Toyota has been a laggard on electric vehicles, and the optics have not been great. We've seen the brand launch several new hybrids, including body-on-frame trucks and SUVs. But Toyota's pure electric efforts thus far — the bZ4X crossover and its fancy Lexus RZ 450e sibling — have disappointed, falling somewhere between compliance car and not meeting the moment.
But Toyota is now under new leadership, and the paradigm with EVs is shifting. Toyota is pouring its full engineering might and production know-how into overhauling itself for EV manufacturing. The company plans to launch 10 new EV models by 2026 and be selling 1.5 million EVs annually — up from fewer than 25,000 in 2022. And Toyota may end up being the legacy manufacturer that "beats Tesla" long term. Here's why.
Toyota could afford to wait to adopt EVs
The first rule of changing the game is when you're winning, don't do that. Toyota has been in a position to let the EV market play out and move when it made sense — for Toyota. Five of America's 12 best-selling vehicles last year were Toyotas — five of the top eight if you factor out Big 3 full-size trucks. That includes America's best-selling two-row crossover (RAV4), sedan (Camry), midsize pickup (Tacoma) and exclusively three-row SUV (Highlander).
Worth noting, that success has not come from disregarding fuel economy. EV proponents castigate Toyota hybrids. But if you want a reasonably-priced, fuel-efficient, three-row family car, Toyota offers the best and most capable options on the market with the Highlander, Grand Highlander and Sienna. Plus, the excellent Prius Prime PHEV is probably a better option for most buyers than a sub-$40,000 EV.
Waiting may provide Toyota with a competitive advantage
Tesla earned a competitive advantage being first to market with serious EVs. But it's not clear that legacy manufacturers who jumped in early have reached the same result. EVs are not profitable in isolation yet. Mass-producing them has been a challenge for automakers. And while Ford earned deserved plaudits for ad hoc vehicles like the Mustang Mach-E and F-150 Lightning, they are developmental dead ends. Ford still needs to double back to build a dedicated EV platform-based F-Series to stay competitive.
Toyota is entering the game late. But they will be entering a more mature EV market and with a more considered approach and better technology. Other automakers got a jump on EV-specific branding. But its not clear how well that ubiquitous-sounding branding — IQ, EQ, ID, Ioniq, i — is resonating with car buyers. If the way forward ends up being leaning on a brand's combustion heritage, Toyota should be in a very good place.
Toyota is going all-in on EV batteries and modern manufacturing
Toyota recently announced ambitious plans to make EV batteries smaller, lighter and cheaper. Solid-state batteries eventually delivering 900-plus miles of range and sub-10-minute full charges steal the headlines. But Toyota's multi-faceted plan also calls for more affordable lithium-iron-phosphate batteries that deliver 20 percent more range than the bZ4X while costing 40 percent less. Essentially, Toyota should have battery options for an LFA replacement, a cheap electric Corolla and everything in between.
Renowned for its manufacturing innovations and efficiency, Toyota is also planning a radical overhaul of its production process — Tesla style — with features like giga-pressing, modular vehicles and the elimination of anchored production lines to reduce costs and complexity.
Toyota's EV lineup should be epic and will be more tailored to buyers than Tesla's
Tesla has built an aspirational brand, and its growth has been impressive. It's also been essentially riffing off the Model S since 2012. The Model X is a Model S SUV. The Model 3 is a smaller, cheaper Model S. And the Model Y is an SUV version of that. Instead of targeting key segments and sensibly broadening their product lineup with family and enthusiast-friendly vehicles, Tesla is building a weird, quirky Cybertruck.
Better batteries and reduced manufacturing costs should allow Toyota to enter the EV space with a more strategic and differentiated lineup than we have seen so far. And these should be the EVs buyers have been waiting for. A three-row family EV crossover — basically the electric equivalent of the Highlander — will arrive soon. An electric take on the Tacoma may not be far behind. Toyota has intriguing plans to make EV sports cars engaging too.
And then there's Lexus. Toyota's luxury brand plans to be all-electric in America by 2030. The brand's traditional emphasis on quietness, comfort and plush interior materials should translate very well to electric cars and be a compelling counterpoint to minimalist Teslas. The only thing letting Lexus down has been dated engine tech. By the end of the decade, that may no longer be the case.
Toyota has a pedigree for crushing established manufacturers
Toyota is the planet's largest automaker. But it got there by being the OG automotive startup and overturning established orders. Toyota bullied American automakers like Ford out of affordable car segments. Lexus changed the way Mercedes had to do business in the 1990s. Tesla may have set the terms of the game with EVs. But Toyota's track record is finding the optimal way to win them with quality, durability and reliability.
