Have Japanese automakers blown?

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Japanese cars ruled the world. In terms of sales, they still do. The world’s number one carmaker Toyota sold 10.5 million vehicles in 2021, compared to 8.9 million for second-place Volkswagen, even though the latter was in the lead in terms of turnover. But Tesla overtook Toyota in market capitalization a few years ago and is still worth more than three times as much. While Toyota isn’t going away anytime soon, there are clearly problems ahead and the company is starting to show signs of recognition.

Step back a few decades and Toyota was the golden child of eco-driving. The Prius may have been much ridiculed by fossil fuel enthusiasts for its emphasis on frugality, but Toyota wrote the book on using a hybrid drivetrain to squeeze more economy – and lower emissions – from an internal combustion transmission. More recently, however, the Japanese giant has emerged as the uncompromising evil of the auto industry, seen as the automaker doing the most to delay the switch to battery-electric vehicles. It didn’t help when Toyota’s first all-electric car, the bZ4X, had to be recalled after a problem with its wheels.

More importantly, Toyota has spent far too long chasing the hydrogen dream, assuming hybrids will be fine until that dream comes true. The company is of course to be commended for pioneering the hybrid and helping to reduce emissions. But Toyota has also made numerous statements intended to delay the arrival of BEVs, even though hydrogen seems no closer to arriving for everyday drivers than it was a decade ago.

There are only seven H2 refueling stations in operation in the UK. Even in California, the Mecca of hydrogen, the situation is not rosy either. If you look at the Hydrogen Fuel Cell Partnership State Site every day, a worrying number of H70 pumps needed for FCEVs like the Toyota Mirai are regularly out of service, which matches anecdotal reports from disillusioned California owners. It’s all well and good to talk about a five-minute refueling, but that’s not much if it takes you 45 minutes to find a pump that works.

However, one Japanese automaker put more eggs in the BEV basket than Toyota. Nissan has been manufacturing the Leaf for more than a decade, and this vehicle has improved considerably since its launch. Some aspects of the car now seem dated – in particular the use of the CHAdeMO DC charging connection – but it’s still a very practical and efficient electric car. Finally this year Nissan renews its BEV range with the Ariya, an excellent electric SUV, with only a relatively high price to dampen its appeal. However, it came alongside the Nissan Qashqai e-POWER, which uses an internal combustion engine as a generator to power its electric motors. The Qashqai was recently joined by a version of the hugely successful X-Trail with the same type of powertrain.

Nissan’s strategy with these “series hybrids” shows the fence on which traditional manufacturers have to sit. They have invested heavily in the development of the internal combustion engine, and although electric vehicle sales are growing rapidly in most developed countries, they are still far from being the majority. In countries with less reliable electricity infrastructure, the switch to electric vehicles is likely to take much longer than the 2030 deadline set in European countries.

Nissan UK Vice President and Managing Director Andrew Humberstone, speaking at the launch of the X-Trail e-Power, says the company has a huge amount of market information and research from Leaf. He says Nissan is waiting for infrastructure and consumers to catch up and need to consider markets beyond the booming UK and Europe. Nissan plans to have 75% of its models electrified by 2026, before going fully electric by 2030. That probably won’t mean a 100% BEV lineup by then, though. There will still be many markets where fossil fuels will continue to dominate.

According to François Bailly, Nissan’s senior vice president and chief planning officer, the company has great confidence in its development of solid-state batteries to take its electric vehicles to the next level. This technology will offer better energy density, with a target arrival date of 2028. By then, Nissan will have a pilot plant, with the main research taking place in Japan but in partnership with the University of Oxford. While Nissan keeps an eye on hydrogen and may launch a midsize van using this type of fuel, Bailly wonders about the cost of fuel cells versus batteries and its limited infrastructure.

There are many factors to consider during this time of transition in the automotive industry. Traditional car manufacturers need to somehow reduce their manufacturing of fossil fuel vehicles while increasing electric vehicles. Skoda, like many manufacturers, has reorganized its factory in Mlada Boleslav in the Czech Republic to manufacture both hybrids and the all-electric Enyaq iV on the same line, with the ability to dynamically switch between the two based on demand. BMW has taken a similar route, for example building the 7-series, i7 and iX in one factory.

Startups like Tesla and quasi-startups like Polestar don’t face this challenge. Of course, they face other challenges to grow a business with huge development costs and initially low revenues. But it’s a one-way trajectory — up or down — so they can focus on maximizing efficiency in their EV manufacturing process. Traditional automakers must strike a balance, constantly adjusting their volumes of ICE versus BEV in response to growing but still unpredictable demand. One of the reasons for Toyota’s electric vehicle problems stems from the fact that its e-TNGA EV platform is designed to be assembled on the same lines as its internal combustion vehicles, as it only planned to sell 3.5 million BEVs by 2030, a third of its production for 2021. But now BEVs are expected to exceed 50% of car sales by 2030 globally.

It looks like Toyota finally gets the message. The company would be consider a change in its EV strategy. This will be based on a series of improvements to its existing e-TNGA platform, having suspended work on some of its current 30 EV projects. This will slow down current deployment but increase manufacturing efficiency, taking into account the cost savings available from production technologies such as Tesla’s Gigapress. At least it looks like Toyota realizes its BEV growth forecast has been way too low and is changing course. He could have already ruined his chances, even if Nissan does not seem so vulnerable.

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