Was Toyota Right About EVs All Along?

Summary

The video explores Toyota's cautious stance on electric vehicles (EVs), contrasting it with the broader automotive industry's rush toward EV adoption. Despite initially leading with the Prius, Toyota hesitated to fully commit to EVs, instead focusing on hydrogen fuel technologies and continuing to develop hybrids. This strategy appears prescient as the EV market faces challenges like declining sales and profitability issues among key players like Tesla, Rivian, and Lucid. Meanwhile, Toyota's hybrid sales thrive, suggesting a balanced approach might suit the current market's needs better than a full pivot to EVs.

Takeaways

• 😮 Toyota has been historically hesitant to fully commit to electric vehicles (EVs), unlike its early adoption of hybrids like the Prius.
• 🔥 Despite being a pioneer in vehicle electrification, Toyota actively lobbied against EVs and climate initiatives, aligning more with oil companies.
• 💸 The current EV market downturn, with reduced sales and profitability issues among automakers, contrasts sharply with Toyota's strong financial performance.
• 💰 Toyota achieved record high vehicle sales and net earnings in 2023, highlighting its robust fundamentals compared to other companies in the EV space.
• 🤖 The stance of Japanese automakers, including Toyota, is influenced by Japan's energy situation, heavily reliant on imported energy.
• 🔥 Toyota and other Japanese companies are focusing on hydrogen as a key energy source, reflecting Japan's national strategy and abundant 'fire ice' methane resources.
• 🚗 Hybrids, particularly plug-in hybrids, have seen significant sales increases, offering an effective bridge technology between traditional and electric vehicles.
• 🚫 Despite a slow move into full EVs, Toyota leads in hybrid technology, indicating a strategic choice rather than a missed opportunity.
• 👉 Toyota's cautious approach to EVs reflects broader concerns over infrastructure and consumer readiness, not just corporate strategy.
• 💻 The broader future of EVs is still positive, though adoption may not be as rapid as once expected, with hybrids playing a significant role in the transition.

Q & A

Why has Toyota been reluctant to embrace electric vehicles (EVs)?

Toyota has been reluctant to embrace EVs due to a combination of factors, including their belief that EVs are overhyped, concerns about the lack of supporting infrastructure, and high costs. Additionally, Toyota has been actively lobbying against EVs and has been promoting hydrogen fuel cell vehicles as a more viable alternative.

What has been the recent trend in the EV market?

The EV market has been experiencing a downturn with companies like Tesla facing reduced deliveries and stock value, and others like Rivian and Lucid struggling financially. Even legacy automakers who invested heavily in EVs, such as Ford, have faced significant losses.

How has Toyota's performance compared to other automakers during this EV market downturn?

In contrast to the struggles faced by other automakers, Toyota has seen record high vehicle sales and strong financial fundamentals, with net earnings significantly higher than Tesla and Nvidia.

What is Japan's historical struggle with energy production, and how has this influenced Toyota's approach to vehicle electrification?

As an island state, Japan has historically struggled with energy production, relying heavily on imported fossil fuels. This has led to a focus on energy independence, which initially drove Toyota to embrace hybrid vehicles. However, the Fukushima nuclear disaster led to a shift in focus towards hydrogen fuel, which is abundant in Japan's natural resources.

Why did Toyota launch the Prius in 1997, and how did the Fukushima disaster impact Japan's energy strategy?

The Prius was launched when Japan's energy dependence was not as dire, and there was optimism about clean energy and nuclear power. However, the Fukushima disaster in 2011 led to a significant reduction in nuclear power generation, causing Japan to explore alternative energy sources, including hydrogen.

What is 'fire ice' and how does it relate to Japan's interest in hydrogen fuel?

Fire ice is a substance found on the ocean floor surrounding Japan that can produce methane gas, which can then be converted into hydrogen. The discovery of fire ice has fueled Japan's interest in hydrogen as a fuel source and has influenced Toyota's support for hydrogen fuel cell vehicles.

