In sales of purely electric cars, Toyota is far behind Europe. It currently controls only about 1% of the market with its battery-powered cars. It wants to significantly accelerate the transition to “electricity”, recently announcing a new goal: the sale of electric cars should account for 20% of all its sales by 2026. Is it achievable?
It feels like a huge acceleration. But let’s look at it in a broader context. Toyota customers’ transition to pure electric cars should be much easier than that of other brands, as they will switch from hybrid, or partially electrified, cars. That’s why even such an ambitious goal is realistic: 20% by 2026 and 50% by 2030. We won’t tell people to switch from a diesel station wagon to an electric SUV, we’ll say that half of the hybrid cars they drive today they will. theoretically be completely electric the same.
But the battery of hybrids is further away from the battery of pure electric cars than a die-hard Czech petrol station attendant in Brussels… These are completely different batteries. Also, Toyota doesn’t have an electric car battery factory in Europe, will this change?
Rather not. I assume that we will deepen cooperation with gigafactories of other manufacturers in Europe, or import batteries directly from Asia. Toyota wants to make a splash with electric cars in the small car segment too. We think that with them the fully electric control is the most natural and the most usable. I can imagine that we will aim to produce electric cars that will be similar in size to the very small Aygo X and Yaris models that we produce in Cologne. But it has its pitfalls.
For example?
It is believed that cars should be technically identical to those we are used to, that is, have a range of at least hundreds of kilometers. However, it doesn’t have to be this way. If you want to make a small car like the Yaris and Aygo X and give it hundreds of kilometers of range, it will be unaffordable, terribly heavy and unusable. If we drivers were able to accept the fact that with this type of car we only need a range of eighty to one hundred kilometers, we would be able to satisfy this demand much more easily and deliver the car to the market. At the same time, the price would be between 390 and 420 thousand crowns. The production of such cars would also be part of the development of electromobility at the Toyota plant in Cologne, overall it would make sense.
Hybrid cars, on which Toyota has been betting for some time, will not be recognized as emission-free by European regulations. Hydrogen propulsion, which you also promote, is very expensive for a change. How difficult will it be for the automaker to convert to pure battery cars?
In 2026 and 2027 we want to launch cars with new batteries that will use solid electrolyte technology. These batteries will work completely differently, should allow a range of up to 1,200 kilometers and recharge in ten minutes. By then we will launch six new battery models. It will definitely be challenging. We will have to modify part of the production lines to produce battery-powered cars. It won’t be a small investment. On the other hand, it is natural for us to produce electric motors and batteries. It is not a brand that has a history of 22 million electric motors sold and the same amount of batteries sold.
Martin Peleska | E15 Michele Tomi
Car manufacturers are facing uncertainty, it is not known how many electric cars the markets will welcome and at what time. For example, Volkswagen has stopped production of the ID.3 and Cupra Born models in Cvikov and Dresden until the end of the year due to low demand. The Czech Republic is one of the European Union markets with the lowest sales of electric cars. How do you evaluate the efforts of the Ministry of Industry and Trade, which is launching support for companies and entrepreneurs for the purchase of electric cars?
It took a long time. At a time when other countries are reducing or eliminating support, we are starting it, albeit with European funds. Customers perceive that there is no ongoing support in the Czech Republic, so this one-off help probably won’t convince them to throw their two-year-old diesel off the cliff. I should probably be grateful, but at a time when the state is saving money, such support can worsen the image of electromobility in the eyes of the public.
The state should say that the plan will help improve the condition of the Czech fleet, which is tragically old and cannot accept more electric cars. By the way, we have instructed lawyers to find out how the support will work. They found there was more confusion than certainty about how it would work. We want to educate retailers so they know what to say to customers. Despite the uncertainty, companies are already entering the market and attacking car manufacturers with offers. They want to collaborate, for thirty thousand crowns they will ensure that the entrepreneurs obtain subsidies.
How have your sales developed in the Czech Republic this year?
Compared to the previous year we grew by half, the overall market by 18%. The number of newly registered cars has increased about as much this year. But these are cars sold last year or the year before. Although there are many of them and our production capacity is full thanks to this, it will not last forever. We are seeing a significant drop in orders.
Martin Peleska
He began his automotive career in 1999 at Ford Motor Company, where he held various aftermarket roles. Since 2006 he has worked for the Toyota and Lexus brands, where he started as a sales manager. Between 2009 and 2012 he worked at the European headquarters of Toyota Motor Europe in Brussels, where he was responsible for sales and production planning and subsequently pricing of selected models. After his return in 2012, he became director of sales and marketing at Toyota Motor Czech and, with the move to Toyota Central Europe, was appointed director of representation for the Toyota and Lexus brands in the Czech Republic.
