NOTE: This is a reprise of some info we gave you before that was basically one sided. Here we have counterpoints and more balance. Is Toyota being smart, or missing out?
Have you ever found yourself wishing for a time machine to project a decade or longer into the future just to see how things turned out?
For starters, we could settle whether Toyota is wise in sidestepping mass-market battery electric cars for now, or whether EV advocates are correct saying it’s misguided, excessively self-serving, too risk averse, and possibly even conspiring to postpone progress.
Yes, we’ve heard all these allegations and more from a well-connected EV advocate who asked to remain anonymous. And it’s almost ironic considering to date, Toyota has basked in a reputation as an electrification pioneer – a mantel it proudly wears and helps along as needed, now having sold 5 million Toyota and Lexus hybrids worldwide.
“The environmental effect has been an estimated 34 million ton reduction in C02 — the equivalent of taking 4.8 million vehicles off the road for an entire year,” said Senior Vice President of Sales Bob Carter last month of Toyota’s hybridization at its first “Hybrid World Tour” media event in Michigan.
“Hybrids are Toyota’s core strategy,” said the caption to this PowerPoint image. In contradistinction, advocates say the Japanese automaker is overlooking opportunities to leverage its current lead, and may hurt itself while doing little for the ultimate cause. Toyota says its vision is simply about meeting customer expectations.
Toyota’s ecological pop-star status started with its Prius launched in Japan in 1997, and the U.S. in 2000. The company now has 23 Hybrid Synergy Drive vehicles across its global lines with plans for 15 more by 2015.
But with the advent of lithium-ion-powered global electric cars from Tesla, Renault-Nissan and even Mitsubishi – plus limited-market or pending EVs from Chevrolet, Ford, Honda, Fiat, and BMW – some say Toyota’s hybrids are no longer the most progressive means to wean away from petroleum.
The company does have its Tesla-powered RAV4 EV, but this is California-only with just 2,600 units to be built before production halts next year.
And Toyota has otherwise sung the anti-theme to the battle cry of the EV faithful.
“The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” said “the father of the Prius,” Toyota Vice Chairman Takeshi Uchiyamada in September 2012 as Toyota canceled development for the FT-EV II city EV.
Last month in Michigan, Toyota outlined its past, present and future centered on hybrids including plug-in hybrids to come, and mentioned also a plan to leapfrog battery electric to fuel cell vehicles beginning in 2015.
It has never said never for commercialized EVs of the sort that Nissan is now spending billions to cultivate a market for, but expounded on why joining the push for EVs would be a waste of its resources.
Toyota had flown in from Japan Managing Officer Satoshi Ogiso, formerly the Prius lead engineer who’d followed in the footsteps of Uchiyamada, and now higher up in Toyota’s alternative-tech development.
“Most importantly, [emphasis by Toyota] it seemed to be a system that held great potential … for constant improvement, for many years to come,” Ogiso said of the Prius in his earlier days working on its evolution. “Uchiyamada-san would be right. If this was a bridge technology it looked like a very long bridge.”
Toyota’s presentation suggested hybrids will grow to near ubiquity and still be going strong as far out as 2070 and beyond.
Articles of Faith
Actually automakers’ amorphous “all-of-the-above” approach will see several competing – or complementary – technologies vying for a place, but where folks are agreeing to disagree is on how much emphasis should be put today on battery powered cars.
If hybridization is a “bridge,” then all-electric is the ground to which the bridge is leading. Are we on a protracted crossing, or are we already setting up camp on the other side?
One of the beliefs encouraging plug-in EV advocates is U.S. market plug-in cars are doing slightly better than hybrids did in their first two-and-a-half years from 2000 onward.
Plug-in cars are being adopted especially in regions where hybrids were more widely accepted first, and their success is considered evidence of battery electric cars’ destiny to also succeed.
To this theory, Toyota offered a refutation.
First off, sales of perhaps “5,000-10,000” battery electric cars annually is not enough to “move the dial” for Toyota’s fleet to comply with regulations considering the 2 million units per year volume it does, said VP of Technology and Regulatory Affairs, Tom Stricker.
And to say plug-ins are doing as well necessitates an “apples-to-coconuts” comparison because today market conditions and policies are “very different” than in the early 2000s, he said.
Back then, the original Prius swam against a heavier tide in America. Gas was cheap and there were no subsidies except for a tax deduction that might net up to $600.
