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Why legacy automakers are panicking and Akio had to go

4227 Views 134 Replies 38 Participants Last post by  1mrBlacky
Panic is spreading among legacy auto manufacturers. Toyota lost valuable time and will pay the price.

EV market share has been doubling every year. In 3 years, EVs will represent half of total auto sales. And all these sales will go to Tesla, BYD, and those manufacturers who have a solid lineup of EV vehicles that appeal to customers in all income ranges (for example Hyundai/KIA, VW). Any manufacturer who doesn't have at least 4-5 EV models (a compact hatchback, a small SUV, a mid-size SUV and a couple of premium/luxury models) will lose market share. There is no way around it. Toyota MUST have competitive EV lineup in 2-3 years, or they will become irrelevant. Companies that didn't invest in EV technologies are panicking.

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Here is another graphic that shows how pathetic Toyota situation is

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... and I added 2022 sales, added a trend line and ma projection for next 2 years. Time to buy Tesla stock, folks.
The R-square is almost perfect, 0.99.

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I more or less 100% disagree with the OP's statements. EVs as a percentage of new car sales are still a fraction of overall sales. Less than 10%. And the technology is still halfbaked and not ready for prime time. Toyota is sacrificing very very little by instead pushing hybrids (which have a bigger positive impact on CO2 reduction compared to EVs [thanks to higher adoption and lower cost]) and developing/waiting for solid state battery tech to mature.

And both of your charts are misleading if you don't show what percentage EVs are compared to ICEs. A 200% increase of a tiny market share is still a small number. But it can look convincing, and alarming, on a chart lacking perspective.

The Chinese EV industry is being fostered/pushed by the CCP. The Continental car makers are more or less being forced into EV adoption by EU political pressure. US ones less so, mostly pushes by the stock market and left side of the government. It would appear that Japan is the only region where automakers are more freely able to make their business decisions in the real world, rather than a fantasy one.
2021 EV market share was 8.3%.
Final numbers are still coming but 2022 EV market share was well above 10%, somewhere around 13 and 14%. EV market share has been growing at about 60% year-on-year rate. It's almost certain that EV market share will hit 20% in 2023.
And yet most of the low hanging fruit has already been plucked. Once all the early adopters, Greenies, rich people wanting the latest tech and people that buy EVs because of government giveaway money have bought their cars, adoption of the general public will slow down. I'm not saying market share won't continue to increase (government regulations have all but made that a certainty). I know very few (if any) people that are interested in paying premiums for EVs (over conventional vehicles).

But a lot of people are waiting for the technology to sell itself, as a superior choice over an ICE vehicle, and we're not there yet. In fact governmental push even turns some people off. Meanwhile, PHEVs, which Toyota is a leader in, make much much much more sense for all factors involved.

Good debate though (y)
You're right about US market. But don't forget that US represents only 11% of the global auto market.

The situation is very different elsewhere. In China, which is a auto market 3 times the size of the US, it's not the rich who buy EVs. China, the largest auto market in world, has plenty of affordable EV choices, and EVs are becoming the #1 choice for 1st time car buyers. Europe is moving fast, too.

And Toyota is NOT the leader in PHEV. Have a look at the graph I posted above. Toyota is in the bottom third when in comes to PHEV, well behind BYD, VW, Stellantis, BMW, Mercedes, CHJ. Again, don't assume that because Toyota is "big" in the US, the same applies to other place. The world is MUCH bigger than US.

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North America (land of the free).
That is debatable. I lived many years in Europe, and in some aspects, Europeans have much more freedom than Americans. They have real democratic governments, not a two-party "duocracy". They have way more personal freedom regarding what they can do in public. Many behaviors that are perfectly acceptable in Europe will get you arrested in the US.

Most companies shouldn't decide their policies based on communist China
China is doing exactly the same thing that US did in the second half of the 20th century. Meddling in politics of other countries. Overthrowing democratically elected governments in Central and South America because they were "inconvenient" for American companies. Even staring wars on a false, fabricated pretext (remember Gulf of Tonkin?).
No country can dominate the world for long. It's payback time.
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Why doesn’t Toyota want to get into the ev game/market or do they have other ideas or plans.
Because Toyota made exactly the same mistake that GM and Ford did when Toyota and Honda brought their compacts to the US. The same mistake that Blackberry and NOKIA did about Apple's iPhone. And many examples more ...
Toyota dismissed Tesla and EVs as a small "fringe" fad that will only appeal to a small number of consumers. They lacked vision and wasted valuable time they could have used to develop EV technology. Instead, Akio Toyoda was fooling around with sport vehicles and hydrogen. And now that market is proving them wrong they are trying to catch up, hence the departure of Akio from the top position.
Toyota is currently relying heavily on BYD technology for their first generation of EVs. I wouldn't be surprised that next few EVs models that Toyota brings to the US will be actually rebadged BYD cars. Developing a new vehicle platform takes many years (5-7), and Toyota doesn't have that much time. Actually, it is quite plausible that BYD will buy Toyota in a few years, and Toyota will be just a BYD subsidiary / brand.
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So how will EVs work for apartment dwellers and those who rent?
Say you have an apartment that has 100 units, would each unit get their own dedicated charging station? What about homes with no garages? Historic homes? How about people who live in very cold places such as Fairbanks Alaska or Siberia?
Ask the Norwegians. Norway is cold, they live in apartments, and EV are 80% of new vehicle sales. Somehow they figured it out.
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So Toyota is going to get into the ev game but too late. Way would byd buy Toyota. Just asking.
Because BYD is well established brand in China, but with little presence elsewhere. On the other hand, Toyota is a valuable global brand, that would give BYD access to all those markets where Toyota is a big player already (US, Europe, Asia, Africa, Middle East, ...). BYD already has tons of money, while Toyota's market capitalization will likely shrink over the next 2-3 years, so BYD will be able to buy a controlling stake in Toyota. Similar to Haier buying General Electric appliances business including the right to use General Electric brand name.
I'll tell you what scares traditional automakers, that Tesla just reported $24.1 Billion in 4th quarter earnings and $3.7 billion in profit. That makes everyone else both scared and have watering mouths too.

