Toyota Motor Corp. is planning yet another tie-up to meet its aim of gaining half of its sales from electric vehicles by 2025. This time though, the collaboration won¡¯t be with another automobile manufacturer but with a battery supplier - China¡¯s Contemporary Amperex Technology Co. (CATL).
The move is to enable a faster transition to electric vehicles for the company¡¯s portfolio. While Toyota is confident on coming up with the EV offerings to meet its 6-year target, the Japanese auto maker is not sure whether it will be able to cope up with the corresponding demand of batteries on its own.
Executive Vice President - Toyota, Shigeki Terashi acknowledged the possible gap between Toyota¡¯s battery needs and the corresponding production capability. As per him, the company expects stringent emission regulations to come up in several of its markets due to which the auto maker will have to pursue an accelerated transition to the said electric vehicles.
Toyota Prius (Representative Image: Reuters)
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What Toyota expects
Terashi mentions that, even though the use of electric vehicles is increasing at a rapid pace, the profitability that the companies have through such vehicles is slow to grow in comparison. Reason for this is largely due to the still ongoing pursuit of cheaper and more efficient batteries for such EVs. Lithium-ion batteries currently form the largest part of the cost of an electric vehicle. Till the time the firms cannot achieve a breakthrough in bringing this price down, the prices of EVs are likely to stay on the higher side of their IC engine counterparts.
There's another factor that will likely dampen Toyota's overall sales - Although, the company has been a pioneer in hybrid as well as fuel-cell technology, it has been slower to bring all-electric vehicles to the markets as compared to its rivals. As the world shifts towards all-electric cars and two-wheelers for transportation, hybrid technology is likely to take a back seat soon, and correspondingly, the sales of such vehicles will decline.
So, Toyota does not really have much time to bring in a strong product lineup in the EV segment to replace its soon-to-be-dying hybrid offerings. The company has, hence, turned to partnerships to accelerate this transition.
Toyota concept electric vehicles. (Representative Image: Reuters)
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The way forward
In addition to CATL, Toyota has also announced a partnership with Chinese EV-maker BYD Co. for EV parts. Through this, and on its own production capability, the auto giant will start selling two-seater micro EVs in Japan by next year.
The company recently also collaborated with Subaru Corp for an all-electric SUV to be launched soon. With this partnership, the two firms will reduce their development cost of the vehicle and then sell it under their own branding.
As for the batteries, Toyota also has a tie up with Panasonic for the production of rectangular-shaped prismatic batteries in the next few years. This, and the new formed partnership with CATL, should prepare the Japanese car giant for the EV-dominated years to come and meet its target of selling 5.5-million electrified vehicle (BEV, Hybrid and Fuel Cell) annually by 2025.