Interview with Executive Vice President Terashi (2) Toyota 2029: Optimizing Vehicle Electrification



An interview with Executive Vice President Terashi by motor journalist Naoto Ikeda was published on March 16th and 17th on “THE PAGE”, a news site operated by Yahoo’s subsidiary Wordleaf Corporation that highlights noteworthy trends and social problems in the world and explains them clearly. Based on the length of the content, TOYOTA TIMES serialized the content of this interview over five episodes with the cooperation of “THE PAGE” and Mr. Ikeda.

Toyota will embark on a project exploring the moon. Borrowing from the words of President Akio Toyoda, Executive Vice President Shigeki Terashi has stated that the challenge is to combine “the virtual with reality” and bring the technology on earth to the moon. In this, the second episode of a five-part series, Motor journalist Naoto Ikeda and Executive Vice President Shigeki Terashi discuss how Toyota is often criticized for being lead-footed when it comes to battery electric vehicles (BEVs), and how the top management of Toyota’s Technical Center thinks about and plans its future strategy to meet the global trend of vehicle electrification.

For example, Toyota will have a lunar rover powered by fuel cells traversing the surface of the moon in just 10 years. Some might ask “What kind of technology will be on earth at that time (that can be taken to the moon)?” and “How will Toyota, which is perceived by some as being “late to the EV game”, chart its path forward in the era of vehicle electrification.

For the past few years, mass media outlets have been abuzz with talk of moving from the current reality towards the fantastical vision of “eliminating internal combustion engines and switching completely to BEVs.” Of course, there are automakers that are trying to take advantage of such ideas to promote their progressiveness, with a few of them even announcing plans to sell tens of millions of BEVs in the next few years.

Talk is easy, but the cumulative total of BEVs sold in the market is only three million, and Tesla is the only company that has years of backorders for delivery of vehicles. If viewed by country, there are only a handful of countries where the share of BEVs among all cars exceeds 1 percent, so it’s hard to say that there is a high demand for BEVs in general.

Toyota’s hybrid car “Prius” “Prius” has been on sale since December 1997

From the perspective of the system, the starting point of vehicle electrification is whether or not to equip the car with an engine, and doesn’t necessarily mean developing BEVs. Electrification includes HEVs (Hybrid Electric Vehicles), PHEVs (Plug-in Hybrid Electric Vehicles), BEVs (Battery Electric Vehicles) that run using a battery charged with electricity from an external source, and FCVs (Fuel Cell Electric Vehicles) that run on the electricity generated by combining hydrogen and oxygen.

Looking at it from a performance perspective, within the category of hybrids, there are “strong hybrids,” represented by Prius, which can be completely driven by the electric motor, while the Suzuki Wagon R is a so-called “mild hybrid,” where the electric motor only functions to assist the engine. Since mild hybrid motors act as an accessory to the engine, the price of the hybrid system is low. Therefore, given the huge number of cars sold in emerging countries and their widespread use, a significant contribution to the environment [even from mild hybrids] can be expected.

Thus, the margin for improvement, combined with the number of cars sold, constitutes the actual contribution to the environment, but the higher the performance or price gets, the lower the number of cars is sold. Even if there is little room for improvement, the impact on the environment only comes if many cars are sold. The media doesn’t talk about that. When a company makes BEVs that retail for over 5 million yen, the impact of the number sold becomes negligible.

Amid this chaotic image of electrification, I first asked how Toyota defines electrification.

What is the answer to the criticism, “Toyota doesn’t make BEVs, right?”

The three key elements or components for vehicle electrification are: the motor, battery, and power control unit (PCU). All electrified vehicles are made based on these elements.

It’s difficult to have a broad understanding of this. While we try to explain things simply, we must also think about how to respond to the criticism “Toyota doesn’t make BEVs, right?”

First, the discussion of electrification and ZEVs (Zero Emission Vehicles) has come to the forefront. The ZEVs were first developed in California to counter high pollution levels, as well as “a desire to decrease the amount of air-pollutants related to photochemical smog.” CO2 issues related to global warming were tacked on later. So, we must of course decrease the amount of CO2, but also create cars considering pollution issues. That is what a true ZEV is.


In fact, pollution and global warming are two separate issues. Doesn’t that mean we must solve both issues simultaneously?


Yes. I hope that in the end, all cars have zero emissions. However, I think we as a company must understand why it's so hard to make this an all-encompassing reality. If you look at the ranking of low CO2 emissions produced by each automaker as officially released by the European Commission in 2017, Toyota leads with the least. The y-axis is CO2 emissions in grams, and the x-axis is vehicle weight. Other companies are barely clearing recent regulations, and these regulations are only going to become stricter.


Yes, that makes sense.


For the past 17 years, Toyota has made the largest contribution to emission reductions. Other makers barely cleared the regulations. What does this mean? If I may be candid, having BEVs doesn’t guarantee good achievement rates for companies.


Toyota is a company that is said to be “late to the BEV game.”