What Tesla has achieved is not something others can do overnight. They build custom machines to makes their auto more efficiently, aimed for a lower volume break-even, have passed that by a long shot and now make nearly $6000 per vehicle profit, 7 times the average of anyone else. Others want that and will chase it to the ends of the earth. Luck all.
While Tesla was visionary, Toyota was stupid. Toyota assumed that 85% of vehicles sold in the US by 2030 will be still powered by a gasoline engine, and that the global share of EVs would be 50% by that date. They are off by at least 4 years. EVs will hit the 50% mark 3 years from now. And Toyota recently announced that they are stopping all development of vehicles based on the e-TNGA platform (derived from gas-powered TNGA), and will now develop an EV-only platform to be able to compete with Tesla. The problems is that the earliest they will be able to start selling vehicles based on this new platform is late 2027 or 2028. By then, they will lose half of the market share to Tesla, VW, Hyundai/KIA. All these manufacturers already have a dedicated EV platform.
Toyota wasted 5 years of precious time because Akio Toyoda wanted to play race driver, instead of understanding technology.
To make things even worse for Toyota, Tesla is working on a new platform that is expected to cut EV cost in half.
Toyota already admitted that they can't match Tesla's (and BYD's) current manufacturing costs, so the new Tesla platform will make things even more challenging.
And Toyota is drawing in debt already, with over $200 billion of long term liabilities, slightly more than there total market capitalization. They will need billions more to develop new dedicated EV platform. Now, they do have substantial cash reserves, but this can easily dry up with supply chain challenges and rising costs. While Toyota appears to be highly profitable at first sight, there financial situation is actually quite similar to where GM was a few years before bankruptcy. GM was also profitable, but they had crushing long term liabilities which eventually exceeded their assets. Toyota is perilously close to the same situation - with debt being very close to their combined market cap + cash reserves. However, any major drawdown on the cash reserves (for example, an expensive multi-billion recall, or another economic upset like COVID or a major war) could very easily tip them toward insolvency, and technically their labilities will exceed their assets. From their, it's a domino effect. Toyota could very quickly become a target of a very cheap takeover by a cash-rich competitor like BYD.

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Katekebo; Always points n counter-points! Just released today, source:….Toyota has been named, Best Selling Automaker in 2022, with just under 10.5 million units, followed by VWGroup with 8.3 million. These are global sales numbers with supply chain issues, chip shortages and confusion around what to acquire Petrol/ICE, PHEV, BEV, FCEV etc. Should the sky really be falling, currently it would be on top of a-whole bunch of Toyotas!

All voids must be filled agreed, should it become an auto manufacturer other than Toyota, they’ve got a lot of catching-up to accomplish, My Two Cents!
Toyota is fine now. They are #1 in sales, make a decent profit and have a competitive product lineup TODAY. The issue is 3-5 years from now. EV adoption is moving faster that expected, and key competitors (Tesla, BYD, Hyundai/KIA, VW, Mercedes) have developed EV-dedicated platforms which are much cheaper and efficient for EVs than Toyota's. Toyota thought that they could compete in a relative small EV market with an e-TNGA platform shared with ICE powered and hybrid vehicles. This would make sense if EV were a small percentage of the market (less than 10%). But EV sales are already higher that 10% (12% in 2022) and growing fast. According to Ford a dedicated EV platform is 40% cheaper to manufacture than an ICE one. And Tesla is working on their next generation EV platform which they claim will cut the cost of EVs in half.

So now Toyota HAS TO develop a dedicated EV platform and do it fast. And that's challenging. 3 years is not enough. 5 years is a more realistic timing to develop a new platform, iron out all reliability issues and convert existing plants. By then EV market will be ~50% or more, and all these sales will go to Toyota's competitors. Toyota announced in October that they were stopping all development on the e-TNGA platform and instead starting from scratch to work on a new EV-only platform. Adding to the difficulty of this situation is the fact that Toyota has a massive amount of debt ($206 billion as of latest report) and developing a completely new platform and production line for it will require a lot more more money. Toyota is already looking at Tesla to copy their manufacturing process. But time is not on Toyota's side.