How big?
I estimate there are less than about a third of them in the entire market: customers are ordering far fewer cars now. Interestingly, for example, among our new customers there is a slight increase in private customers, but a notable decrease in companies. At the same time, everyone would expect the opposite. Previously, companies accounted for about seventy percent of sales, now it’s almost half and a half.
If conventional cars are also not “sold”, reaching the aforementioned 20% share of electric cars in sales will be even more challenging, or not?
It depends on demand and mix, how many people switch from hybrid to electric. However, I don’t think the total size of the market would have a significant effect on the share that goes to internal combustion cars or electric cars. So, even if Europeans save money, I believe that the sale of electric cars can achieve the manufacturers’ goals. In total European sales of all cars, Toyota is currently second behind Volkswagen, in the electric car category it is significantly behind, as you already mentioned.
In the first wave, car manufacturers introduced large electric SUVs onto the market, now they announce that the next target will be a smaller and more affordable model for a wider clientele starting from twenty thousand euros. Will manufacturers be able to design a battery-powered car “so economical” that also meets customer expectations in terms of range or charging speed?
I also worked on pricing in Brussels for three years and I know that the price is not determined by costs and margins, but by how the market behaves. Of course, manufacturers have to work out some basic ideas about the future price more than five years before putting the car on the market. While these are the best, these are still just estimates. All it takes is a significant change in the yen exchange rate or the price of steel and you’re off the plan.
Chili?
Electric cars will approach the prices of conventional cars, partly by making them more expensive. Finally, after years of promises, we will also see the desired economies of scale. It will be cheaper to produce electric cars because more and more of them will be produced. This is already happening and will happen. I dare say that the cheapest electric cars of most brands will start from 750 thousand crowns. If we continue to require a range of at least five hundred kilometers, the price will not fall below that threshold. If we don’t ask for it, what I said applies, that is, cars with a range of up to one hundred kilometers can reach the market at a price of around four hundred thousand.
Major Chinese automaker BYD is planning to build a factory for its electric cars in Hungary, but several Chinese manufacturers have expansion plans. Do they represent strong competition?
I do not think so. It’s a bit like when Japanese and Korean brands arrived in Europe in the 1980s. Yes, when you enter the market, you can relatively easily create a wow effect and show big numbers. And yes, the Chinese are stirring things up a bit. But it’s another thing to repeat those numbers, if not actually increase them. You need to have a solid infrastructure: dealers, services, etc. If the Chinese are unable to compete with established brands among conservative customers, they will not survive the second life cycle.
But if they offer cars that are competitive in price and quality, the market will have to adapt to them. If I forget that Chinese car manufacturers have the support of their state, which has invested in the sector, they also benefit from the fact that they have very low distribution costs. The standard brand has about 25%, about eleven. But as the Chinese start building their dealer networks, distribution centers and European headquarters, their costs will rise. If they don’t, they won’t satisfy conservative customers. True, car distribution is a behemoth, but there’s no other way to do it.
Numerous brands, for example those of the Volkswagen Group or Stellantis, are switching from dealer sales to agency sales. How do you explain it? Will Toyota do the same?
They allowed themselves to be provoked by Chinese brands and Tesla. Moving to an agent model is one way to reduce distribution costs. The dealer will not have a contractually guaranteed margin of around ten percent, but will be paid as an agent when the car is sold.
I still can’t understand it, because the price is not set by the car manufacturer or the dealer, but by the market. Even though the auto company will make money from dealer margins, it will still have to pay these funds out of its own pocket for the cars to remain competitive in terms of price. We go in the opposite direction and look for new resellers. Toyota’s network in the Czech Republic will grow from 32 existing dealerships to ten new ones and will maintain the dealership sales model.
Imagine yourself sitting in a new Toyota ten years from now. What will change compared to today?
We’re probably a bit exotic in this regard, we go against the grain compared to different car sharing and similar, because we would like the car to be much more connected to the owner or his family. Cars will understand people more. They will know who is entering them and where they are going. If it’s a normal trip to work, the car will advise you where to go to drain the battery as little as possible, taking into account the terrain.
The car will understand the mood of the crew and adjust the music played accordingly. Upon your recommendation, he will order dinner at the restaurant or book a seat at the cinema. We see it in the studies that this is the direction the world will go. Whether we like it or not, the car will also become much more autonomous. It will cooperate with other cars and the road if it is equipped with technologies. All this will be quite common in ten years.
