Why Toyota isn’t all-in on electric vehicl

Investment Analysis Clubs Macro Economic Trends and Risks
#28

Not a few years behind. About $7,000 and $1.50/gallon behind.

Hardly. Most people and most locations in CA do not qualify for a $7000 state rebate.
Many of the programs are for charger installation by specific utilities and/or are income capped.
And Tesla used up the federal rebate 3 years ago, but sales went up.
And even though gas is more expensive so is electricity.

I’d guess that electricity has gone up in price more in the last 10 years than gas has…but gas prices do spike up and down a lot more.

But my point in that post was about apartments in SJ and SF having EV chargers and how the rest of the country will tend to follow, years later.
So I did a few random searches. You can duplicate it by searching for “apartments with EV charging in xxxx” and pick your own cities.

Kansas City
https://chargehub.com/en/stations/mo/kansas-city/apex-on-qua…

Denver
https://www.aptamigo.com/CO/Denver/Apartments/ev-charger

Chicago
https://www.aptamigo.com/IL/Chicago/Apartments/ev-charging-s…

Atlanta
https://www.cityviewvinings.com/amenities

Idaho Falls
https://www.apartmentfinder.com/Idaho/Idaho-Falls-Apartments…

Cherry Hill NJ
https://www.dwellcherryhill.com/features/

NYC
https://www.apartments.com/77-w-24th-st-new-york-ny-unit-12d…

Boston
https://www.churchpark.com/2020/10/21/apartments-with-garage…

Miami
https://www.miamicondolifestyle.com/electric-vehicle-friendl…

Sure, maybe these are a drop in the bucket. But it was just a drop in the bucket in CA 5 years ago too. Apartment owners seem to think that it is important to advertise EV charging.

Apparently there are oodles and oodles of them :slight_smile:
https://www.oodlesenergy.com/lets-talk-ev-charging

Mike

3 Likes
#29

The relevant question is how long can legacy car makers afford to make two very different kinds of cars. Having to support both ICEs and EVs seems inefficient and noncompetitive compared to companies focused on one or the other.

That’s a good point. We may indeed see some legacy automakers spin off their ICE divisions into separate companies - or even rebrand them - if it becomes inefficient to house them both in the same company. Maybe not, though - modern corporations can sometimes house disparate product lines in the same company, even if there’s little to no overlap between them. But I don’t think that those types of decisions will affect the availability of ICE’s too much, if there’s still robust demand for them.

with vehicles limited to the used market. ICE model choices will become rapidly fewer as 2040 approaches. Furthurmore, as EV adoption rises, the number of gas stations will go down with reduced demand. Use of ICEs will become increasingly less convenient.

Seems to me that ICEs have maybe 20 years left, regardless of the price of gas or the size of rebates.

Oh, I doubt that very much. I mean, look at EV’s - there’s limited models, and a far more inconvenient fueling system (at least away from home) than gas stations, and there’s lively demand for those vehicles. If the cost of ownership of an ICE remains materially lower than that of EV’s, then there will continue to be a vibrant and non-trivial ICE market. And I think that’s pretty likely to be the case in the U.S., and probably a number of other non-trivial markets as well. Even the avid enthusiasts at BNEF think that the majority of new cars sold in 2030 globally will still be ICE. Plus, in the U.S. most of the used car market in 2042 will still be ICE’s no matter how fast we race towards an electric future - we’re just not going to get to 100% EV’s in the U.S. quickly enough for the majority of used cars to be EV’s within 20 years.