That’s right. We currently (2019) don’t sell a single BEV. Regardless, we have the best achievement rate. Ultimately, because the customers are the ones choosing the car, I feel that this data is more the result of us thinking, “What is the kind of car that customers want to buy?” We provide BEVs because we naturally have the corporate responsibility to do so, but the majority of customers prefer to buy cars like HEVs that don’t require a special infrastructure and can be used normally, so they are in reality valued more.
For example, Toyota’s current position is if HEVs were converted to BEV sales would be equivalent to a little under 20 percent. Of course, if regulations become stricter in the future, for example, if by the year 2050 the regulatory rate becomes 80 percent or 90 percent, we’ll inevitably need zero emission cars, and everyone will have to work on them. However, realistically, we believe that HEVs are what customers will choose for the foreseeable future.


In other words, you’re saying that no matter how well environmentally friendly cars perform, they won’t contribute to the environment as long as they are merely featured in the catalogue [and not sold]. So, it’s important to have mass production cars that actually run on roads be eco-friendly. That’s what you mean when you say, “It’s only eco-friendly if it’s popular,” right?


Yes. I don’t mean to denigrate BEVs or FCEVs; it’s just that it’s going to take more time for customers to reach the point where they want to buy those cars, and, as a company, we have a responsibility to work on attracting more people, so there are steps that we can take in the meantime.


Even if you make a very attractive BEV, if the price point at which customers are willing to buy is lower than the cost, you will have to sell them at a tremendous markdown.


Exactly. The other thing is, what must we do to increase the number of people who would want to buy an BEV? Because of the price and the frequency of charging, I feel that it will still be some time before there is a major increase in interest.


I remember that data showing that there have been 3 million BEVs sold cumulatively worldwide, but Toyota has already sold almost 12 million HEVs. Is that right?


Actually it’s already over 13 million (as of Feb 2019).


It's amazing how popular they are. That’s why you are No. 1 in reducing CO2 emissions.


I’m not trying to make any major points, but when considering the standard for what customers want, we can’t say that the current BEV is something that many people will choose. I think it’ll take some time before BEVs becomes something people will readily choose. Of course, we must work hard on improving battery performance and lowering costs. We must avoid having no plan until we overcome the hurdles related to both BEVs and FCEVs. In the meantime, we can contribute by continuing our work on HEVs.

Instead of being limited to FCEVs or BEVs, it’s best to use what is most appropriate based on various energy conditions.

According to Executive Vice President Terashi, “Instead of being limited to FCEVs or BEVs, it’s best to use what is most appropriate based on various energy conditions.” (Photo: Koji Shiwa)

Another thing to consider is how different the infrastructures are depending on where you are in the world. For example, isn’t Toyota now conducting a demonstration experiment of a large FCEV truck at a port in Los Angeles? Since BEVs didn’t see success as shown by their low utilization rate, you were asked to make FCEVs. That was only possible because you were at a location where hydrogen could be regularly obtained. That was the best choice at that place, but that’s not always guaranteed to be the case. On the other hand, it’s possible to find places with similar conditions. As you know Mr. Terashi, even in Japan, there are industrial areas where by-product hydrogen, hydrogen generated naturally in the process of making industrial products, is available, and the surplus can be used to run cars without having to create hydrogen.


We believe that instead of switching everything to FCEV or BEV, it’s best to use what is most appropriate based on various energy situations.


Depending on the conditions of each location.


As you said, hydrogen is produced in many industrial complexes such as Kombinat. As such, for example, we can use a hydrogen-based infrastructure in this town. Alternatively, if hydropower is thriving, like in Norway, we can use some of the electricity generated for BEVs. Any surplus electricity can be converted to hydrogen and used for FCEVs. I think that the way we use energy changes depending on each location and that location’s characteristics.


So in other words, instead of one-sided or “all-in” thinking, there may be optimum power trains depending on the area; is that right?


I do believe that by around the year 2050, we will reach a final realistic answer by comparing different areas and their conditions, such as places with cheap electricity, places that generate a lot of hydrogen, and places with neither that may need a new approach.


It’s also very possible that the time axis will determine the infrastructure, moving from one situation to a different situation.


That’s also true, of course.

Realistically, I think you can see how Toyota is looking at mobility over the next 10 years. However, strangely enough, Toyota has said that it will release the technology that they have developed to the public over the next 10 years. Why is Toyota planning to release these highly competitive BEV and FCEV technologies? We will be exploring that in the next installment.

Naoto Ikeda

Ikeda was born in Kanagawa in 1965. He joined the Neko Planning Division (now Neko Publishing) in 1988, where he was in charge of Car Magazine, Auto Maintenance and AUTOCAR JAPAN. After leaving the company in 2006, he became editor-in-chief of the business news site “PRONWEB Watch.” Following his departure in 2008, he established the “Granite” editing production company, and currently writes articles on automaker strategies, market structures, as well as the history of mechanics and technology. He authored the book “Spirit of the Roadster: Lightweight Sports Born in Hiroshima” (President Inc.).


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