The second of a six-part series on the 2021 Ordinary General Shareholders' Meeting features Toyota's all-round electrification strategy. Why not focus on narrower range of options? Can Toyota afford the investment? Toyota's Chief Technology Officer responds to the shareholder's question.
The 117th ordinary general shareholders’ meeting held on June 16 took one hour and 49 minutes, of which 1.5 hours was spent for answering questions from the shareholders.
Of the 11 questions from the shareholders this year, Akio, who was chairing the meeting, decided to respond himself only twice. Until last year, Akio would respond more to certain questions or have others respond first and make an additional comment afterwards. This year, he seemed to have relied more on responsible executive members including operating officers, to explain.
Toyota Times picks up this time on the response on Toyota’s all-round electrification strategy made by Chief Technology Officer Masahiko Maeda.
When considering measures to achieve carbon neutrality in the automotive industry, some companies have decided to shift most of their management resources into non-ICE (internal combustion engine) technology or battery electric vehicles (BEVs) that enable CO2-free driving, as part of a “selection and concentration” approach.
On the other hand, Toyota takes a full (all-round) lineup approach to develop hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), fuel cell electric vehicles (FCEVs), and BEVs, as well as other new options including the hydrogen-powered engine vehicle that recently completed the 24-hour endurance race.
One of the shareholders asked if this approach was truly effective as he shared his thoughts, “The all-round strategy requires a considerable amount of investment. Wouldn’t it just be better to spend management resources exclusively on BEVs?”
In responding to this question, it was digitalization and the Toyota Production System (TPS) that Maeda referred to as key initiatives.
What brought Toyota to offer a full lineup of vehicles
Toyota is working on a full (all-round) lineup of vehicles for electrification, and I explained this at the announcement of our financial results the other day.
President Toyoda says customers have the final say. I believe that Toyota has long been building relationships with its customers.
Using the word “strategy” might make something seem like it’s the main objective, but, as a result of pursuing customer convenience and always responding to customer requests, the cars that Toyota offers have come to form a full lineup.
I think the same is true in achieving carbon neutrality when considering vehicles that emit as little CO2 as possible.
Because BEVs are getting a lot of attention right now, they might seem like the only answer to some people. However, when we listen to what our customers have to say, while some people prefer BEVs, it is also true that others find that, with the current technology, BEVs are not yet convenient enough.
Due to our relationships with our customers from the past, we need to live up to the expectations of customers who have trusted Toyota up until now, and even when electrification becomes a necessary technology for our customers in the carbon-neutral era, we will continue to offer a full lineup.
We believe that it is best to provide customers with not only BEVs, but also a variety of other options, such as HEVs, PHEVs, FCEVs, and hydrogen-fueled engines.
“Eco-friendly vehicles are only meaningful if they achieve widespread use and contribute to CO2 reductions”－this has been Toyota’s stance on environmental technology development ever since it launched the world’s first mass-produced hybrid electric vehicle “Prius” back in 1997.
No matter how good it is for the environment, if customers don’t choose the technology or product, its environmental impact on CO2 is close to zero. For a wide range of people to choose and enjoy the product, it needs to be practical: something both convenient and affordable to customers.
A wide variety of customers use Toyota vehicles around the world. At the financial results briefing held in May, Maeda explained that vehicles are used in many different ways, by taking an example of the need of towing capacity enough to pull a 10,000-pound (4.5 tons) trailer, something people in Japan are unfamiliar with.
Customer needs and preference differ depending on how vehicles are used. Regulations for vehicles also vary according to regions and countries.
Toyota’s approach is to accept that there are diverse needs, and to strive to offer a variety of convenient and green options for each customer.
Toyota Production System is key in efficient development
Following his comment on the all-round electrification strategy, Maeda shared how the company can improve efficiency of ever-increasing research and development efforts.
Because such wide-ranging development requires much investment, I think we must keep our basic unit (the smallest unit of development) as small as possible.
For that, I think that digitization and TPS, which is the philosophy of Toyota, are important. Many engineers are involved in product development, resulting in various flows of information.
TPS is very useful in organizing such flows of information. When a flow of information is organized, it becomes very easy to understand where digitization can improve efficiency.
Last year, President Toyoda himself encouraged office positions to practice TPS. He gave a lecture to them so that TPS is promoted not only at the production genba but also at the development genba. That is how he instilled the spirit of TPS in office-position development members.
By putting that to good use and combining it with digitalization, we can make each of our development efforts smaller.
Digitization has enabled advanced computer simulations and technologies, and by successfully multiplying them together, it is possible to compress considerable amounts of basic units.
By reducing the basic unit of each investment in this way, we want to be able to soundly meet the needs of a full lineup of electrified vehicles.
We hope that you will, by all means, watch over Toyota’s activities for expanding the options for achieving carbon neutrality in the future.
Traditionally, many people at Toyota have regarded TPS as something to be practiced at production sites. However, since last year, an initiative that aims to apply TPS in non-production workplaces has been underway.
At the financial results briefing, Maeda also revealed that Toyota reduced development lead time for the “bZ4X”, an all-new BEV jointly developed with Subaru, by 30% compared to usual Toyota vehicles. Furthermore, according to him, the company is targeting 10% more reduction for future new BEVs.
“Shortening lead time results in conducting development with less resources and at low fixed costs. This enables us to have flexibility even when faced with drastic changes (such as customer preference and regulations),” said Maeda in May about the benefit of applying TPS in development.
The strength of TPS that Toyota has developed over the years continues to play a key role in developing future technology. Continuous improvement enables Toyota to inch closer to the goal as the company strives to expand paths to achieving carbon neutrality.