Toyota has announced $5.2 billion of investments towards battery production and future electric vehicle ambitions. Centered around the retrofitting of a plants currently used to produce powertrains for ICE vehicles, the shift’s largest issues may be shifting employment to work in the new EV-era.
The investment focuses on two key regions. $2.85 billion will be invested in the Plant of Prime Planet Energy & Solutions in Himeji, among other Toyota property in Japan. As much as $2.3 billion more will be invested into a plant in North Carolina, tripling an initial injection of $1.29 billion.
With these investments Toyota will go from 6 gigawatt hours (GWh) of battery production capacity to 46 GWh, with an aim to reach 280 GWh by 2030; there’s far room for more investment if it wants to reach its targets.
The decision to convert ICE plants into battery manufacturing facilities is a no-brainer for most companies, especially somewhere as population-dense and environmentally protected as Japan, where land can go for a premium. The rate of conversions will be accelerated as demand for new ICE vehicles continues to crater and the use-case for ICE vehicle manufacturing disappears. The Stellantis group has already done this for a factory in Milan, leading to layoffs to the tune of 50% of the factory’s workforce. Stellantis claims all workers would be re-employed as of 2030, but we’d be interested to see the small print in those contracts.
Toyota’s president Akio Toyoda is also the chairman of the Japan Automobile Manufacturers Association (JAMA) and has been a strong advocate for job security when undergoing the change to EVs. While this is a commendable sentiment, we don’t think it cleanly reconciles with the reality of the situation. This is because EV production requires far less manpower than the production of ICE vehicles, since more of the process can be automated through robotics, giving considerable long-term cost-savings.
Japan’s automotive industry is integral to the economy, with 5.5 million workers being employed by Japan’s main 7 automakers. Toyota and other Japanese manufacturers can’t get too attached to their domestic workforce if they want to stay competitive. Our worry is whether or not it is going to be willing to break tradition or attempt to successfully navigate this situation.
Japanese culture and particularly industry can be very conservative, often despite overwhelming evidence that it would benefit immensely through change. A rather timely example is that Japan’s digital minister recently declared war against floppy disks, CDs, and the minidisk since they’re still widely used within governmental procedures despite being ancient by modern standards.
This conservatism even extends to people within the workplace, where individuals are often expected to work for the same company for a vast majority of their working life. This could lead to problems for Japanese automotive manufacturers when navigating the transition to electric vehicle production.
Do you cut your workforce down significantly and risk domestic demand falling as you go back on your word? Or do you keep and retrain your workforce and risk not having the best people or too many people heading into a crucial period for the company and the industry?
While it may be dreading it in some ways, Toyota and other companies will have to undergo massive changes in the next decade to remain competitive and compliant within the global automotive market. How it handles not only job creation, but also job destruction, will be very important for the company.