How VW, Toyota aim to overthrow Elon Musk with very different approaches

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“Heading into uncertainty, what we need are diverse solutions,” the grandson of Toyota’s founder said during a Nov. 13 news conference. “We do not want to tie ourselves to just one option.

Diversity is one thing; absence is another. The hybrid-powertrain trailblazer known for the Prius has acknowledged being “a little bit late” to full-electric models — and that was four years ago. Toyota’s first mass-market global EV is not set to debut until the middle of this year.

But weeks after taking hot laps in a hydrogen car, Toyoda traded his racing overalls for a suit and tie and gave outsiders an unprecedented look at a bevy of future products. When the first curtain was unveiled at a media briefing on a man-made island in Tokyo Bay, there were five EVs flanking him.

Toyoda delivered a brief sales pitch for each vehicle, then raised his palms to the skies before another curtain revealed 11 more battery-electric models. “Welcome to our showroom of the future,” he said, announcing plans to roll out 30 EVs by the end of the decade.

Of the 8 trillion-yen ($70 billion) Toyota dedicates to electrification in that span, half will go to full-electric models. The automaker is aiming to sell 3.5 million EVs annually by the end of the decade, almost double a target set just seven months earlier.

It took some prodding for Toyota to get to this point. With cautious comments from executives running against the industry’s general enthusiasm for EVs, some investors and environmental groups criticized the automaker for dragging its feet. Last summer, Anders Schelde, the chief investment officer of Danish pension firm AkademikerPension, which holds Toyota shares, said he did not see management’s attitudes toward EVs as a winning strategy for the long term.

Schelde said his fund was beginning to look more broadly at its investments to make sure they align with the goals of the Paris Agreement, which established a framework to limit global warming to well below 2 degrees Celsius. “Toyota has two or three years to clean up their act,” he said in an interview.

This sort of critique was a pain point for Toyota, with time during top management meetings consumed by debate over why its messaging around carbon neutrality was not being well received. Last month’s EV event in Tokyo was the latest in a flurry of festivities the company has held around the globe to deliver its nuanced message of allegiance to hybrids and hope that the hydrogen-powered cars the automaker has plowed years of research and investment into will gain traction alongside vehicles that run on just a battery.

In Brussels at the beginning of December, the company vowed to be ready to sell only zero-emissions cars in Europe by 2035. In North Carolina a few days later, it hosted the governor and hundreds of other guests at a press conference to announce the state would be home to its first U.S. battery plant — a $1.29 billion investment.

While Toyota’s onslaught is to be taken seriously, the start VW has gotten off to with its EV push shows transitioning to electric will not be a matter of flipping a switch.

Tesla’s push

And Tesla is doing some scaling of its own. As the company closed a year in which it delivered over 936,000 vehicles — up almost 90 percent — it plotted out an investment of as much as 1.2 billion yuan ($188 million) in its two-year-old Shanghai plant to upgrade equipment and take production beyond its stated capacity of 450,000 units a year. It will add another 4,000 workers at the facility, bringing the total to about 19,000.

Two new assembly plants — one outside Berlin and the other in Austin, Texas — are also gearing up to start making Model Ys. And there is plenty of demand to meet all this additional output. Wait times on the Model 3 and Y have stretched to more than six months, Martin Viecha, Tesla’s investor relations chief, recently told a Deutsche Bank conference.

“With market demand for EVs clearly outstripping industry’s ability to produce, success in EVs is no longer about the order book, but rather about production capacity, ability to secure supply, and best cost, where Tesla feels it has considerable lead,” Deutsche Bank analyst Emmanuel Rosner said in a note.

Others see Tesla being toppled from the electric-car throne as new entrants muscle into the growing market. IHS Markit projects Tesla’s EV market share in the U.S. will fall to 20 percent by 2025, from slightly more than 50 percent today.

Heavy investment “will put Toyota and Volkswagen in a better position to compete with EV specialists,” said Anna-Marie Baisden, head of autos research at Fitch Solutions. “We have long held the view that the more traditional carmakers will have certain advantages over startups such as scale, manufacturing experience and brand loyalty.

In addition to changing up their assembly lines and model offerings, VW and Toyota will have to chase Tesla on another front: software.

Early sales of the ID3 were plagued by challenges VW had in getting certain tech functions to work. Initial cars were delivered to customers with missing features including the ability to connect smartphone apps with the vehicle’s display screen. Rather than beam a fix to its owners over the air — the way Apple does with iPhones, and Tesla does with its models — ID3 drivers had to pay their dealer a visit to have their car serviced.

Joey Mandel’s experience is a case in point. The music festival industry worker in Los Angeles’ Woodland Hills neighborhood was the first person at his local dealership to get an ID4 electric SUV. He has encountered his fair share of bugs — the audio cuts out periodically, and other times the vehicle will not release from its charging plug.

Overall, though, Mandel says he is still happy with his purchase. He has not had trouble traveling to events along the West Coast thanks to VW’s “solidly built-out”charging network.

“It’s not a Tesla in terms of technologies,” Mandel said, “but for people thinking they are scared to make the shift to EVs, Volkswagen keeps things relatively like a normal car.

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