Why can't Toyota beat Tesla?

Recently, Tesla and Pinduoduo had a quarrel online, and Toyota, the big brother standing by, was secretly laughing.             

You should know that Toyota and Tesla have a big holiday. On July 1, Toyota's market value was directly surpassed by Tesla. On that day, Tesla's market value was about 207 billion US dollars (about 22.24 trillion yen), while Toyota's was 21.7185 trillion yen. Netizens joked that Toyota was beaten by its younger brother. 

Source: Bloomberg 

According to media reports, Toyota was furious and bought a Tesla. He took it apart and complained that the resistors were crooked and the soldering skills were not good. Why did the car sell so well? 

But the sales data really slaps Toyota in the face. Among the top ten electric vehicle brands in the world in 2019, Tesla ranked first with sales of 368,000 vehicles, while Toyota ranked last with only 55,000 vehicles.

Why did Toyota, the giant with the largest market value founded in 1937, lose in the field of electric vehicles to Tesla, a young company that was only founded in 2003 and nearly went bankrupt due to financial and production capacity crises?

This story begins in 1970.

1970-2005: The birth of the hybrid king

In fact, Toyota had already started researching electrification technology as early as the 1970s, and embarked on the path of the joint development of hybrid, hydrogen fuel cells and pure electric vehicles.

The oil crisis at the time caused oil prices to soar and Japan's economic growth to slow. In addition, the Japanese government implemented some of the world's strictest pollution standards in 1971. Japan's domestic market was sluggish, and the pollution standards were strict. This led Toyota to want to develop a more fuel-efficient car that could open up overseas markets.

Toyota first tried to develop electric vehicles. This can indeed solve the fuel consumption problem, but at that time it used lead-acid batteries, which are toxic. Secondly, electric vehicles need to be charged, while fuel vehicles do not. Toyota is unwilling to take the risk of changing consumers' usage and driving habits. 

Not only that, to fully promote electric vehicles, a sufficient number of charging piles must be built, otherwise the charging problem cannot be solved.

In 2003, Toyota gave up on its pure electric vehicle RAV4 EV, which it had been pursuing for seven years. The failure of its pure electric exploration was due to the inevitable industrialization challenges such as battery technology, market requirements, policy restrictions, supporting facilities, and capital investment. 

Next, Toyota chose a path that was more suitable for itself: developing hybrid electric vehicles.

Hybrid usually means that a car has two power sources: battery and engine. In addition, some hybrid cars also use natural gas, propane, ethanol fuel, etc. as a second power source. The advantage of hybrid is that it can reduce fuel consumption and harmful substances in exhaust emissions. Hybrid cars do not need to be charged, and there is no need to build charging piles.

For Toyota, developing hybrids has another direct benefit. The three major components of traditional fuel vehicles (engine, gearbox, chassis) have not been completely discarded. They have been modified and innovated to be dual-purpose. In contrast, developing pure electric direct lane change from scratch, and improved innovation can reduce the internal resistance of large companies. 

For large companies, it is better to innovate incrementally rather than start from scratch. 

So Toyota launched the world's first mass-produced hybrid passenger car, the Prius, in 1997 and entered the U.S. market in 2000. 

In 2003, Israel and Palestine had a serious conflict, and global oil prices soared. At that time, there were not many charging stations. Prius was fuel-efficient, with a fuel consumption of only 3.22L per 100 kilometers and no need to charge, and was deeply loved by consumers. The first generation of Prius sold a total of 123,000 units in more than 20 countries around the world, with a good record.

From 2006 to 2014, we encountered three major crises

Due to the impressive sales of the first generation Prius, Toyota decided to enter the Chinese market in 2006, but encountered its first crisis: Prius did not perform well in China.

In 2006, the Prius sold only 2,152 units. In 2007, its sales were only 414 units, of which only 9 units were sold in December. In 2008, Toyota decided to launch a price war and cut the price by 24,000 yuan, but people from FAW Toyota said that due to low sales, the Prius would still be selling at a loss even if the price was not cut. 

In the second half of 2008, Toyota faced its second challenge - the financial crisis. 

Losses and layoffs became the two key words for Toyota in 2008.

On December 22, 2008, Toyota announced that it expected to suffer a loss of 150 billion yen (about 1.7 billion U.S. dollars) in operating profit for the current fiscal year (ending at the end of March 2009). This would be the first annual loss for Toyota Motor in its 71st year. 

