Among global automakers, few are held in such high esteem as Toyota Motor Corp. (TM, Financial). This goes well beyond Toyota’s mere scale, which allows it to sell around 10 million vehicles globally every year. The Toyota Production System, the Japanese automaker’s eponymous manufacturing philosophy, redefined the automotive sector in the second half of the 20th century and remains the industry standard for manufacturing excellence to this day.
Despite this illustrious pedigree and living reputation for excellence, both within and outside the automotive industry, Toyota has lagged behind its peers in recent years in one important regard: It has been slow to embrace the battery-electric vehicle, or BEV. However, that reticence appears at last to have come to an end.
An electrifying new vision
On Dec. 14, Toyota unveiled its new and improved BEV strategy to the world. In a glitzy press event, the company announced it will spend $35 billion to accelerate BEV development over the next several years, with plans to roll out a whopping 30 new electric vehicle models by 2030. This marked a significant step up from its prior commitment, which had called for investing $17 billion in order to bring 15 EV models to market by 2025, and is an undeniable repudiation of its BEV-shy past.
Toyota’s new EV plan is certainly ambitious. In fact, it may be even more aggressive, in some respects, than the updated BEV strategy unveiled earlier this month by Ford Motor Co. (F, Financial). Ford’s new EV roadmap, which I have discussed previously, calls for reaching 600,000 annual BEV unit sales within the next two years and calls for at least 40% of total vehicle sales to be electric by 2030. Toyota’s new strategy calls for selling 3.5 million EVs globally by 2030.
In addition to new and retrofitted vehicle manufacturing capacity, Toyota’s lofty BEV targets will require plenty of batteries in the near future. The company has gotten started on the latter front in earnest, announcing plans to invest $1.3 billion to build a battery plant in North Carolina on Dec. 6.
Lexus leads the way
As a massive, multi-brand automotive enterprise, Toyota can hardly be expected to transition to an all-electric lineup overnight. Thus, while the 30 EV models promised at this month’s press event certainly reflect the company’s vast range of vehicle classes and categories, they will come to market only over time. To lead its newly aggressive EV charge, Toyota will be relying on the strength of its flagship luxury brand, Lexus, as Popular Science highlighted on Dec. 18:
“Leading the pack will be Toyota’s flagship brand, Lexus, which will offer an electrified version of every vehicle it sells in North America, Europe, and China by 2030. It will also axe the combustion engine completely in these markets by 2035. This begins with the launch of the Lexus RZ crossover in 2022, which is built on the same platform shared by the upcoming Toyota bZ4X and Subaru Solterra…Lexus will also launch electrified vehicles in at least three other segments, including a full-size SUV, a sedan, and a supercar that supposedly inherits some of the best driving characteristics from the legendary Lexus LFA—only with electric motors powering the wheels instead of a gas-gulping V10.”
Lexus has long been a crucial part of the Toyota constellation of brands. Making it the face of its EV transition thus makes sense, especially since it has largely been more up-market BEV models that have been pushing the market’s broader transition efforts.
My take
Toyota has been something of a laggard among automakers when it comes to EVs, so its recent shift toward a more ambitious and aggressive stance may be welcome news to many long-term investors. However, Toyota has a lot of work to do if it hopes to make its big promises a reality. Its progress over the next year should be highly instructive, in my opinion. I will be watching with great interest.
