A single stone stirs up a thousand waves. What does Toyota mean by opening up its hybrid technology?

The waters of the automobile industry have never been calm, and it is currently at a critical juncture in the transition from fuel vehicles to new energy vehicles!

At the end of March, under the organization of the German Association of the Automotive Industry (VDA), Germany's three major auto giants, Daimler CEO Dieter Zetsche, BMW CEO Krueger, Volkswagen CEO Herbert Diess, and related parts manufacturers held consultations and reached a consensus on the future direction of the automotive industry. They all expressed that the focus of development will shift to electric vehicles in the next decade.

A few days later, on April 3, Toyota Motor held a press conference at its headquarters in Nagoya, announcing that it would provide free patent rights to the core electrification technology in Toyota's hybrid technology. The number of patents opened this time reached 23,740, including patents for key technologies in electric vehicle development such as motors, batteries, electronic controls (PCU), and system controls (ECU) (including projects under application). It is particularly worth mentioning that Toyota will also provide technical support to companies that use Toyota's powertrain system, although it is paid.

One stone stirs up a thousand waves, two fingers produce a myriad of sounds

Toyota's move immediately attracted great attention from the automotive industry and the media. Friends who know Toyota know that hybrid technology has always been regarded as a moat by Toyota, which has a strong sense of insecurity, and has established a towering patent barrier around the world. Why would Toyota open up its treasured hybrid technology for free? And why did it open it up at this time? What exactly is Toyota up to?

To find answers to these questions, we first need to look at what Toyota is opening up?

According to information disclosed on Toyota's China website, in order to contribute to the popularization of electric vehicles, Toyota will provide free use of approximately 23,740 patents (including those currently pending) held by Toyota regarding vehicle electrification technologies such as motors, electronic controls (PCU), and system control.

The patents cover six areas: motor: about 2,590; electronic control (PCU): about 2,020; system control: about 7,550; engine and transaxle: about 1,320; charging equipment: about 2,200; and fuel cell-related: about 8,060 (including 5,680 patent technologies provided free of charge since January 2015).

At the same time, the press conference also clarified that the use period is until the end of 2030, and that it is necessary to apply to Toyota first and discuss the specific implementation conditions before signing the contract. In addition, technical support for the commercialization of electric vehicles will be provided to third parties that use Toyota's key technologies for electric vehicle development.

Please pay attention to the key words inside.

1. Including projects under application. There is a view that Toyota is opening up patents related to the first-generation hybrid technology that are about to expire, but from the point of view of "including projects under application", this is not the case.

Second, by the end of 2030. Toyota Vice President Shigeki Terashi said when talking about the decision: "Toyota believes that now is the best time to cooperate, especially if we can focus on promotion in the next 10 years, the popularization of electric vehicles will be just around the corner."

3. Submit an application and sign a contract. Unlike Tesla's previous announcement of open-source patents, Toyota's patent opening this time is relatively conservative.

4. Provide technical support. According to our understanding, this technical support is not free, but charged. Indeed, for car companies with insufficient technical reserves, such as Toyota's core planetary gear technology, it may take a long time to fully digest and absorb these technologies. At this time, seeking Toyota's help may be the most effective solution.

Why does Toyota open up its technology patents at this time?

There is no such thing as a free lunch, especially when it comes from Japan. In fact, Toyota’s decision to open up its patents was driven by the environment and was also a choice made after lean measurement of gains and losses.

With the pressure of environmental protection, major automobile markets in the world such as Europe, the United States, and China have introduced the "CAFE" fuel efficiency regulations and even formulated a clear timetable for the end of sales of fuel vehicles. If car companies want to comply with the regulations, there are only two relatively mature technical paths at present: hybrid and pure electric technology. Other technologies, such as Toyota's hydrogen energy technology, are not feasible for large-scale application in the short term.

However, in the field of hybrid vehicles, Toyota has always held a large number of core patents. Except for Honda, which has developed the i-MMD hybrid system that can compete with it, Volkswagen, GM and other major players have not made any real achievements, and Chinese independent brands that started later have no chance to compete.

There is no other way, and the transition to pure electric vehicles has become a last resort, even though pure electric technology is still immature in many aspects such as driving range, usage environment, and battery recycling. This is exactly why the three German auto giants are focusing on pure electric vehicles, and it is also the logic behind China's strong support for pure electric new energy.

Moreover, on the other hand, with the encouragement of many national policies led by China, pure electric vehicles have developed very rapidly. In 2018, the global sales of pure electric vehicles have exceeded 2 million, and the growth momentum has not slowed down. The pure electric vehicle market has begun to take shape. In China, the world's largest automobile market, although the new energy subsidy policy has declined this year, it still enjoys many policy supports such as tax exemptions, financial subsidies, and no lottery and no restrictions.

This year's Geneva Motor Show shows that mainstream automakers including Volkswagen, BMW, Mercedes-Benz, GM, and Kia have increased their research and development efforts on pure electric products. For example, Volkswagen Group plans to launch more than 50 pure electric models (including Audi brand) by 2025.

If most global automakers switch to pure electric vehicles, the technical problems they are facing now may be overcome more quickly, and the cost will be greatly reduced, and the competitive advantage of pure electric vehicles will be greatly enhanced. By then, Toyota, which insists on hybrid technology, will become an outlier.

From this perspective, Toyota had no choice but to open up its hybrid patented technology.

Killing Three Birds with One Stone: Lean Measurement of Toyota’s Open Patents

On the other hand, Toyota's open hybrid technology has also been carefully calculated and can achieve at least three goals.

First, differentiate the car companies that are transforming into pure electric vehicles and reduce Toyota's competitive pressure in the pure electric field. Relatively speaking, Toyota's development in the pure electric field is relatively lagging behind. It will only launch its first new electric vehicle in China since the eQ (a model launched in 2010) next year. Free access to hybrid technology patents is undoubtedly very attractive to car companies that are eager to meet emission requirements. Many car companies joining the hybrid camp can also further share Toyota's financial pressure in hybrid technology research and development and speed up the resolution of technical problems.

Second, Toyota can increase profits through technical support and sales of core components. Unlike Volkswagen and GM, which are better at horizontal development through multiple brands, Toyota pays more attention to vertical development in the upstream and downstream of the industry. By controlling core component suppliers such as Denso (engines, etc.) and Aisin Seiki (transmissions, etc.), Toyota firmly holds the entire product chain in its own hands. Even if Toyota opens up the THS hybrid technology patent, due to the restrictions on the opening time, manufacturers using these patents may still have to purchase a lot of Toyota's core components. At the same time, as mentioned above, the technical support provided by Toyota is not free, which is another tangible benefit.

Third, it can enhance the company's brand image. Toyota attaches great importance to corporate social responsibility. The initiative to open up THS patent technology has great practical significance for promoting the progress of the entire automotive industry, and can greatly enhance the brand image in the minds of users. When users drive a Volkswagen hybrid car supported by Toyota technology, they will probably still think highly of Toyota. Of course, it is still unknown whether Volkswagen will use it.

Final Thoughts

Like most Japanese companies, Toyota's management style tends to be conservative. On the surface, the active opening of core hybrid technology patents seems to be very different from the past style, but after careful analysis, it is still a choice that Toyota, which advocates lean management, has to make after many considerations.

But in any case, Toyota's opening of THS technology patents can lower the threshold for other automakers to use hybrid technology, which will greatly benefit the advancement of automotive technology and environmental protection.