How has Toyota's strategy of promoting hydrogen cars affected the market for these vehicles?

Toyota has been offering significant incentives to promote hydrogen car adoption, such as substantial discounts and free hydrogen for the Toyota Mirai. This has made hydrogen vehicles more accessible and has positioned Toyota as a leader in the hydrogen car market.

What are the advantages of hybrid vehicles over fully electric vehicles (EVs) from a consumer perspective?

Hybrids offer the benefits of both gasoline and electric power, providing improved fuel efficiency without the need for charging. Plug-in hybrids, in particular, allow for electric-only driving for short distances and eliminate range anxiety by switching to gasoline when the battery is depleted.

How has the market for plug-in hybrids evolved compared to regular EVs?

Sales of plug-in hybrids have increased significantly, with an 83% growth in 2023 compared to a 21% growth for regular EVs. This indicates that consumers are more inclined towards the flexibility and convenience offered by plug-in hybrids.

What is the current market leadership in plug-in hybrids, especially in Western markets?

Chinese automakers, particularly BYD, lead the plug-in hybrid market globally. In Western markets, Toyota is the leader, thanks to their continuous development and success with hybrid technology.

What does the future hold for EVs, and how does Toyota's approach to hybrids position them for this future?

EVs are still seen as the future of transportation, but the adoption curve is slower than initially anticipated. Toyota's decision to focus on hybrids has put them in a strong position to pivot to EVs when the market is ready, aligning with their historical strategy of adopting mature technologies for broad consumer use.

How does Toyota's historical approach to technology adoption apply to their current strategy with EVs?

Toyota has a history of not being the first to introduce new technology but rather of bringing reliable, affordable versions of mature technologies to the market. This approach may play out with EVs as well, with Toyota potentially entering the market at a time when the technology is more mature and consumer adoption is on the rise.

Outlines

00:00

🚗 Toyota's Hesitation and Subsequent Success in the EV Market

The first paragraph discusses Toyota's initial reluctance to fully embrace electric vehicles (EVs), despite being a pioneer in electrification with the Prius. It highlights Toyota's past lobbying against EVs and the recent downturn in the EV market, with companies like Tesla and Rivian facing challenges. In contrast, Toyota has seen record vehicle sales and financial success, leading to questions about whether Toyota's strategy was correct. The paragraph also touches on Toyota's biased intentions, influenced by Japan's energy situation and the country's focus on hydrogen fuel, which Toyota is heavily invested in.

05:01

🌐 Japan's Energy Dependency and Toyota's Promotion of Hydrogen

The second paragraph delves into Japan's historical struggle with energy production and its heavy reliance on imported fossil fuels. It explains the country's brief period of reduced energy dependence due to nuclear power, which was disrupted by the Fukushima disaster. This event led to a shift in focus towards hydrogen fuel, which is abundant in Japan's surrounding ocean. Toyota, as a major Japanese corporation, supports this national strategy by promoting hydrogen vehicles like the Mirai, offering significant discounts to consumers. The paragraph also contrasts Toyota's approach with its continuous development and success in the hybrid vehicle market.

10:07

🚦 The Role of Hybrids and the Future of EVs in Toyota's Strategy

The third paragraph addresses the current and future state of EVs. It suggests that while EVs are still seen as the future, their adoption will be slower than initially anticipated. The paragraph discusses consumer concerns such as charging infrastructure and range anxiety, which are leading many to opt for hybrids or plug-in hybrids instead. It acknowledges Toyota's late entry to the mass-market EV segment but praises its decision not to abandon hybrids, which positions the company well in the current market. The paragraph concludes with a reflection on Toyota's historical approach to technology adoption, suggesting that their strategy with EVs may yet prove successful.