But I think ICE’s will continue to be a solid alternative, because they’ll continue to be pretty expensive compared to EV’s. We’re pretty far along in squeezing economies of scale out of designing and manufacturing batteries and other EV systems, and running into the factors that lead to supply curves always sloping upwards (ie. that the marginal cost rises as quantity provided rises) - scarcity of inputs. EV’s need raw materials and components (like lithium, nickel, and cobalt) which are rising in price with the increased demand. At least one automaker (Stellantis) believes that there will never be an EV product that will be economically viable for average wage earners - they’ll always be too expensive:

Stellantis, now the 2nd biggest collection of auto brands in Europe behind Volkswagen, has said the high price of new electric vehicles and the absence of cheap ICE ones will price average wage earners out of the market, and that is likely to trigger political resentment.

https://www.forbes.com/sites/neilwinton/2022/08/21/accelerat…

It is possible (though I doubt it) that Europe will hold fast on their carbon regulations that will make it impossible to make money selling an ICE car by the turn of the decade. I don’t think that will ever happen in the U.S.

Albaby

2 Likes
#30

Canadians are jumping for joy! Apartment houses in Halifax, Canada, and other cities are getting charging stations:

Dec. 16, 2021 /PRNewswire/ – Enel X, the advanced energy and decarbonization services arm of the Enel Group, today announced its entrance into the Canadian EV charging market through an agreement with Killam Apartment REIT (“Killam” or the “REIT”), one of Canada’s largest multi-residential landlords. With the support of agency partner Catalyst Sales and Marketing, Enel X will install 438 JuiceBox Pro smart EV charging stations across Killam properties. The Enel X charging stations aligns with Killam’s long-term commitment to reduce carbon emissions to combat its impact on climate change.

https://www.wfmz.com/news/pr_newswire/pr_newswire_business/e….

Jaak

#31

Canadians are jumping for joy! Apartment houses in Halifax, Canada, and other cities are getting charging stations:

Hopefully they’re waterproof. Good luck to our Nova Scotian and Newfie fools (if there are any here) as they’re about to get walloped by a hurricane.

Albaby

1 Like
#32

> But I think ICE’s will continue to be a solid alternative, because they’ll continue to be pretty expensive compared to EV’s. <

Most analyses I’ve seen project price parity between EVs and ICEs within the next 5 years. Add to that the substantial reduction in maintenance costs and EVs should have substantial ownership cost advantages over ICEs by 2030. Some may disagree, but since we are only now seeing the mass production of EV batteries, economies of scale are to be expected. And yes there is a current scarcity of some necessary battery inputs like cobalt and lithium, but finding solutions to scarcity is something the free market is really good at.

>Plus, in the U.S. most of the used car market in 2042 will still be ICE’s no matter how fast we race towards an electric future <

Perhaps. But those used cars will become increasingly obsolete in their technology. I think in 10 years technology will be the principle differentiator of car models, much like it is with computers today. From what I’ve seen, the bulk of auto research dollars is going into EV development and EV software. Even if self-driving is far off, as automated driving systems improve they will make EVs safer with AI anticipating driving dangers and initiating emergency responses.

All this requires a big battery, which is why the near future will belong to hybrids and EVs that have the electricity needed. Pure ICEs are just a few years away from obsolescence.

And then you have the long-term prospect of Hydrogen, which because it can be produced from renewable energy has the potential to become a cheaper transportation fuel than diesel or gasoline.

#33

I don’t get this. Why are technology advances limited to EVs? They are just as easily attached to an ICE vehicle. ICEs are already largely controlled by computers. The driver’s inputs are mostly inputs to the car’s computers, which then do the actual work of physically controlling the car.

So it doesn’t matter if the AI is attached to an electric vehicle or an ICE vehicle or a hydrogen fuel cell vehicle.

Frankly, if we ever get to level 4 or 5 autonomy, I’d expect to see it on diesel powered 18 wheelers pretty quickly. Eliminating the driver is going to be quite cost effective for the trucking industry.

—Peter

2 Likes
#34

I agree with Peter. If a company spends a bag of money on connectivity or entertainment systems why would they limit that to EVs? Same thing for the truck load of money on ADAS. Sure, drive train stuff would be specific to an EV or an ICE or a diesel.

