“Toyota’s plans will expand the appeal of EVs and the marketplace for consumers.”
Japanese automaker Toyota announced Monday its long-term electric vehicle (EV) ambitions. The company said it will include 10 fully electric vehicle models in its line-up by early next decade and plans to offer all of its models by 2025 in electrified form, whether fully electric, plug-in electric hybrid (PHEV), or fuel cell. The company aims to sell 5.5 million EVs per year by 2030 and invest $13 billion to reach this objective.
“Toyota’s plans will expand the appeal of EVs and the marketplace for consumers,” Rebecca Lindland of Kelley Blue Book told The Fuse.
The announcement represents a pivot for Toyota. Toyota has touted hydrogen as its main alternative fuel source for the future even though the company has seen tremendous success with its PHEV Prius, the first electric car to break through with significant sales.
Why has Toyota shifted to aggressive plans in electrification?
Toyota has pivoted to EVs as its competitors have expanded their electric portfolios and sales have soared. Analysts say that it makes strategic sense for Toyota to align its priorities more closely with its peers as battery prices fall, consumers begin to shift toward EVs, and EV sales continue to hit records. Traditional automakers such as GM, Ford, Volvo, VW, Daimler, along with tech company Tesla, have committed to increase the number of EVs in their long-term plans. The success of Tesla’s Model S and GM’s Chevy Bolt indicate how much momentum EVs have experienced in the last couple of years. In fact, in the past 12 months, Chevy Bolt, with a range of 238 miles, registered the highest sales of a new EV model in its first year. With battery costs declining, consumers becoming more comfortable with electrification, and the $7,500 federal EV tax credit surviving tax reform, EV sales are poised to continue on their upward trajectory.
Besides mirroring its competitors, Toyota is committed to reducing tailpipe emissions in its vehicles by 90 percent by 2050 and sees EVs as a key factor in meeting its goals. “Electrified vehicles, which are effective for economical consumption of fuel and promoting usage of alternative fuels, are indispensable in helping to solve current environmental issues,” Toyota said in a press release. Toyota’s long-term plans will boost its appeal in California and other states that require 15 percent of new sales to be zero emissions vehicles (ZEV) by 2025. At the same time, shifting toward electrification also supports Toyota’s ability to penetrate markets such as China, India, and Europe, where governments are luring consumers to EVs with subsidies and other incentives. In its press release, Toyota said its 10 fully electric models will be first available in China at the beginning of next decade.
The difficulties with hydrogen
For Toyota, the lack of infrastructure has been a key issue in the deployment of hydrogen vehicles. Consumers can recharge EVs at home, but with fuel-cell cars they must use public filling stations. As of now, there are only 39 hydrogen fueling stations in the U.S., with most in California. The lack of infrastructure forced Toyota to temporarily halt U.S. sales of its Mirai model early last year, and total sales globally have yet to pass 5,000. Hydrogen vehicles also have to deal with high costs. The Toyota Mirai, first available three years ago, has sold for $57,500 before incentives, and the price of constructing a hydrogen refueling station is also well above gas stations. Fuel costs are volatile and are currently above petroleum. The California Fuel Cell Partnership reports that hydrogen prices currently fluctuate from $12.85 to $16.78 per kilogram. But hydrogen prices would have to drop to below $8.75 per kg to make economic sense with gasoline at $3.50 per gallon.
Toyota’s announcement of its electrification plans does not mean it will abandon hydrogen.
Toyota’s announcement of its electrification plans, however, does not mean it will abandon hydrogen. Toyota’s hydrogen efforts are showing promise in the heavy-duty sector. The company has worked with the state of California on a major hydrogen fuel cell trucking project, and it has completed initial testing and is now running regular cargo routes from Port of Los Angeles and Long Beach terminals. Toyota has also increased its investment in infrastructure, announcing last month that it would build a renewable fuel-cell power-generation plant and a hydrogen fueling station at the Port of Long Beach. The shift toward lower emissions will require a multitude of solutions, and hydrogen will remain part of the vehicle mix that Toyota offers.
Another boost to the long-term EV outlook
EVs saw tremendous growth this year, but they still represent approximately only one percent of overall sales. Nonetheless, Toyota’s plan is another step in making EVs mainstream and laying a foundation for mass penetration in the future. “The more manufacturers that come out with EV models, the more routine it will be for consumers to buy them,” said Lindland.
Toyota, like other traditional automakers, is a trusted brand, and consumers are more likely to take chances with new technology with established companies. The investment in technology will help Toyota expand its presence in the EV space, and it will work with Panasonic to improve battery technology. Analysts expect EVs to reach cost parity with internal combustion engine (ICE) vehicles in the middle of next decade as battery costs fall. The increasing sales of EVs and ongoing government incentives to purchase EVs, along with more companies like Toyota rolling out new models at a time of low gasoline prices, the outlook for further electrification of the vehicle fleet continues to improve.