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Toyota is working with BYD because it entirely underestimated EVs

The news that China’s BYD and Toyota will work together on EVs is an admission by the world’s largest car maker that it has completely missed the mark on its CO2 reduction strategy – so badly that it may end up in thrall to the Chinese battery giant, and unable to remain at number 1 globally unless it makes urgent changes now, which it cannot source internally.

For people that have dealt with Japanese conglomerates, this is a massive cultural admission of defeat, and the company would never make such an announcement unless it was entirely necessary.

But when you sit down to plan the transition of around 8.8 million (it used to be 10.5 million) cars a year from the well understood combustion engine to a series of Electric Vehicles, if you do not start with at least a battery head start, then you are in trouble.

This is the same reason that others have merged their EV efforts, Ford with Volkswagen, Renault with Nissan (or is that with Fiat Chrysler)?, Volvo with battery makers CATL and LG Chem. BMW still seems to believe it can go it alone – very few other’s do

Back in June Toyota began to see that its plan to use hydrogen fuel cell EV hybrids was doomed when it conceded that it would add battery electric vehicles and bring forward the target of 5.5 million EVs from 2030 to 2025. But even then it thought that this would be made up of 4.5 million hybrids and 1 million EVs.

The reality is that all over the world the confusion and uncertainty around new car sales, has stunned all car makers. Consumers want to buy EVs, the charging market and the car sales market is not ready for them, so instead they are waiting. And right now even cheap EVs are expensive, except in China, where they have been officially unleashed by the government.

Once this market matures, you will be able to buy a brand new EV, which requires less maintenance, has almost no moving parts (under 20) compared to the 2,000 in an internal combustion engine, which will last twice as long, for about $15,000. By then the car industry will employ less than half of he people it employs today.

Earlier this month Ford said it would make an EV for Europe “in the next couple of years.” That was shortly after it said that it would close factories who’s mission had been to make engines which used less petrol. Low carbon engines were to have been Ford’s plan for emissions reduction – and it has had to change its plans, suddenly and late.

Ford is now planning a European launched of an electric SUV inspired by the Mustang – but it will be made in the US and imported. That’s because the simplicity of EV design means that it can all be made in a single factory.

So just a month after Toyota has realized its mistake, it has cut this deal with BYD. They will jointly develop EVs and the announcement highlighted sedans and SUV which will get launched in China in the first half of the 2020s.

What about everywhere else? Is this purely for China? Western Europe and the US are just as in need of EVs? And just how much help does BYD  need to “develop onboard batteries,” for the jointly developed EVs?  We would suggest none and this is just a ruse to award the largest battery order ever.

This type of deal will be cut because Toyota believes that its momentum cannot be halted. It is skilled at making cars, it has made engines for years, and dealt with the massive complexity around supply chains for finally pulling together each vehicle at a particular factory or group of factories around the  world. It has the sales infrastructure in place and BYD is only supplying a battery after all, perhaps it will help with the EV drivetrain, but they wil beo remain focused on China. Wrong.

We remember when Apple’s Steve Jobs said he would design a music phone with Motorola. Apple had never made a phone, it had none of Motorola’s experience, few of its contacts, and no established supply chain. The product they produced together was weak, the ROKR phone. Two years after that Apple introduced the “real” Apple phone, the iPhone. And the rest is history.

The problem of the current batch of established car makers is that they believe they know all the things they need to build a superior car, and BYD will learn how Toyota does it and say, “Half of these steps (and costs) are unnecessary, let’s do one ourselves.”

Rethink Energy fully expects EVs to dominate in short order and that at least 50% of the major car companies will be fatally wounded by the arrival of EVs, and that those which survive will all be significantly smaller.

BYD was founded in 1995 as a battery business and has grown into a total energy business not only making EVs but also large-size energy storage cells.

Last month, Toyota rolled out plans to co-develop a new chassis with Subaru specifically for EVs called the electric Toyota New Global Architecture. It is a flexible platform which can be stretched or shrunk to fit different vehicle types. Toyota cut a battery supply deal with the Chinese battery maker CATL, another broad partnership, ranging from the development of new technology to recycling batteries. That will mean that Japanese rival Panasonic will be harmed by the deal, as it leads in batteries.

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