Toyota plans to enter EV market in a big way

Toyota, the largest automaker in the world, has been lagging behind in the growing market of electric vehicles (EVs). The company sold 9 million cars by March 2023, but did not sell a battery-charged vehicle till 2019. And when it did manage to sell its electric version, it did not make a dent in a market like China nor was it able to near the popularity of Tesla in California.

Now the company is planning to move back centre stage in the expanding EV market. The new CEO, Koji Sato, wants to change all that in a two-step strategy. First he wants to produce an electricity-gas hybrid, which was first produced in its Prius model in 1997. With the EVs market sliding, Sato wants to gain an upper hand for Toyota vehicles in the immediate future. But he knows that electric is what will work, and he is going about it systematically. First, he wants to increase Toyota’s EV production four times in 2023 compared to 2022. Second, the research wing has managed a technological breakthrough with batteries that run longer and the charging time is less. The manufacturing technology is also set to change. Sato wants to set up a new Toyota plant in North Carolina spending $8 billion. The company is ahead in its hybrid sales.

It is an interesting phenomenon that an older, established company like Toyota is willing to learn from the newcomers in the market like Tesla, use its economic clout to forge ahead with new technology because it is not enough to imitate competition to survive in the market. And this is where Sato followed the right strategy, focusing on research and achieve a breakthrough in technology that will give the company an edge in the market.

There has been a slide in the sale of EVs, and companies like Ford and General Motors have cut back on production as the sale of EVs had come to 30 per cent so far in Delhi compared to the triple digit growth earlier. At the moment, the hybrids are controlling the market, and Toyota is leading the pack as it were.

This goes to show that there is a big learning curve for the EVs. They have to match feasibility in the ancillary markets like battery technology and recharging units before they can turn the whole sector into an electricity driven one. Secondly, they will also have to become comparatively less costly. The cost price is high right now because technology innovation is still at its starting stage. The EVs have to change gradually with added features and more efficient running system over the years. And that research infrastructure is still not in place.

The production of EV on a mass scale is an achievement in itself. Now innovation and improvements have to become part of the process of production at a continuous level. That is, new generation EVs have to be rolled out in quick succession. And there cannot be a long gap between two generations of EVs. That of course can happen when the EVs on roads reaches the critical stage in terms of numbers.

And at the same time, there has to be a variable price tag attached to different models. There has to be the mass model, which is fairly cheaper, and the higher sophisticated model whose price can be fanciful. The question of course is whether the EVs can sustain the momentum of growth. It would be unrealistic to expect that EVs will become dominant in the auto market because there is no option. If the manufacturing technology of EV does not achieve its economies of scale, then the EV market itself and society will face a huge challenge.