Shulou(Shulou.com)11/24 Report--

On January 8, the audience sitting in the front row witnessed a performance about the future of the auto industry at the Nazca Cup Grand Prix in November 2022. A plane sponsored by the non-profit organization Public Citizen flew over the Phoenix racetrack with a banner that read: "want to seek excitement? try to drive an electric car. Want to stay bored? then keep driving Toyota!"

Before the air show, Toyota Motor CEO Akio Toyoda, the world's largest carmaker, sent an open letter to groups, including Public Citizen, responding to their criticism of Toyota's slow launch of electric cars. "No carmaker can keep up with the surge in consumer demand for pure electric vehicles (battery-powered), but Toyota has not even tried to meet that demand," the company wrote. Toyota can and must quickly switch to electric vehicles, or risk being eliminated. "

While these NGOs are motivated to promote environmental protection, their message reflects a broader concern in the global $2.25 trillion car industry. That is, Toyota and other Japanese carmakers could lose their lead by failing to switch to electric cars fast enough.

Early start but left behind these once legendary car brands are being left behind as the auto industry undergoes its biggest transformation in decades. According to statistics, Tesla is the world's largest electric car manufacturer by car sales, followed by BYD and German Volkswagen. No Japanese carmaker made it into the top 20, leaving them on the sidelines in the industry's fastest-growing market segment. In the first three quarters of 2022, sales of pure electric vehicles grew by about 80% year-on-year, while total car sales fell by 4%.

"Pure electric cars are becoming an important part of the car industry," said Colin McKerracher, an analyst at BloombergNEF. "but so far, the Japanese seem to be missing this opportunity."

For a long time, many Japanese car brands have been the favorite of consumers around the world, usually accounting for more than 1/3 of new car sales in the United States, and dominate markets from Southeast Asia to Africa.

The absence of Japanese car brands in the field of electric cars is particularly puzzling because they started producing environmentally friendly cars early on. Toyota, for example, launched the mass market hybrid Prius 25 years ago, which was once the first choice for Hollywood stars to seek green certification. In 2009, Nissan launched the all-electric hatchback Leaf, which is considered to be the pioneer of mass-market electric vehicles. In the same year, Mitsubishi Motors also launched its first electric car. In 2010, Toyota invested in Tesla.

However, enthusiasm for early electric cars quickly waned because of tepid sales. Japanese carmakers are convinced that the battery revolution will only happen slowly, so they began to focus on gas-electric hybrid cars and work with the Japanese government on hydrogen fuel cell vehicles. Hydrogen fuel cell is also an emerging technology, which may even be more environmentally friendly than pure electric vehicles.

In September 2022, Toyota CEO Akio Toyoda said it would take "longer than we expected" to popularize pure electric vehicles. " The company also said its mission is to reduce carbon dioxide emissions, but does not want to limit its focus to all-battery cars. "in this diverse world, in an era where we don't know the right answer, it's hard to satisfy everyone with only one choice," Toyota said in a statement. "

It may be too late to catch up, and while higher gasoline prices and government incentives have boosted demand, Japanese carmakers have few suitable models for consumers trying to avoid fuel cars, including potential Tesla buyers who were unhappy with Elon Musk's acquisition of Twitter.

All-electric cars sold by Japanese carmakers are likely to be disappointing: Toyota launched an electric SUV bZ4X in May last year but stopped sales in June on the grounds that a defect could cause its wheels to fall off. Since then, although sales of modified models have resumed, sales have not been satisfactory. "the Japanese auto industry needs to catch up, but it may be too late now," said Masahito Inoue, chief product designer for Nissan's first electric car, the Leaf.

Carlos Ghosn, Inoue's former boss and former Nissan chairman, agrees. "Nissan has lost its pre-emptive advantage," he explained. " He predicts that Japanese carmakers are likely to struggle to catch up with competitors, including BYD. It is "too late" to invest in electrification.

Mr. Inoue and Mr. Ghosn are not the only ones who are pessimistic. Other critics worry that the carmakers are repeating the decline of Japan's semiconductor and consumer electronics industries. Japanese manufacturers, once dominant with products such as NEC memory chips and Sony's Walkman, were caught off guard by major disruptions such as Apple's iPhone and failed to maintain their lead through innovation.

Shingo Ide, chief equity strategist at NLI Research, a unit of Nippon Life Insurance, said: "Japanese carmakers seem to have lagged behind and are unable to regain their leading position."

Japan's six largest carmakers accounted for about 40% of the u.s. passenger car market in 2021, roughly the same as it was before the outbreak. But their share fell to 34% in the second quarter of 2022 and just 32% in the third quarter, according to the latest data compiled by Bloomberg.

General Motors last year took Toyota's top spot in the U.S., where the Japanese company reported a 9.6% drop in sales in 2022. As more and more Americans choose electric cars, Japanese brands have become the biggest losers.

