19 May 21

Japanese OEMs unsure about road to electrification

As the trend towards electrification is now confirmed – strategic and regulatory –the future of hybrid is being discussed amongst Japanese OEMs. Toyota foresees a big space for electrified vehicles, as opposed to Honda, that is committing to full electric and hydrogen only. Both car manufacturers are aiming for a carbon neutral position by 2050.

Both camps have valid arguments. Toyota underlines that the automotive industry is highly volatile and flexibility is key. Aiming for a carbon neutral goal with a single strategy is not an option. Honda reads the market differently and believes that decarbonization has become such an important – global – topic that EV transition is inevitable, so why continuing a – literally and figuratively – hybrid solution?

The other argument in favor of Honda’s approach that analysts are putting forward, is legislation, especially coming from the EU. The European Union is looking at the total carbon dioxide emissions of battery manufacturing processes and is also preparing to introduce a so-called carbon border adjustment mechanism that would raise the cost of imports from countries considered to be doing too little to reduce emissions. The U.S. is considering following suit.

In this context, Toyota’s careful strategy could be rewarding for another few (up to 5) years, but will ultimately out of line with global requirements. Toyota is eager to reply that if all OEMs were to move to pure EV right away, the consumer would end up with a limited offer, infrastructure is not ready and even the supply of electricity is not adjusted to a different type of utilization.

A final risk, in particular for the corporate car / leasing industry, is the risk on residual values of hybrid cars. At some point in time, BEVs will become the standard and hybrids will consequently be virtually unsellable on the secondhand market. Without clear timelines and a glidepath of tech developments, this transition could be a costly adventure.

Authored by: Yves Helven