Stricker observed only two hybrids were marketed for the first 31 months after 2000, the Prius and Honda Insight.
Since December 2010, the U.S. market has seen a dozen EVs and PHEVs come along and their combined volume is only mildly exceeding the two lone hybrid pioneers.
But these EVs and PHEVs are actually riding on the coat tails of hybrids, said Stricker. They are being bought most heavily in regions prepped by hybrids and need less explaining to sell to those already lined up to buy.
What’s more, billions in government dollars allocated for subsidies for consumers, loans and grants for manufacturers and infrastructure providers is adding to a virtual “tailwind” pushing EVs and PHEVs along.
But, Stricker postulated, what if we look at hybrid sales from the moment the IRS allowed them a several-thousand-dollar credit around 2005 through 2010 and California offered solo occupancy for its HOV lanes?
Isn’t this sort of fair? Hybrids in 2005 benefited from the previous several years of hybrid proliferation and so are today’s plug-ins.
Assuming a worthwhile comparison, Stricker presented another chart showing hybrids sold from 2005-on enjoying just some of the props from which EVs and PHEVs have benefited.
Coincidentally, Stricker said, exactly a dozen hybrids were being sold after January 2005, and guess what? For the period of 31 months after the 12 hybrids sold 10-times the volume of the 12 EVs and PHEVs for their first 31 months.
Stricker said he realized this was not a completely equal parallel, but felt it had a measure of validity.
He noted also plug-in car proponents are basically “hanging their hat” on the assumption that battery costs per kilowatt-hour will drop and allow for longer-range, cheaper EVs.
The Electrification Coalition, one of the “more optimistic” advocates of this belief, Stricker said, had estimated a few weeks prior that $275 per kwh will mean a tipping point to be achieved in the next several years.
Stricker figured by then, federal plug-in subsidies will no longer be available, so factoring savings for battery costs, but an increase due to lack of incentives, he calculated EVs’ value proposition would be worse, not better.
That’s one alternate view anyway, he said at the finish of his presentation.
Nissan and GM have reported Prius owners trading hybrids for their Leaf and Volt.
Plug In America’s Legislative Director Jay Friedland turned tables on Toyota’s spin saying this indicates Toyota is missing market signs as its once-faithful move on.
Despite expected and unexpected setbacks, he said, evidence suggests the proverbial horses have left the stable, and there’s no putting them back.
Friedland and others in his camp have pointed to principles including those taught by Crossing the Chasm explaining conditions surrounding “disruptive” technology, as well as statistical analyses explaining the study of “technological diffusion.”
The study of technological diffusion looks at past adoption curves and may also chart how fast a given technology may be accepted from the day of its introduction onwards.
It involves advanced mathematical equations and data-crunching computers but the short story is technology that has made it always did so against resistance.
Trends have shown newer and less regulated technologies became mainstream faster than previous ones – assuming the technology was destined for viability and did not die in the cradle.
It’s as though this more-connected society is consuming new inventions with less lag time, than, say, the telephone, that required 71 years to be in 50 percent of homes. In contrast digital TVs took 10 years, DVD players took 7, and MP3 players took 6.
A paper examining diffusion of battery electric cars, plug-in hybrids, and hybrids by Dr. Patrick Plotz of the Fraunhofer Institute for Systems and Innovation Research (Fraunhofer ISI) suggests these propulsion technologies are substitutable for one another.
His paper goes into great detail, but his charts project proliferation for battery electric and plug-in hybrid cars. By later in the decade of 2020-2030, one hypothetical model suggests hybrids will start tapering off as technology ripens for plug-in cars.
This could be due to plug-in EVs becoming less expensive, their range multiplying, charging much faster, or a combination thereof.
And if anyone is saying three years into it that battery cars are a losing investment, bear in mind we are 13 years since the U.S. Prius launch, and today hybrids comprise less than 4 percent of U.S. sales.
Technically, hybrids are still early in the adoption curve. Toyota now embraces them, but Friedland said it’s misreading the parallel for battery cars.
Diffusion theory contemplates that first-generation EVs are going against societal expectations rooted in petroleum vehicles that have matured for 100 years.
Friedland also noted an “Innovator’s Dilemma” that could be working against Toyota’s leaders and explained in another seminal work with this same title by Harvard Business School professor Clay Christensen.
Unbeknownst to Friedland, his views echoed those from a recent article by Green Car Reports which used tenets on disruptive technology espoused by Christensen’s Innovator’s Dilemma to essentially put Toyota on the therapist’s couch.