Not only that, Toyota also decided to lay off 3,000 employees. In 2009, Toyota announced Akio Toyoda as the next president. They hoped to turn the tide, but it rained on top of the leaking roof.

In 2010, Toyota encountered its third crisis - the pedal gate incident. 

The pedal-gate incident refers to the fact that the accelerator pedal may not return to its normal position after being pressed due to design problems, which can easily cause accidents. Reuters said that the death toll from accidents related to the pedal-gate incident has risen to 34. 

Toyoda publicly apologized and announced a recall of all vehicles with the problem.

According to statistics from the Zhejiang Administration for Industry and Commerce, Toyota recalled 24 vehicles in China from July 2004 to August 2009, involving nearly 1.2 million vehicles. During the same period, Toyota sold only 1.3 million vehicles in China. This means that about 90% of the vehicles have safety hazards. After the pedal door incident, a survey showed that about 73% of more than 10,000 netizens would not buy Toyota cars. 

Failure to enter China, financial crisis, pedal gate. While Toyota was constantly resolving crises from 2006 to 2010, Tesla was also not doing well. In 2008, Tesla almost went bankrupt in the financial crisis, but Toyota helped it out. 

In May 2010, Toyota invested $50 million in Tesla, agreed to jointly develop the pure electric vehicle market, and sold the Fremont factory near Silicon Valley to Tesla. This factory is responsible for the production of the famous sexy series in the future: Model S/X/3/Y, and has become Tesla's main production base. 

It was a rare honeymoon period for Toyota and Tesla. Toyota President Akio Toyoda praised the company to the media, saying, "I hope to learn from Tesla's spirit of challenge as a startup." Musk also responded by praising the company, saying, "This is a historic day for our cooperation with the respected Toyota." 

But at this time, Toyota still did not spend too much time on pure electric vehicles, although it re-launched the electric version of the "RAV4" SUV and launched it in 2012. However, the core lithium-ion battery motor and related software were still provided by Tesla, and the sales of this car were mediocre. 

Toyota's RAV4 pure electric SUV successfully met the California Air Resources Board's zero-emission vehicle requirements. However, Levi Talman, special adviser to the U.S. Department of Energy and author of "The Global Race for Future Cars," made a comment: Toyota's RAV4 is a completely admirable electric vehicle, but it is not a heavyweight product or a game changer. 

This year, Toyota also actively launched the hybrid electric vehicle Camry in China, still hoping to reverse the situation by developing hybrid vehicles.

2015-Present, is it too late to catch up with pure electric vehicles?

By 2015, Toyota had a clear strategic shift: it gradually began to pay attention to pure electric vehicles, with the focus on increasing sales targets, gradually transforming products, and innovating business models.

Why has Toyota, which has always been obsessed with developing hybrid vehicles, begun to focus on pure electric vehicles?

This is caused by three reasons: policy changes, market changes and fierce competition.

In the global new energy market after 2010, countries have become less and less interested in hybrid vehicles, while pure electric vehicles have become popular. Countries around the world have accelerated the process of banning the sale of fuel vehicles and provided higher subsidies for the purchase of pure electric vehicles. However, hybrid vehicles are fuel vehicles, not new energy vehicles, so they cannot receive subsidies.

Countries choose to develop pure electric vehicles because oil-electric hybrids do not solve the problem of oil imports. In addition, there is another very realistic problem: other countries certainly do not want to rely on Japan for core technology. If you can overtake others, who wants to be controlled by others?

In addition, although plug-in hybrid vehicles are new energy vehicles, they have not become mainstream.

Plug-in hybrid vehicles have two power systems, which makes them more expensive and more complex. In the future, when the range of pure electric vehicles and plug-in hybrid vehicles is similar, plug-in hybrid vehicles may lose their appeal due to the above problems.

Competitors also put great pressure on Toyota.

Especially Toyota's "predecessor" Tesla. After a brief honeymoon period, Tesla and Toyota officially broke up in 2014, and both companies claimed that it was due to differences in strategic direction.

One important difference between the two is fuel cells. A fuel cell is a device that converts the chemical energy of a fuel directly into electrical energy, such as the reaction of hydrogen and oxygen to produce electricity. 

From the performance point of view, fuel cells are better than lithium-ion batteries in terms of charging time, endurance and emissions. But a realistic problem is that the golden period of hydrogen energy industrialization that Toyota bet on has not yet arrived.