The chair of Toyota told his executives, suppliers, and engineers that they needed to produce better internal combustion engine.
Akio Toyoda, racing under the name Morizo, said in January that “we will keep the flame of the engine burning.” I will not let the hard work that you have all put in so far go waste.
Toyota has developed a new generation of smaller engine that uses shorter pistons and promises better fuel efficiency in conjunction with batteries. The engines are capable of running on petrol, diesel or carbon-neutral fuels like hydrogen.
Due to cost and range concerns, consumers prefer hybrids over fully electric vehicles.
Analysts and industry executives are divided over whether the Japanese company is underestimating how fast the Chinese are advancing the electric revolution and whether their bullish bets on engines will prove costly in the end.
BYD, along with other Chinese automakers, are not deterred by the move towards higher taxes in Europe and North America. They continue to aggressively make inroads in new markets such as South-East Asia and Latin America. BYD is now competing with Elon Musk’s Tesla in the EV market.
The Chinese automaker, on the same day Toyota unveiled plans for new engines, also revealed a new hybrid technology. It claimed a record-low fuel usage, a driving distance of 2,100km, and a thermal efficiency of 46% — the percentage of input energy converted to output work.
Toyota didn’t disclose any specifics but the new 1.5L engine will be available around 2027. Its fuel efficiency in the sedan category is improved by 12 percent and its thermal efficiency is higher than its old record of approximately 40 percent.
France’s Renault and China’s Geely have also formed a partnership to develop hybrid engines and internal combustion engine.
Thomas Besson is the head of automotive research for Kepler Cheuvreux. He said that China’s electrification was unstoppable. It’s dangerous for automakers to think that the hybrid boom is going well.
Toyota’s current strategy seems to be working. Toyota’s size and profits allow it to bet on everything from hybrids to pure electric vehicles and fuel cell cars.
Toyota’s assertion that the transition to electric cars will be uneven around the world has been confirmed by the recent slowdown in EV sales in the US and China. This confirms the need for consumers to have a wide range of choices, including electric vehicles.
Kota Yuzawa, Goldman Sachs’ analyst, said that some global OEMs (original equipment manufacturers) are already reducing the development of gasoline engines to better allocate resources to electric cars. “I cannot say that the gasoline engines will be the sole factor that Toyota uses to capture market shares, but they are one of the most important factors we should consider.”
Hiroki Nakajima, Toyota’s chief technology officer acknowledged that investment in new engines were “a magnitude less” than funding it had invested into electric vehicles. This was because it could use existing plants rather than spending billions to build new ones.
He added that the cost was not their top priority. “Both internal combustion engines and battery electric vehicles are important.” The corporate value of our company and its social responsibility will be affected by the amount of carbon dioxide that we emit.
Volkswagen has been hit hard by the EV slowdown in Europe after it made a bold move to phase out combustion engines and a aggressive shift towards electric. Nissan and other smaller players have said that they will not spend more money on developing new combustion engines.
Toyota and other companies, such as Stellantis or Ford, want to maintain highly profitable hybrid sales as long as they can. Analysts estimate that hybrids and plug in hybrids have margins ranging from 10 to 15 percent.
Battery electric vehicles are a much more grim picture, barring outliers like Tesla and BYD. Many companies struggle to even break even, never mind show profits, without government assistance.
Stellantis, the company that owns Peugeot, Citroen and Fiat, will sell electric cars to higher-end customers. However, sales and profits from “mild” hybrids — cars powered by combustion engines but with a battery added to improve performance — are expected to be much larger.
Carlos Tavares said, “Mild Hybrid Technology is Affordable for Middle Classes. The technology represents a large volume, and this technology is very, extremely profitable.” He made the statement at a Bernstein conference held in New York. He estimated that EVs cost 40 to 50% more in production costs than cars with internal combustion engines, and parity wouldn’t be achieved for several years.
Carmakers are faced with the dilemma of deciding which technologies to invest, while consumer preferences change at a rapid pace due to the increasing number of Chinese electric vehicles.
Besson stated that “the lead time for this industry’s development is very long and that one of the biggest challenges that many automakers face today is that the Chinese are able to accelerate that process.”
The Chinese can spend as much money they want on getting there.
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