Keywords

💡EVs (Electric Vehicles)

Electric Vehicles (EVs) are vehicles that are powered by electricity, either through batteries that need to be charged or through fuel cells. In the video, EVs are central to the discussion as Toyota has been reluctant to fully embrace them, despite being early pioneers with the Toyota Prius. The script discusses the current challenges faced by the EV market and Toyota's strategic positioning regarding EVs.

💡Lobbying

Lobbying refers to the act of attempting to influence decisions made by officials in government, typically legislators or members of regulatory bodies. In the context of the video, Toyota is mentioned as being one of the top lobbyists against climate initiatives, which is tied to their hesitance to fully commit to the EV market.

💡Toyota Prius

The Toyota Prius is a hybrid vehicle developed by Toyota that was one of the first mass-produced cars to feature significant electrical power. It represents Toyota's early foray into electrification, which is contrasted with their later reluctance to fully transition to EVs in the video.

💡Hydrogen Fuel

Hydrogen fuel is a type of fuel that is used to power vehicles through fuel cells, which combine hydrogen with oxygen to produce electricity. The video discusses Japan's interest in hydrogen as an alternative energy source, with Toyota actively promoting hydrogen vehicles like the Toyota Mirai, as part of the country's national hydrogen strategy.

💡Plug-in Hybrids

Plug-in hybrids are vehicles that combine an internal combustion engine with an electric motor and can be charged from an external source of electricity. The video highlights the rise in popularity of plug-in hybrids as they offer the benefits of both electric and traditional vehicles, addressing consumer concerns about range anxiety and charging infrastructure.

💡Market Adoption

Market adoption refers to the process by which a new product, technology, or idea is accepted and used by the general market. The video discusses the slower than expected market adoption of EVs and how Toyota's strategy with hybrids might position them well for when the market is more ready to transition to EVs.

💡Infrastructure

Infrastructure refers to the basic physical and organizational structures needed for the operation of a society or enterprise, such as roads, bridges, and in the context of the video, charging stations for EVs. The lack of supporting infrastructure for EVs is mentioned as a factor that could hinder their widespread adoption.

💡Range Anxiety

Range anxiety is the concern of an electric vehicle running out of power before reaching a charging station. The video mentions range anxiety as one of the consumer fears that hybrids and plug-in hybrids help alleviate, as they can switch to gasoline power when the battery is low.

💡Tesla

Tesla is an American electric vehicle and clean energy company that has been a major player in promoting and advancing the EV market. The video discusses Tesla's current challenges, including a drop in deliveries and stock value, as a point of comparison to Toyota's more conservative approach to EVs.

💡Nissan and Honda

Nissan and Honda are Japanese multinational automobile manufacturers. Alongside Toyota, they are mentioned in the video as being slow to embrace EVs, which is attributed to various factors including a focus on hydrogen fuel and the existing success of their hybrid vehicles.

💡Commoditization

Commoditization is the process by which goods or services become similar in quality and price, turning them into commodities. The video suggests that Toyota's strategy is not about being first with new technology but rather about commoditizing it, offering reliable and affordable versions of established technologies like hybrids.

Highlights

Toyota has been reluctant to embrace fully electric vehicles (EVs) despite being an early pioneer in electrification with the Prius.

Japanese automakers, including Toyota, Nissan, and Honda, have been slow to adopt EVs compared to the global trend.

Toyota was notably the third biggest lobbyist against climate initiatives, after major oil companies.

The EV market is experiencing a downturn with Tesla's deliveries and stock value declining, and companies like Rivian and Lucid facing significant financial losses.

In contrast to the struggling EV market, Toyota achieved record vehicle sales and strong financial performance.

Toyota's stance on EVs is influenced by Japan's energy situation and historical context, including the country's heavy reliance on imported fossil fuels.

Japan's 2011 Fukushima nuclear disaster led to a significant reduction in nuclear power, impacting the country's energy strategy and Toyota's approach to vehicle electrification.

Japan has discovered substantial reserves of 'fire ice', a potential source of hydrogen fuel, influencing Toyota's focus on hydrogen vehicles.