"consumers who switched to electric cars in 2022 are mainly Toyota and Honda users, and they cannot guarantee the loyalty of fuel vehicle owners until these two brands begin to participate more actively in the transformation of electric vehicles," Sipp Global Mobility reported at the end of November last year.

One of the biggest problems is that some markets are turning to electric cars much faster than many expected. About 15% of new cars sold in Germany and the UK in the first three quarters of 2022 were electric, while more than 20% of new cars sold in china were electric, according to Bloomberg data. Although electric vehicles accounted for 5 per cent of new car sales in the US during this period, demand for electric vehicles is likely to grow sharply as a result of the tax cuts in the inflation reduction Act, which was signed into law in August. As of mid-December, companies had invested nearly $28 billion in electric vehicle-related manufacturing in North America.

Jeffery analysts believe there is a "serious miscalculation" in Toyota's electric vehicle strategy in North America.

Toyota's development of hydrogen fuel cell vehicles, which transforms or destroys Japan's traditional auto industry, is supported by the country's Ministry of Trade, which believes hydrogen is the key to achieving net zero emissions by 2050. The Japanese government said in June last year that by 2035, all cars sold should be "so-called electric vehicles", but only if hybrid models are also included.

Japanese carmakers and government leaders have been reluctant to push for a shift to all-electric vehicles because they fear it will eat into existing car sales and destroy an extensive network of parts suppliers and subcontractors. After all, electric cars don't usually need as many parts as traditional cars.

Car production is one of Japan's most important industries, accounting for nearly 20 per cent of Japanese manufacturing and 8 per cent of total employment, according to a report released by the environmental group Climate Group. Toyota has pledged to continue to produce about 3 million vehicles in Japan, or about 1/3 of its global production, to maintain jobs and competitiveness.

"if electric cars are promoted, basically half of Nagoya's population will be out of work and the growth potential of the Japanese economy will certainly be hit hard," said Jesper Koll, an investment adviser at Monex Group, a financial services company. Nagoya is located in central Japan, near Toyota's headquarters, where there are many auto parts manufacturers.

However, realizing that electric cars are no longer niche products, Japanese companies are now stepping up investment in related projects, such as Toyota's announcement that it will spend 4 trillion yen ($30 billion) to launch 30 electric vehicles by 2030. Honda is developing an electric SUV with GM, which is scheduled to make its debut in 2024, and is also partnering with Sony to launch high-end electric vehicles from 2026. Nissan, which began delivering the Ariya electric SUV to US customers in December, has stepped up spending to launch more models.

However, competitors are also accelerating their foray into electric vehicles. John Murphy, an analyst at Bank of America, said GM was moving particularly quickly and could overtake Tesla in electric car sales by 2025. GM's electric vehicle portfolio includes Chevrolet Bolt hatchbacks and compact utility vehicles, Cadillac Lyriq SUV and GMC Hummer pickups, and the company expects to launch several more electric vehicles this year.

Toyota executives say pure electric cars are still too expensive or unfeasible due to the lack of charging infrastructure in many markets, especially in developing countries. Kelly Blue Book released a report in December last year that the average price of electric cars in the United States is about $65000, while the average price of all new cars is more than $48000.

Jill Gill Pratt, Toyota's chief scientist, pointed out that many countries lack the charging infrastructure to sustain the electric vehicle boom, and the combination of electric vehicles, plug-in hybrid vehicles (PHEV) and hydrogen-powered vehicles (HEV) is the most realistic choice in these markets.

Pratt also said: "for these places and customers who cannot easily find charging infrastructure, hybrid and hydrogen vehicles are the most effective ways to reduce their carbon footprint. This is also the best way to reduce net carbon emissions, the sooner the better."

While Japan's top carmakers face challenges from car upstarts, they retain many of the advantages they have accumulated at the pinnacle of the industry for years. They have spent decades catering to the needs of mass-market consumers and have strong brands and distribution and service networks, which is an unmatched advantage for electric carmakers. Competitors like BYD are still unknown in many countries and lack experience in serving customers around the world.

"I will never exclude them, they will stay in the race," Michelle Krebs, an analyst at Cox Automotive, said of Japanese carmakers.

But analysts say it will not be easy for the Japanese to catch up as competition over electric vehicles shifts from traditional mechanical engineering to software and services. Karl Brauer, executive analyst at iSeeCars.com, a car and dealer ranking website, said that because of their late start, these Japanese companies missed the opportunity to learn about electric vehicle suppliers and customers before their competitors.

Mr Brauer adds: "even if you have all the resources and capabilities of Toyota, you still need to go through a learning curve when you are ready to produce electric cars. Other carmakers are already ahead of you because they are doing it now."

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