FAILURE 2.0 Toyota Scrambling to Reboot EVs

October 2022 was the startup again of production of the bZ4X as well as the announcement of the bZ3, the second EV in the bZ series. This second electric sedan was jointly developed between Toyota, BYD and FAW Toyota of China. Many would have thought that Toyota was finally on the bandwagon for moving forward with EVs as they had announced 30 new EVs to be produced and released by 2030. This in comparison to companies like Hyundai or GM where they have committed to having EVs replace full portfolios by 2025.

So why then is a reboot in order for Toyota?

Per an exclusive story released by REUTERS, "Exclusive: Toyota scrambles for EV reboot with eye on Tesla"

We need to take a few steps back first to understand a little history. The 1970's and the world's first oil issues with the Arab countries forced America to change almost overnight from gas guzzling V8's to 4 banging econoboxes for autos and Japan was new on the scene with fuel thrifty little cars and trucks.

This actually began in the 1960's when two individuals, W. Edwards Demming (renowned statistician and management expert) and Peter F. Drucker (father of modern management thinking) offered American manufacturing a concept of better productions through lean manufacturing and a transformation of management to get greater innovation, higher productivity and quality, joy in work and better jobs overall. At America's peril U.S. companies ignored these two visionaries and they left for Japan where Toyota's management system was designed based on their ideas. To quote Shoichiro Toyoda, Honorary Chairman and director of Toyota: "There is not a day I don't think about what they meant to us. Deming's 14 Points is the core of our management."

Lean manufacturing is the Deming and Drucker core to how Toyota has become the most efficient manufacture of autos to this day.

So, one can understand the thought on this, here is the core of these two men's thinking.

At this point, Toyota was moving into very efficient manufacturing processes with modern management training that would make teamwork between management and assembly line workers a success for all.

Fast Forward 6 Decades and now you have Toyota, stuck in that past, still doing the same thing they have done over and over but with a twist. Toyota moved forward with Hybrids showing the world you could have very efficient autos, but this is also where the path to the future diverges. Toyota moved into Hydrogen as the fuel of the future where they would continue to have mass produced auto's that would have hybrid systems that ran on Hydrogen. 

Another company based in California at the time called Tesla believed electric vehicles was the future. EVs was the way to go and with it a cleaner way to live with autos that were less complex and less toxic liquids that had to be used to run. Tesla not only won this battle of EV versus Hydrogen but was showing the way by allowing a large set of their patents to be used globally to get others to build EVs.

Toyota then corrected their course to embrace EVs with a plan to have 30 EVs out around the globe by 2030 as launched in 2020 and with their first EV the bZ4X being released on their complex eTNGA electric platform. This was supposed to support this modern portfolio that was shown off by Toyota.

This was supposed to be a very efficient future platform to standardize the whole company on globally for the 21st century.

eTNGA electric platform

This is where the big problem lay in that this is still based on traditional ICE production of many parts to build an auto and Tesla was not sitting still in how they produced EVs.

Tesla was the first company to move to MEGA Cast parts and this is what has destroyed this second change of course for Toyota as the eTNGA platform is based on building many little parts into an auto, still very complex and time intensive at a time that Tesla has reduced costs by using Mega Casting.

They Model Y went from a 70 piece hand assembled rear end to a single piece by way of Mega Casting.

The physical pieces look like this:

70 piece assembled unit

Mega Cast Unit

Now that you have been brought up to speed on why this is a Reboot of Toyota's EV plans are that four individuals per the REUTERS story talked on how Toyota is allowing into production those autos, bZ4X and bZ3 to move forward as they have halted all other EVs due to the fact that Tesla is more profitable and efficient compared to Toyota's eTNGA platform of old-world thinking.

Internally at Toyota, there is a proposal under review that would make a dramatic shift for Toyota and rewrite their $38 Billion dollar EV rollout plan to better compete with Tesla and GM who has just started to use Mega Cast in their EVs.

An internal working group at Toyota has been charged to outline plans for improvements to the existing EV platform or if needed a new architecture these four individuals have stated. Current work on the 30 EV projects announced last December 2021 has been suspended. This includes according to REUTERS the documents they were allowed to see that included the Toyota Compact Cruiser Crossover and the battery-electric Crown autos.