Toyota has been promoting hydrogen cars, such as the Mirai, with significant discounts and incentives to encourage adoption.

While late to the mass-market EV game, Toyota has continued to develop and sell hybrids, capitalizing on their established technology and consumer trust.

Hybrid vehicle sales saw a significant increase in 2023, reflecting consumer preference for the combined benefits of electric and gas power.

Plug-in hybrid sales are outpacing those of pure EVs due to their flexibility and reduced range anxiety for consumers.

Toyota's strategy of not abandoning hybrids has positioned them strongly in the current market, allowing them time to transition to EVs.

The rapid adoption of EVs predicted by some is not materializing as quickly due to various consumer concerns, including charging infrastructure and range anxiety.

Toyota's approach aligns with their historical business model of adopting and perfecting mature technologies for affordability and reliability.

Despite being late to the hybrid market, Toyota became a leader by focusing on broad market adoption rather than being the first with the technology.

EVs currently make up a small fraction of vehicles on US roads, suggesting that there may still be time for Toyota to become a significant player in the EV market.

Transcripts

TOYOTA’S BIG BET: It’s no secret that Toyota has been extremely

reluctant to embrace EVs.

Even though they were one of the first people to jumpstart the electrification trend with

the Toyota Prius, they haven’t been as enthusiastic about going fully electric.

They were even actively lobbying against EVs.

In fact, they were the 3rd biggest lobbyist against climate initiatives, only beaten out

by oil giants.

And it wasn’t just Toyota either.

All the Japanese automakers including Nissan and Honda have been slow to embrace EVs.

And with all the EV hype over the past couple of years, it seemed like these guys were making

a massive mistake.

But, more recently, the picture is starting to look a lot different.

For starters, the EV market is crashing hard.

Tesla’s deliveries are down year over year, they just cut 10% of their global staff, and

their stock is down 65%.

But at least, Tesla is already profitable and can weather the downtrend for as long

as needed.

Rivian and Lucid on the other hand are losing ridiculous amounts of money on every car they

sell, and at this point, they’re just trying not to go bankrupt.

Even legacy automakers who took a big plunge into EVs are struggling to make it work.

In fact, Ford lost $4.7 billion on their EVs last year.

In stark contrast, things are going better than ever for Toyota.

They just put in a record high in terms of vehicle sales coming in at 11.23 million cars

sold in 2023.

And their fundamentals are looking quite healthy as well.

In fact, over the last 12-month period, they netted a total of $31.8 billion.

For perspective, that’s more than double Tesla’s earnings and even more than Nvidia’s

earnings.

Considering these stellar fundamentals, I don’t think you’d be surprised to hear

that Toyota stock is making new all-time highs while the rest of the automotive industry

is getting crushed due to high-interest rates.

So, was Toyota right about EVs all along?

Was it just a short-term bubble that Toyota masterfully avoided?

Or are we just going through an EV slump after which Toyota is gonna get destroyed?

Well, let’s find out.

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But anyway, with the EV market in shambles, it seems like Toyota was a prophet who saw

through all the hype, and to a degree, they were.

In fact, Toyota’s former CEO, Akio Toyoda publicly stated that EVs are quote “overhyped”

and that the lack of supporting infrastructure and high cost would hinder their adoption.

But, this doesn’t tell the full story as Toyota’s stance on EVs isn’t fully analytical,

it’s actually quite biased and to understand this, we have to take a look at Japan.

As an island state, one of the biggest historical struggles for the country has been energy

production.

Japan doesn’t have any crude oil or natural gas pipelines, nor do they have any of these

resources at home.

So, almost all of Japan’s energy consumption has to be shipped into the country, and that’s

not an exaggeration. 94% of Japan’s energy literally comes from cargo ships filled with

crude oil and other fossil fuels.

Things are so unstable that Japan even often asks their citizens to conserve energy to

avoid blackouts.