Mike

#35

As I said upthread, we’re already well into the range where economies of scale are being realized. We’re not “only now” seeing the mass production of EV batteries - there were 3 million electric cars sold in 2020. EV batteries are no longer bespoke conversions of batteries that were purpose-made for other uses - they’re already mass-produced.

Folks have been predicting that EV/ICE parity was just around the corner for years and years - since at least the days when Tesla was claiming that the Model 3 would be a $35K car. I don’t think it’s happening within five years, mostly because battery production can’t scale fast enough due to materials constraints for them to get much cheaper than they are now. And if batteries are constrained, automakers have strong economic incentives to allocate them to more expensive models than cheaper ones.

Remember, the market doesn’t “find solutions” to scarcity. All economic goods are (by definition) scarce, and that never changes. Instead, the market is very good at allocating resources in the face of scarcity. That’s why supply curves always slope up - meaning that it gets more expensive to produce larger volumes of things, once you get past initial economies of scale.

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#36

I don’t get this. Why are technology advances limited to EVs? They are just as easily attached to an ICE vehicle. ICEs are already largely controlled by computers.

There are two main reasons. The first is that the power consumption of the cameras/radar/lidar and computer required to perform anything approaching self-driving is far greater than can be provided by a standard car battery. If you are going to have to use a much bigger battery the hybrid or BEV configuration is more cost effective.

Second, electric power trains have much fewer moving parts than ICEs. The design is much simpler and therefore easier for software to regulate. Also more efficient. As just one example, consider torque:

Electric cars such as Tesla’s Model S accelerate extraordinarily quickly because electric motors produce maximum torque from a standstill. Internal combustion engines (ICEs) need to rev up to reach maximum torque. Because there’s no wait for torque buildup with EVs, electric car designers can take greater advantage of torque-vectoring than with ICE-powered vehicles.
(Best Electric Cars | Digital Trends)

If one believes as I do that cars are evolving to become computers with wheels then the shift to electronic from mechanical (ICE) systems is inevitable. Cars will be primarily electric, run by simple electric motors with internal combustion or fuel cells used only to generate electricity to extend range.

2 Likes
#37

Tesla has apparently reduced the average production cost of a Tesla vehicle to $36K in 2021. It probably could make a profitable $35K car if it weren’t for the fact that they are selling all the $45K cars they can produce at near 30% margin.

Markets frequently find solutions to scarcity either by finding new sources or alternatives. Oil was growing scarce in the US until the market developed fracking. Chile and Peru have large amounts of lithium that are mostly untapped while lots of research is going on with solid state batteries that don’t require these scarce materials. The market is good at innovation.

1 Like
#38

Which is, indeed, the point. They can sell cars at 30% margin (in the U.S., at least) because competitors can’t get battery supplies fast enough to flood the market. Note also that a production cost of $36K for a sedan is still pretty high for a sedan. EV’s are pretty expensive, and are likely to stay that way for quite some time.

Yes it is, but the market doesn’t work miracles - especially when it comes to the “floor price” of finished products. There’s a reason why they were never able to make that $100 laptop a reality, and why Tata ultimately couldn’t really make a one lakh car. As a very general matter, prices for manufactured goods don’t keep falling over time. Moore’s law works for chips, but things made of steel and aluminium and whatnot generally don’t keep getting cheaper and cheaper and cheaper through innovation. At some point, a toaster oven or a power drill or a car costs what it costs, even at the bottom of the line.

EV’s are much more advanced, electronically, than below-average priced ICE’s. You’ve stated that this trend will continue, as cars converge towards highly sophisticated computers on wheels rather than mostly mechanical. Those trends drive prices up, not down. As I posted upthread (maybe stuck on Boards 1.0?), Stellantis believes that the transition to EV’s is going to permanently raise the cost of owning a car significantly - basically pricing much of the bottom of the market out of car ownership altogether, if regulators force the transition.

Since that’s not likely to be the policy in the U.S., I think ICE cars will continue to be with us for quite some time longer than you anticipate.