Toyota has committed to be carbon neutral and to achieve this, the current programs will not allow Toyota to achieve this and as they work with their range of partners and suppliers, it will be essential to initially slow the work on EVs to allow Toyota to put in place what is needed to make EV manufacturing more efficient as industry-wide EV sales run past Toyota's earlier projections.

Green investors and environmental groups have argued that Toyota, once a darling of environmentalists for their hybrids has been slow to embrace the EV revolution and ignored cleaner ways of doing business due to an outdated thinking from the 60's.

Even the Deming and Drucker groups have moved on from where Toyota is today as Toyota in this internal review that was triggered by younger engineers and executives has realized that Toyota is losing the factory cost war to Tesla on EVs and other legacy OEMs that have embraced changes such as Mega Casting.

Toyota's plan was that EVs would not take off for 2 to 3 decades and the eTNGA platform could be built alongside ICE autos and hybrids on the same assembly line. This was based on Toyota selling 3.5 million EVs by 2030 a year or 1/3rd of their global production to stay competitive according to these internal sources.

EVs are now on pace to replace 50% of global auto production by 2030 at a pace that Toyota is not ready to deal with nor the industry-wide investments that now total $1.2 trillion dollars by 2030.

According to these four internal sources, Shigeki Terashi, Toyota's former chief competitive officer is the person now leading this Toyota EV review team. Terashi was contacted by REUTERS for comment, and he declined to comment at this time.

According to the internal sources, Mr. Terashi team is designated BR or Business Revolution group which has only been used twice, once in the 1960's and again in the 1990's as Toyota went through internal revolution in changing business to increase profits and growth.

This BR team is looking at how to fix the eTNGA platform in the short term to be profitably competitive with Tesla but retire it for an all-new EV dedicated platform that takes into account efficient processes like Mega Casting. This new EV platform would not be ready for 3 to 5 years as why a fix to eTNGA is needed.

Areas of improvement to be made is a massive change in how thermal management is done. Tesla has already moved to heat pumps and a very efficient way to manage the temp of the battery pack and the internal cabin area. On top of this is the need to simplify and reduce the size and weight of an EV battery pack which are currently being made by Denso and Aisin for Toyota. 

A decade ago, when Toyota took a financial stake in Tesla and the two collaborated on battery-electric technology which was used in the RAV4 Hybrid, many of Toyota's engineers believed that Tesla technology was no threat to Toyota with the attitude of "There was not much to learn" Toyota concluded in 2014 and Toyota sold their stake in Tesla in 2017.

Today, 2022, Toyota now recognizes that as the Worlds Biggest Automaker, they have been surpassed in factory efficiency as Tesla is the new benchmark for EV manufacturing costs and this marks a major reversal from 2014.

Toyota much like many other Asian, European and American auto companies now find themselves playing catch up to Tesla and having to reboot their EV plans to take new age thinking again into account on how to build EVs far more efficiently and cheaper.

Tesla has today already informed the world that their goal is a 3-piece base frame that allows for various battery pack sizes in the middle, add on the front and rear piece and then the body panels allowing a very efficient build of an EV.

With Texas having taken delivery of a 130 ton Mega Cast, they have not only been producing the rear sections but have also started to produce front sections having Tesla on track to build a 3 piece platform for their auto's in 2023.

Model Y front end cast.

Toyota brought out the Prius Hybrids and believed that Hydrogen was the future. Hydrogen lost out for many reasons and Toyota had to reboot to get EVs going using processes they have honed to perfection some would say from the 1960's to today with the eTNGA platform. Now realizing they are losing out big time in profitability and simplicity of auto building to Tesla, reboot 2 is under way for making a short-term fix to eTNGA and for a long-term platform that will be competitive against Tesla and GM who have moved to Mega Casting as just one process of building better EVs.

Toyota today is now rebooting again on EVs and it will be interesting to see if they can catch up to keep their crown as the largest global auto builder or if it is lost to someone else who never had it or might have lost it but could take it back.