its upscale Lexus brandd will become an only-electric globally by the end of the decade in the US, China and Europe while the brand aims to sell only full-electric cars globally by 2035.
A change of thought
Until recently, Mr. Toyoda had distinguished himself with cautious remarks about EVs, questioning if customers are ready for a battery-powered car and whether EVs are truly good for the environment because the majority of electricity across the globe is generated from fossil fuels who are the greatest culprits for climate change. In December 2020, Mr. Toyoda also warned that a hasty shift to EVs could devastate the supply network that was established for producing internal combustion engine cars. Under this scenario, the existing business model of the entire automotive industry is bound to collapse.
A lot has changed even since May when Toyota finally admitted EVs are the future, and it is because of the climate summit in Glasgow, Scotland, and the Biden administration’s focus on increasing EV adoption. On December 14
th
, we saw Mr. Toyoda in a new light as he praised EVs as fun to drive in a video of himself driving a Lexus EV in development. At the news conference, he stated that the efficiency of an electric motor greatly exceeds that of its ICE counterpart.
The EV race
Nonetheless, Toyota’s shift to EVs is still lagging competitors. According to Mr. Toyota, the reason is the undeveloped charging infrastructure and consequently, lack of electricity supply, in its major selling locations. But, looking at Toyota’s figures, there is room for criticism. For the year ended on March 31
st
, Toyota recorded 9.9 million total retail vehicle sales. Assuming the same total, this would mean that the 2030’s target of 3.5 million EVs makes merely one-third of global sales. As a comparison, Ford Motor Co. (NYSE: F) is aiming to have 40% of its sales come from EVs by 2030. Volkswagen AG (OTC: VWAGY) who is closest in size to Toyota, plans for half of its sales to be EVs by the end of the decade, with the luxury maker Daimler AG (OTC: DDAIF) aiming for its Mercedes-Benz brand to go fully electric by the end of the decade.
But, Mr. Toyoda finds three-and-a-half million vehicles to be a big number, equivalent to the entire output of a company such as Daimler and therefore finds any kind of criticism of the depth of its commitment unfair.
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