3 Likes
#39

No one is asking for a miracle and no offense, but I don’t think you really know what the floor price is of an EV. The CEO of VW projects EV price parity with ICEs by 2025 and 50% VW sales by 2030.

Come the end of this decade, Volkswagen Group foresees 50% of its vehicle sales coming exclusively from electric cars, the German automaker announced Tuesday. Perhaps more importantly, it expects EVs to reach a price parity with cars powered by internal combustion engines in the next two to three years. Volkswagen foresees EV price parity with ICE by 2025, 50% EV sales by 2030 - CNET

That makes no sense to me. EV maintenance costs are much less than with ICEs and over the air upgrades makes it easier to maintain car performance as it gets older. From what I’ve read, Stellantis argues that the transition to EVs is being forced to occur too quickly by the EU, before companies are able to get production costs down. It is not that EVs are inherently more expensive to own than ICEs as you seem to be suggesting.

4 Likes
#40

Of course. We’re speculating. But CEO projections don’t always come true. After all, the CEO of Tesla projected that you’d be able to buy one of his cars for $35K - but that didn’t happen. VW might have thought that a year plus ago, when they made that comment - but what we’re seeing in the market today is exactly what we would expect if you weren’t going to see price parity in a few years: rising costs of production as increased demand for the product bumps into supply constraints for essential components and materials.

But they cost so much more to make - and because they’re in the luxury segment, and have all those fancy OTA capabilities, they’re even more expensive for being bundled with all those add-ons. Maintenance costs may indeed be lower - but that doesn’t matter if those operating costs aren’t low enough to compensate for the higher upfront costs.

Stellantis’ perspective is that you won’t be able to make an EV for the lower end of the market - ever. The batteries will be too expensive, too valuable given the mandated demand from government officials, that they’ll only be sold in expensive cars. Those expensive cars might price comparably to luxury ICE cars (which we could call ‘parity’) but you still end up with EV’s being more expensive than ICE’s as a general matter.

To use an analogy, it’s like what we see in the new housing market in a lot of areas. For a number of reasons, builders can’t economically build a small 1,200 s.f. 2BR starter home any more. So they start building 1,800 s.f. 3BR homes instead. And since they’ve moved up the price range, that 1,800 s.f. home will have nicer appliances, fixtures, and furnishings than the 1,200 s.f. they might otherwise have built. The 1,800 s.f. home today will sell for roughly what a 1,800 s.f. home might have sold for in the past, but the cheap 1,200 s.f. home is now gone from the market. So home prices rise, even though there’s price parity between any given new home today and the equivalent home of days gone by.

1 Like
#41

True. But there are no $35k luxury cars either. Is it not possible to create an EV that is equivalent to a Civic, for example? Sure, you strip away a lot of the stuff that makes a Model 3 so good. But that’s the point. Give me an EV Civic or Corolla, and stop trying to make a $35k Avalon. Because nobody can.

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#42

Well, it might indeed not be possible to do that.

Right now, EV batteries are expensive and scarce. The assumption that proponents make is that the current pause in price declines is, in fact, a pause - that once the supply chain stuff gets worked out, prices will start declining again. But if that doesn’t happen, it might indeed be the case that this essential component of an EV just is and will remain too expensive to use in a Civic-equivalent car.

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#43

It is true they don’t. On the other hand, GM seems to be backing up its more optimistic view of EV pricing with its advertised $30K electric SUV out in 2023 and a lineup of EV models below $30K by 2027. All apparently made possible by a new battery architecture called Ultium. Meanwhile at Ford:

Ford’s chief executive says the global auto industry is headed for a huge price war in the coming years as electric vehicle costs drop and multiple companies sell EVs priced around $25,000. https://www.usnews.com/news/business/articles/2022-06-01/ford-ceo-sees-electric-vehicle-price-war-as-ev-costs-decline

So you have Ford, GM, and VW with optimistic views of EV adoption, while Stellantis and the Japanese companies are more skeptical. On the other hand, Toyota has partnered with BYD to build a $30k Corolla-sized EV for the Chinese market. Apparently what attracted Toyota was improved battery technology that may make EVs affordable for the masses.

