Toyota to buy batteries from Chinese suppliers for first time
Japanese carmaker wants half of its sales to come from electrified vehicles by 2025
Toyota has broken sharply with tradition and struck a partnership with two Chinese battery producers as Japan’s biggest carmaker aims at a grand global rebalancing towards electrified vehicles.
Under the groundbreaking tie-ups, Toyota will buy batteries from Contemporary Amperex Technology (CATL) and BYD, sourcing the critical component from Chinese manufacturers for the first time.
CATL, only an eight-year-old company, already has a relationship with Honda and other global carmakers and has been the world’s largest supplier since 2017 when it overtook Panasonic by sales.
Toyota will also expand its domestic battery supply deals beyond its longstanding relationship with Panasonic to include GS Yuasa and Toshiba.
The decision highlights Toyota’s massive expected demand for batteries and the reality that its current arrangements may encounter what senior executives described as a “a gap” between the impending supply and demand. Those concerns echo those of rival global carmakers who have recently unveiled a wide variety of strategies to invest in battery manufacturing and diversify their source of supply.
Projections for electrified vehicle sales — a broad category that includes gasoline hybrid, plug-in hybrid and battery electric vehicles — have had to be fundamentally redrawn over the past year as global carmakers have scrambled to adapt their line-ups of new cars to meet stricter emissions rules, especially in Europe.
General demand for electric vehicles is on a far steeper trajectory than Toyota and others had expected, which could leave the Japanese company’s existing strategy of producing batteries on its own and with Panasonic looking inadequate.
Toyota had previously set itself the target of deriving half of its global vehicle sales from electrified categories by 2030.
But in a move that reflects what Toyota said was a much higher “rate of popularisation” than it had anticipated when it set the original target in 2017, it has brought its 50 per cent target forward to 2025.
Part of Toyota’s new plan includes beginning in 2020 mass production of proprietary battery electric vehicles in China, which is widely expected to become the world’s largest market for electric vehicles.
Last financial year, about 17 per cent of Toyota’s global sales of 9.5m vehicles were classed as electrified, with the overwhelming majority of those coming from sales of gasoline hybrid cars. Just 46,000 of Toyota’s 2018 global sales were plug-in hybrid vehicles.
Despite the ambitious projections for electrified vehicle sales, Shigeki Terashi, Toyota’s executive vice-president, sounded a note of caution on profitability and said that settling on a business model that could deliver higher margins would be a challenge.
Toyota accompanied its announcement on batteries with a glimpse of a new ultra compact two-seater electric car with which it hoped to capture the imagination of drivers who were “concerned about being able to drive a standard car”.
Toyota said the car would appeal to people who were unwilling to drive long distances but needed mobility for local errands such as shopping and hospital visits.