Exclusive-Toyota scrambles for EV reboot with eye on Tesla

To better compete in a booming market it has been slow to enter, Toyota (7203.T) is considering a reboot of its electric-car strategy and has halted some work on existing EV projects, according to four people with knowledge of the still-evolving plans.

If adopted, the under consideration proposals would represent a significant change for Toyota and rewrite the $38 billion EV rollout plan the Japanese automaker announced last year to more effectively compete with Tesla and other EV manufacturers (TSLA.O).

The four people said Toyota has given a working group the task of outlining plans for upgrades to its current EV platform or for a new architecture by the beginning of the following year.

The Toyota Compact Cruiser crossover and the battery-electric Crown are among the 30 EV projects that Toyota announced in December that have been put on hold, according to sources and a document examined by Reuters.

Although Toyota said it was committed to carbon neutrality, it would not discuss any specific programs.

In response to inquiries from Reuters, the company stated that its own technology as well as the work being done with a variety of partners and suppliers is crucial to achieving carbon neutrality.

Due to the fact that the plans have not been made public, the four sources declined to be named.

The redesign under consideration might delay the introduction of EVs already in the works. However, as industry-wide EV sales surpass Toyota's initial projections, it would also give the company a chance to compete with a more effective manufacturing process.

Additionally, it would respond to criticism from environmental organizations and green investors who claim that Toyota, once a favorite of environmentalists, has been too slow to adopt EVs.

Toyota is taking into consideration an upgrade to its 2019-released e-TNGA EV-basing technology as part of the review. The people claimed that Toyota would be able to reduce costs as a result.

The bZ4X crossover, the first EV built on the e-TNGA platform, debuted earlier this year but was dogged by a recall that forced Toyota to halt production starting in June. This month, production has started up again.

TESLA AS BENCHMARK

The realization by some Toyota engineers and executives that Toyota was losing the factory cost war to Tesla on EVs, according to the sources, was one factor that led to the review.

According to the four people, Toyota had planned on EV demand not picking up for several decades.

Toyota created the e-TNGA so that EVs could be manufactured on the same assembly line as hybrids and gas-powered vehicles. According to the sources, this was reasonable given the expectation that Toyota would need to sell about 3.5 million EVs annually by 2030, or roughly one-third of its current global volume, in order to remain competitive.

But EV sales are increasing more quickly. As part of a wave of industry-wide investment that has now reached $1.2 trillion, automakers worldwide now anticipate that EVs will account for more than half of total vehicle production by 2030.

Shigeki Terashi, a former chief competitive officer, is in charge of Toyota's EV review, according to six people with knowledge of the project, including two people close to Toyota. Terashi didn't reply when contacted for comment.

Toyota has designated Terashi's group as a "BR" or "business revolution" group, a term used to describe significant changes, such as a revamp of its development and production processes two decades ago.

The rapid adoption of cutting-edge innovations by Tesla and others, as well as the EV's faster-than-expected takeoff, are what, according to one of the sources, are fueling Mr. Terashi's effort.

Due to the sensitivity of the plans, all six people opted not to be identified.

According to three of the sources, Terashi's team is considering a strategy to extend the usefulness of e-TNGA by combining it with new technologies.

Terashi might also suggest retiring e-TNGA sooner and switching to a platform designed specifically for electric vehicles. According to two sources, new models could take up to five years. There wasn't much time to waste, one said.

To reduce costs, Toyota is collaborating with suppliers and looking at new manufacturing techniques like Tesla's Giga Press, a sizable casting machine that has streamlined operations in Tesla plants.

According to the sources, one area under review is a more all-encompassing strategy for thermal management in EVs, which already includes passenger air conditioning and temperature control for the electric drivetrain.

According to one of the sources familiar with the situation, this could enable Toyota to decrease the size and weight of an EV battery pack and reduce costs by thousands of dollars per vehicle, making it a "top priority" for Toyota suppliers Denso and Aisin. Both Denso (6902.T) and Aisin (7259.T) declined to comment right away.

A significant turnabout has occurred with Toyota, the largest automaker in the world, acknowledging that Tesla has raised the bar for EV manufacturing costs.

Many Toyota engineers thought Tesla's technology posed no threat a decade ago, according to two sources, when Toyota invested in Tesla and the two companies worked together to create a battery-electric version of the RAV4.

One of the sources said, "They came to the conclusion back then that there wasn't much to learn."

In 2014, Toyota stopped producing the electric RAV4, and in 2017, it sold its Tesla stock.

Tesla already had three models on the road by the time Toyota finally established a dedicated zero-emissions division and started developing an e-platform in 2018.