But, if energy is so hard to come by in Japan, why was Toyota one of the first automakers

to embrace EVs?

Why was the Toyota Prius launched way back in 1997?

Well, historically, Japan’s energy dependence wasn’t nearly as dire.

While the majority of Japan’s energy has come from imports for decades now, it was

nowhere near 94% energy dependency.

And, for a hot minute, it seemed like Japan was actually gonna escape their energy dependence

due to clean energy sources and more importantly nuclear power.

Back in the 90s and 2000s, Japan was one of the world’s biggest nuclear powerhouses.

During the peak of it, roughly a third of Japan’s electricity generation was thanks

to Nuclear power.

And this trend is what prompted Japanese automakers to invest in hybrid vehicles.

It seemed like pivoting cars to electricity was a surefire way to further minimize oil

imports and maximize Japan’s energy independence, but then, things went wrong, really wrong.

In 2011, a massive tsunami and earthquake struck Japan leading to the Fukushima nuclear

disaster.

154,000 people had to be evacuated and Fukushima is to this day the 2nd worst nuclear disaster

in history only beaten out by Chernobyl.

Naturally, Japan cut back on nuclear power substantially over the following years.

In fact, in 2014, nuclear power accounted for 0% of Japan’s electricity generation.

Things have somewhat recovered since then, but it’s only a fraction of where Japan

was before the accident.

So, from an energy-dependence perspective, it doesn’t matter for Japan whether cars

run on gas or electricity as both have to be imported anyway.

This obviously stalled Japan’s EV spirit but it didn’t quite turn the country against

EVs.

What turned the country against EVs was the discovery of a new fuel source: hydrogen.

It turns out that the ocean floor surrounding Japan is filled with a substance called fire

ice.

And each cubic meter of fire ice can produce 160 cubic meters of methane gas which can

then be turned into hydrogen.

Yeah, that right there is why Japan has become so obsessed with hydrogen.

In 2017, they became the first country to create a national hydrogen strategy, and they

have since committed to betting 15 trillion yen on hydrogen efforts.

And as Japan’s largest company, Toyota is naturally doing everything they can to promote

this national vision.

This includes lobbying against EV initiatives, shying away from EV production, and throwing

shade at EVs every chance they can.

Conversely, they’re doing everything they can to promote hydrogen car adoption including

giving them away for nearly free.

Take the hydrogen Toyota Mirai for example.

Normally, this car retails for $66,000.

But, just a few months ago, Toyota was offering a $40,000 discount, 0% financing, and $15,000

worth of free hydrogen meaning that you could walk away with this car for just $11,000 out

of pocket.

So, as you can see, Toyota wasn’t employing some 200 IQ strategy by avoiding EVs.

They were just leaning on promoting something else that would benefit their country way

more.

And it just so happens that consumers ended up on the same page for completely different

reasons.

THE CASE FOR HYBRIDS: Toyota is no doubt late to EVs.

In fact, they didn’t even introduce their first mass-market EV till mid-2022.

For perspective, Toyota started selling the hydrogen-based Mirai way back in 2014.

But, while Toyota shied away from full-on EVs, they never dropped the ball when it came

to hybrids.

They continuously built upon the technology and success of the Prius and what was once

seen as a geeky car has turned into one of the hottest products within the automotive

market.

Not the Prius specifically, but hybrids in general.

In fact, in 2023 hybrid sales were up 76% compared to 2022.

And when you peel back the layers regarding consumer concerns and fears with switching

to full-on EVs, this makes perfect sense.

For a lot of people, hybrids offer the best of both worlds.

For starters, you never have to charge a traditional hybrid.

The battery is small enough that it can be charged purely using regenerative braking.

And this energy can then be used to vastly improve the vehicle's energy efficiency to

45 to 50 miles per gallon.

But, the traditional hybrid isn’t what’s really popping off.

That title actually goes to a more modern style of hybrid, the plug-in hybrid.