GCR writer Matthew Klippenstein succinctly analyzed Toyota’s corporate psyche questioning whether its success with hybrids is blinding and binding it to its past instead of allowing it to bravely go from strength to strength.
This is exactly what Friedland said independently. The idea behind the innovator’s dilemma is that leading technological innovators – such as Toyota – have been shown to lose their market dominance as a potentially superior but underdog replacement technology – such as battery electric cars – comes along.
Past examples of the phenomenon include floppy disk drives that shrunk in size until they were replaced by solid state storage, CRT televisions replaced by flat screens, VCR tapes replaced by DVDs, cassette tapes replaced by cds, and so on.
Along the way there were Big Dogs – like IBM, Sony, etc. – who became weaker members of the pack in specific markets because they failed to embrace on time the superiority of new ideas over the technology to which they were wedded, and they were left behind.
Toyota does not say it will be left behind, but will continue to lead.
It has worked out its hybrid formula which is now quite profitable, does cost less than EV tech, doesn’t need subsidies to sell, refuels in minutes, has no range anxiety, and the market presently speaks louder than theorists.
“Over the past 5 years, the percentage of hybrid sales at Toyota has grown from 10 to 16 percent of our total sales mix,” said Toyota’s Carter. “Honda is less than 2 percent and Ford is less than 3 percent. And while hybrid as a percentage of the total market is just under 4 percent, we believe that it can … and must grow.”
Not at all bashful of Toyota’s stance on hybrids, Carter actually issued a challenge for competitors to join it.
“I would like to see us – as an industry – accomplish the same thing in the U.S.,” said Carter. “That is … 5 million hybrids, cumulatively, in the U.S. by close of business 2016.”
Do you think Elon Musk or Carlos Ghosn are listening?
In any event, Toyota says such things now, but in 1997, Toyota’s leadership had no idea that its allowing the Prius to see daylight would be a turning point and make it a hero.
The company fully admits there was huge internal resistance and skepticism all the way through to the second-generation Prius in 2003.
What’s more, if “business is war,” it’s been suggested today Toyota is playing a cagy strategy of sitting out expensive, uphill commercialization of mass-market EVs while it lets its competitors do the heavy lifting and preparing of a market it may come back to when it sees profitability.
And, Toyota is ultimately not against battery electric cars.
“The performance of this new generation of powertrains will reflect significant advances, in battery, electric motor and gas engine technologies,” said Ogiso of hybrids. “And is part of Toyota’s larger portfolio strategy towards the electrification of the automobile including plug-in hybrid, battery electric [emphasis ours] and fuel cell technologies.”
Fact is, no one, including Toyota, knows the future. According to Toyota media rep, Maurice Durand, its decisions are based on the present as it sees it, and it can shift gears later.
“We are aware of all different possibilities out there,” said Durand, “If the market merited it Toyota would be prepared to meet this need.”
And truth be told, at the moment only Nissan and Tesla are making much of a dent in the battery electric market.
Through August this year, Tesla sold in the U.S. an estimated 13,150 of its pricey Model S, and more tellingly, Nissan sold 14,123 of its Leafs. Limited-market players by comparison are hardly doing more than Toyota’s next-to-nothing. Honda sold 420 Fit EVs, Ford sold 1,225 Focus EVs, even poor Mitsubishi sold only 958 i-MiEVs and the recently launched Chevy Spark EV is only offered in Oregon and California.
In 2012, Toyota’s total U.S. sales rose 27 percent to 2.08 million units. If Stricker said “5,000-10,000” EVs was insignificant, do you think 25,000 like Nissan may sell would make Toyota change its mind?
For now, the answer is not likely. If later technology improves – and assuming the prognosticators in Silicon Valley are wrong – Toyota will be able to pick up where it left off and this is part of Toyota’s long-term consideration, as Ogiso said.
Ogiso also dropped hints about a massive R&D budget for things like advanced solid-state batteries, wireless recharging, and other technologies the company will want in battery electric cars wearing a Toyota or Lexus badge.
And it sees fuel cells coming to maturity soon too, but we’ll save that for another day.
Meanwhile, is Toyota betraying its core as is alleged? Or is it continuing to be true to itself? Is it making the right choices? Are its options still open? Or is it due to miss out?
Lacking a time machine, we’ll have to ask you to check back with us in 10 years or so to learn whether Toyota is being crazy, or crazy like a fox.