A Toyota source talking to Reuters said that it is what is enabling the automaker to produce its first affordable all-electric car:

“The car was enabled by BYD battery technology. It has more or less helped us resolve challenges we had faced in coming up with an affordable small electric sedan with a roomy interior.” Toyota partners with BYD to build affordable $30,000 electric car | Electrek

Toyota may be joining the EV wars.

#44

Clearly, if that happens it would cut against the Stellantis prediction. If GM can actually bring to market an EV Equinox that’s actually 20% cheaper than their current ICE version of the Equinox, that would be a significant accomplishment indeed - and point towards considerably better affordability that I expect.

#45

I disagree with your idea that we are “at scale” with EV components, especially batteries.

Recall the PC market in the 1980s and 1990s. Chip production was at scale with millions of PCs being made. And yet laptops weren’t that great and a desktop PC was not to be found for less than ~$1795 anywhere in the mid 1990s. Motherboard chipsets (Northbridge & Southbridge had already taken ~40 chips and reduced to 2) A CEO announced that they would make a $999 PC the next year using a clone x86 chip. Unheard of, can’t be done, but if you did no one would want it.
Mix in Internet demand, hundreds of no-name box makers and less than a decade later you can buy a desktop PC for $499. Much more capable and laptops are substantial as well.
You can buy more premium parts and build a better PC, but most don’t. And, of course, speed is better and there are more features too (mostly thanks to Moore’s Law which mostly doesn’t apply to BEVs)

Second point. The market does correct for lack of supply of commodities. Just look at oil and gas industries. Low supply/high prices = more searching, more drilling and tech advances (like fracking) and supply goes up and prices drop…usually overshooting. Although everyone complains about oil prices, haven’t you posted about how the price of oil hasn’t kept up with the CPI over decades?
Do you NOT think that various mining companies plus innovators (like Tesla and other companies with lots of cash) aren’t going to go all in on establishing multiple source of lithium and other commodities? More than 50-50 odds there is an oversupply coming. Just hard to predict exactly when.

Mike

2 Likes
#46

I don’t think you can compare chip production to EV’s (or EV batteries). There’s no Moore’s Law for batteries. Or indeed almost any other manufactured product. Microchips and electronics are a perhaps unique situation where technological development advances at such a rate that the cost per unit memory keeps falling and falling, and doesn’t have an upward-sloping curve. There’s almost no other product that applies to. Cars and lawnmovers and toaster ovens and jet skis and patio furniture and bidets and almost anything else you can think of aren’t declining in price over time.

The same is true of oil, BTW. Over the very long term, oil prices aren’t rising to the moon - but neither are they generally falling:

They’re certainly going to try - but that doesn’t mean that they’ll successfully be able to bring those resources on-line to match demand. I agree that there may be an oversupply - but not if there continues to be robust, indeed hyper-, growth in EV uptake.

#47

Maybe you didn’t notice…but that is what I wrote. :grinning:
What actually happened in the mid 1990s with PC prices was that the price of lots of things got optimized and that brought down PC prices – higher demand, higher volume, lower prices.
I’m talking about the price of the metal cases, the power supply, the motherboards (without chips), the CRT (later replaced by better cheaper LCD). Even the cabling. Wide ribbon cables for parallel signals replaced by cheaper/better serial digital cables. Oh, and the hard disk drive. Smaller and cheaper. (Similar to Moore’s Law they also got denser and faster, but mostly irrelevant to the fact that the most basic HDD was cheaper.

High demand, led to high volumes with better automated factories and an optimized supply chain. Even though they were making tens of millions before, 100s of millions per year meant even greater economies of scale. Moore’s Law got the headlines…but you can now buy a (cheap) PC for the price of a case and power supply back then. Moore’s Law makes it do more and run 100x - 1000x as fast.

Mike