If you’re not familiar with plug-in hybrids, they’re basically EVs that can also be powered

by gas.

Generally, they have relatively small batteries that are only able to power the car for 25

to 50 miles.

But, for most people, that’s more than enough for their daily commutes, meaning that they’re

able to fully rely on electricity for transportation on a day-to-day basis.

And the best part is that they never have to deal with range anxiety.

If you forget to charge the car one day or have a longer trip for some reason, it doesn’t

matter because the moment that the battery runs out of juice, the car will simply switch

to running on gas leading to extraordinary range numbers.

In fact, the average plug-in hybrid comes with a range of 400 to 600 miles.

It’s literally the best of both worlds and that’s why last year, sales of plug-in hybrids

increased by 83% while sales of regular EVs only grew by 21%.

And can you guess who leading the plug-in hybrid market?

Well, it’s actually the Chinese automakers and more specifically BYD.

But, when it comes to Western markets, the leader is of course Toyota, and that’s largely

thanks to other legacy automakers and startups going all in on EVs.

In fact, many legacy makers made it a point to skip past hybrids like GM.

At the time, it seemed like the forward-thinking strategy, but unfortunately, consumers haven’t

adopted EVs as quickly as expected.

And as such, GM recently announced that they’re actually gonna backtrack on their hybrid stance.

It’s a similar story with Ford.

Till recently, Ford was betting big on EVs, but now they’re delaying their big EV investments

and focusing on converting their entire lineup to hybrid.

EV-only companies like Tesla, Rivian, and Lucid obviously don’t have this option which

is likely going to make the upcoming couple of years rather rough for these companies.

That’s why Rivian and Lucid’s stocks are making new all-time lows day after day and

why Tesla has shed nearly a trillion dollars worth of market cap.

So, was Toyota right all along about EVs?

THE FUTURE OF EVS: Well, the answer is yes and no, Toyota was

not exactly right about EVs as it’s highly unlikely that people will switch to hydrogen

vehicles or stick with hybrids indefinitely.

EVs are still the inevitable future, but what has become abundantly clear is that the adoption

curve isn’t gonna be anywhere near as fast as EV enthusiasts hoped for.

And initiatives like this that are pushing for all new lightweight vehicle sales to be

zero emission by 2035 are simply not realistic.

The bottom line is that the hassle of EVs is a bigger concern for the average person

than EV makers expected.

And just because EVs cost the same as ICE vehicles doesn’t mean that people are immediately

willing to switch.

More times than not, they’re worried about charging times and charging infrastructure

and range anxiety and cold weather.

Obviously, these concerns will be addressed with time, but in the meantime, the average

person isn’t willing to make the jump directly to an EV.

They’d much rather buy a hybrid or a plug-in hybrid.

This is largely true for even EV enthusiasts who generally own a gas car as well.

Toyota partially saw these concerns ahead of time and they were partially blinded by

the country's enthusiasm for hydrogen, but the one good move they made was to not ditch

hybrids.

This has put Toyota in a strong position within the current EV environment and gives them

plenty of time to pivot to EVs.

When you zoom out though, none of this is really surprising, and I think this Reddit

comment really summarizes the situation well.

“Toyota isn't late to EVs, they're doing what they always do.

You've never had new tech in a Toyota, you've had 10 year old tech that will never fail.”

Toyota has never been in the innovation business.

They’ve always been in the commoditization business.

They specialize in bringing developed technology to consumers with better affordability and

reliability than anyone else.

In fact, they weren’t even early to hybrids.

Hybrids have been around since 1899, so the Prius was actually 100 years late to the scene.

But, that didn’t prevent Toyota from becoming a leader anyway because they were still early

from a broad market adoption standpoint.

And we might very well see a similar story play out with EVs.

EVs only account for 1% of all vehicles on the road today in the US.

So, it may very well turn out that Toyota is actually early to the EV market as well.

And their decision to hold out on EVs may turn out to be the right choice, but only

time will tell.

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