This week, global automaker Toyota indicated that the company would nearly double its investment in a planned battery production facility being constructed in the state of North Carolina.
The automaker is reportedly increasing its investment in this facility by $8 billion, on top of the $6 billion already planned. The reported strategy is to construct 14 assembly lines that can produce batteries for either hybrid, plug-in hybrid, or fully electric powered vehicles.
Production within this facility is scheduled to begin in 2025 with a capacity of 30 gigawatts-hours of batteries annually.
According to a published report from The Wall Street Journal (Paid subscription), the automaker indicated that 10 of the planned production lines will be configured to be able to adjust battery supply for either fully electric or plug-in hybrids needs, allowing the flexibility to plan battery supply needs based on consumer demand for either model type.
Toyota’s existing product development strategy is reportedly focused on vehicles that can utilize higher powered batteries for shorter, localized driving needs, and operate on hybrid power for longer distance driving needs. The company’s latest premium branded Lexus line-up includes a luxury SUV that performs in this manner.
Sean Suggs, Toyota’s designated manager for the planned North Carolina facility indicated in the Journal report that the amount of materials needed to produce one electric-vehicle battery, can be utilized to build 90 hybrid focused support batteries.
In a prior Supply Chain Matters commentary which we titled as: Told You So Moment for Akio Toyoda, we highlighted for readers that in his CEO role, Akio Toyoda questioned the timelines of the global auto industry’s wholesale transformation toward an all-electric model offerings. His context was that the goal for meeting global carbon neutrality targets along with the global availability and carbon emitting impact of electrical charging stations to support such a transition did not seem feasible from a timing and infrastructure perspective. He rather steered the company toward providing varying power train options for consumers and for specific countries, which included considerations for hybrid power technologies.
Under his watch, Toyota pioneered the Prius line-up of hybrid powered vehicles, and later all-electric plug-in models. Thus, this automaker can attest to market experience and buyer feedback.
Ultimately, in the midst of the multiple announcements and direction setting made by Toyota’s global wide competitors regarding a wholesale transformation to battery powered vehicles, along with nervousness among investors, Mr. Toyoda elected to hand over the reins of day-to-day leadership to a younger generation leader while he assumed the Chairperson role.
Over these past few weeks, the industry’s news cycle has now turned to caution as well as concerns relative to the timing of the market transition to sole EV powered vehicles, and the readiness of larger amounts of prospective buyers to want to acquire an all EV powered vehicle over the next few years.
At the same time, inventories of unsold vehicles remain on dealer lots despite price reductions. Some automakers such as Ford Motor and General Motors are now incurring an operating loss on each vehicle sold because of the large amounts of added investments being made in strategi commodity, newer technology and battery supply needs.
With each passing week there are now indications that automakers are now in the process of revisiting their EV product development strategies in the light of current market indicators that consumers remain concerned about availability of EV vehicle recharging infrastructure and existing vehicle driving ranges. Cost is an obvious factor as well, even as government subsidies for purchase exist.
For readers familiar with Toyota’s inherent production processes, this automaker has long embraced flexible production lines which can be readily and flexibly configured for different vehicle models or options.
Our sense is that this latest Toyota announcement will be significant for the industry, and we would not be surprised at all if other automakers revisit their vehicle design and supply network strategies to accommodate demand for hybrid powered vehicles. The key to such efforts will be whether automaker can influence legislators to adjust government purchase subsidies to include certain amounts of hybrid powered vehicles, at least in the near-term horizon.
For the industry’s strategic supply management, supply chain planning and manufacturing teams, the takeaway is to anticipate needs for added supply chain network design analysis and supply network planning to quantify the various impacts.
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