Things will move slower in the US, but US is hardly relevant anymore. It is only 11% of the global market and shrinking. China alone is 2.5x bigger market than US, and it's Chinese market that will dictate future automotive trends. And China is going EV at warp speed.
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In 1922 Sarah T. Bushnell published the biography “The Truth About Henry Ford”. She included a story about attorney Horace Rackham whose law firm drew up the incorporation papers for Henry Ford’s automobile company in 1903. Rackham was asked to become an investor, but his health was poor, and he feared risking his precious savings. So he visited an unnamed leading banker to obtain advice.
The banker took him to a window. “Look,” he said pointing to the street. “You see all those people on their bicycles riding along the boulevard? There is not as many as there was a year ago. The novelty is wearing off; they are losing interest. That’s just the way it will be with automobiles. People will get the fever; and later they will throw them away. My advice is not to buy the stock. You might make money for a year or two, but in the end you would lose everything you put in. The horse is here to stay, but the automobile is only a novelty — a fad.”


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It's obvious that the author of the investmentwatchblog is not an engineer. He's worried about power distribution infrastructure. The part that he missing completely is the fact that EVs can actually alleviate the power distribution problem. You can think of the electric grid as comprised of three elements: generation, distribution and consumption.
There is already a revolution going on in the generation area with distributed generation via solar panels installed on private homes. The problem is that this distributed generation is very uneven (the sun only shines a few hours per day) so it requires the conventional power generation to step in almost instantaneously to supplement the variations. This is expensive and puts a lot of strain on the distribution. It would be really nice if one could store the excess energy produced during intense sunshine hours and use it later when needed. And here is where EVs step in. Most EVs have way more storage capacity then they need 90% of the time. Your EV can can have 300 miles range, but on average people drive only 20-30 miles per day. So what can you do with this excess stored energy? "Inject" it back to the grid so your Tesla can "sell" its excess electricity to the neighbor's Tesla that is getting ready for a long road trip. Of course this requires that all these "smart" devices talk to each other. But the technology not only exists already, it's actually put in practice. Have you ever seen a guy from the utility company to ever come to your house to read the electric meter like they did 30 years ago? Of course not, because now your meter is constantly "talking" digitally with the utility company using the same wires that bring electricity to your house. And there is no reason why your meter (and Tesla) can't talk real time with your neighbor's meter (and Tesla). All the communication infrastructure is already there. And it's being tested as we speak.

Let's talk in 10 years ...
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Kate, with respect I suggest, my Econ Prof would grade your paper quite high on the bell curve. My example of this Manufacturing Void, or laps in business trends etc, circles back to biblical thought; “The first now shall”…you know the rest. The same way I chose my first Honda Civic in the 70’s, new customers will move-on to the newest n most innovative vehicles they can find.
It's the essence of S-curve in innovation. EVs are the disruptive innovation that is allowing new players to step in and replace old, mature competitors.
Funny enough the pic below shows the transition from compact cassette to CD. The Dutch company Philips invented the former, while the latter was invented in partnership between Philips and SONY. Both were leaders in consumer electronics, very much like Toyota is today in automotive field. Philips did a great job by creating disruptive innovation not once, but twice in a row. But eventually both Philips and SONY faded into becoming irrelevant because they didn't catch on the digital revolution and were outclassed by Apple and its iPod.
Toyota is the SONY, Tesla is the Apple. Some established companies realized the potential of EVs and invested early (Hyundai/KIA, Mercedes-Benz, VW). New players sprang overnight (BYD). Toyota, on the other hand, is behaving exactly like SONY did when CD was becoming obsolete - SONY developed Blu-Ray, an incremental improvement to CDs which helped them to stay relevant for a few years, but eventually was replaced by streaming and solid state storage. Does anybody buy SONY TVs these days? I haven't seen one in stores in ages - it's Samsung, LG, Visio, etc. Toyota's hybrids are a perfect analogy to Blu-Ray, an incremental (and significant) improvement over previous technology, but not a disruptor.

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Read the article.. Educate yourself. Our power grid much less power production cannot support EV fantasies.
You're looking for "education" in the wrong place. Stop reading conspiracy crackpots and get an engineering or science degree at a university.
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Someone posted on Scotty's recent video why Toyota is hesitant with EVs; it does deal with apartments. many Japanese live in apartments near or in the major cities which could make it difficult to set up charging stations to cover every car driving residents living there.
Japan has electric infrastructure issues. They shut down their nuclear power plants after Fukushima and still have generation capacity issues. Their distribution infrastructure is also in worse shape than the US. Japanese government has been prioritizing hydrogen as the fuel of the future.

In general, this insular mentality has costed Japan a lot in more areas than just automotive. The world is much bigger that Japan (and the US), and this has forced Japanese companies to develop two different product categories, one for the domestic market, another for the rest of the world. China and Korea are much more "global" thinking allowing them to optimize their industry. Consequently, Japan has lost their leadership in many industries where they were the undisputed leader a few decades ago: electronics, shipbuilding, just to name a few. And now it's their automotive industry that is quickly losing leadership to China.
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