INTRO: Toyota was one of the first automakers to
embrace an EV future.
I mean, how could anyone forget the iconic Toyota Prius.
The Prius didn’t have the best of social images, but it was and still is one of the
most cost effective vehicles on the road.
Aside from pioneering the way with hybrids, Toyota was also an early investor in Tesla.
Way back in 2010, Toyota invested $50 million into Tesla which gave them a 1.43% stake in
the company.
If they were still holding this stake, it would be worth over $10 billion, but unfortunately,
they sold this stake in mid 2017.
At the time, it seemed like Toyota was simply taking risk off the table and locking in profits,
but looking back, it seems like something changed with Toyota as they sold off this
stake.
Since then, Toyota has actually become more of an EV opposer.
For example, Toyota has actually been lobbying to slow down the move to EVs.
They’ve also been behind the curve when it comes to fully electric vehicles.
It wasn’t till April of 2022 that they released their first fully electric SUV onto the market.
And they’ve actually recalled this vehicle due the wheels falling off, so it’s not
exactly going great.
Now, supporters of Toyota would probably point out that Toyota is investing a significant
amount into battery technology.
For instance, they have a plan to invest $13.5 billion into battery tech by the end of the
decade.
But, compared to the rest of the industry, this is rather underwhelming.
Take Ford for example.
Ford is literally drowning in debt with over $200 billion in liabilities.
Yet, they just increased their EV investment from $30 billion through 2026 to $50 billion.
Similarly, Volkswagen is investing $180 billion into EVs over the next 4 years.
Considering these investments, Toyota’s commitment is rather underwhelming.
Clearly, they haven’t ditched EVs altogether, but at the same time, they’re also refusing
to go all in and jump onto the EV bandwagon.
So, why is Toyota so hesitant with EVs?
HYDROGEN: One of the main reasons Toyota has been so
hesitant when it comes to EVs is because they’ve been betting on hydrogen.
According to Toyota’s Vice chairman, they “don’t want to be seen as an EV maker,
but as a carbon-neutral company.”
Toyota argues that this carbon neutral future does not have to be achieved with EVs.
“Carbon neutrality is not about one having a single choice, but about keeping options
open.”
This in itself is not a bad stance per se, but thus far, we’ve only seen issues when
it comes to hydrogen vehicles.
Take the 2021 Tokyo Olympics for example.
Toyota supplied the Olympics with 500 hydrogen busses and cars.
The vehicles themselves worked alright, but the same could not be said about the finances.
You see, Toyota leased out these busses to Japan for $900,000 for 6 years.
A comparable diesel bus could have been leased out for $220,000 for 15 years.
On an annual basis, the hydrogen bus works out to $150,000 per year while the diesel
bus works out to under $15,000 per year.
In other words, the hydrogen option is literally 10 times as expensive, and that’s just the
lease.
Unlike EVs where fueling up is dramatically cheaper than gas counterparts, with these
hydrogen busses, it’s actually 2.6 times more expensive.
If you thought EVs were already expensive, these are clearly on a different level.
To make things worse, financial concerns are just the first of your worries.
Hydrogen vehicles also suffer from an extremely underdeveloped refueling network.
Unlike electric charging, you can’t just setup a few charging stations that link up
to the local power grid.
Instead, you have to buy hydrogen specific fuel dispensers that often cost $100,000 per
unit.
You also have to spend a significant amount on storing the hydrogen and you also have
to deal with regular hydrogen deliveries.
In other words, you basically have to run a gas station.
And given that the majority of gas stations make their money off of the convenience stores
attached to the gas stations, I don’t think they’ll be particularly thrilled to invest
into hydrogen infrastructure.
One advantage that should be pointed out, however, is that filling up a hydrogen vehicle
is similar to filling up a gas vehicle meaning that you can get a full tank of gas within
just 3 to 5 minutes.
If you’re someone who does a lot of road trips, this is likely a significant advantage,
but that’s pretty much where the advantages end.
It’s not just the fueling process that’s similar between gas vehicles and hydrogen
vehicles.
The maintenance process is also quite similar.
You see, hydrogen vehicles are way more complex than EVs meaning that they naturally come
along with more maintenance given that more things can go wrong.
So, from a big picture view, hydrogen vehicles cost more, they require more maintenance,
and the infrastructure is the least developed, so hydrogen vehicles just don’t stack up
against EVs.
But then why is Toyota so determined to go down this path?
Well, the answer seems to lie in what’s best for Japan as opposed to what’s best
for everyone.
JAPAN’S ENERGY CRISIS: Japan’s obsession with hydrogen is nothing
new.
In fact, it’s just one of many avenues that Japan has been experimenting with for decades.
And the main reason the country doesn’t want to bend to western standards is because
of the country’s energy dependence.
Japan is basically just an island which means that they don’t have any neighboring countries.
At first glance, this might seem cool.
They have this entire piece of land all to themselves.
But, logistically, this is actually a nightmare.
Here’s the thing, when you aren’t physically attached to any other countries, shipping
becomes extremely difficult because everything has to be shipping through the sea.
And this is especially a problem when we’re talking about energy.
You see, much of the world either creates their own energy or they rely on neighboring
countries.
Europe for example used to rely on Russia for crude oil and natural gas.
They had a massive set of pipelines that facilitated the trades between the two regions.
A similar case can be seen with America as well.
Canada is the largest energy exporter to America and the reasoning is obvious.
The two countries are touching which makes it easy to trade energy.
Japan obviously doesn't have any such partners.
They also don’t have any of the high demand resources like crude oil or natural gas.
So, they’ve essentially been forced into importing all of their energy.
This is not only expensive, but it also puts Japan at a massive trading disadvantage.
I mean, when you’re importing 94% of your energy, you’re not exactly in the best position
to implement tariffs or start a trade war.
The other countries could hit back with an energy boycott, and you’re country would
be screwed within a matter of days.
Japan is obviously not a fan of this situation and they’ve been trying to escape this situation
for decades.
Their initial solution to this conundrum was going all in on nuclear energy and this was
actually playing out really well.
At their peak in 2010, they were able to produce 13% of the entire country’s energy needs
using nuclear power.
But, all of this would come crashing down in 2011 with the Fukushima Nuclear disaster.
You probably heard about this on the news.
154,000 people had to be evacuted and it’s ranked as the second worst nuclear disaster
of all time, only beaten out by Chernobyl.
The worst part is that Japan couldn’t even do anything about it.
It’s not like the disaster was caused mismanagement or negligence.
It was actually caused by a record breaking earthquake plus tsunami combination.
Really, the only way Japan could’ve avoided this disaster was to not support nuclear energy
in the first place.
And that’s exactly what they’ve been trying to do eversince, but this has catapulted the
entire country into a perpetual energy crisis.
Nowadays, its extremely common for Japan to issue power conservation messages to households
and companies as the country is constantly fighting to avoid blackouts.
As you would guess, Japan has been frantically looking for solutions eversince the disaster,
and one of the top solutions that they’ve landed on is hydrogen.
A SAVIOR: While Japan doesn’t have access to any of
the common sources of energy, what they do have access to is Hydrogen.
For once, Japan’s ocean surroundings are actually helpful.
You see, the ocean floor surrounding Japan is filled with a sherbert like substance often
referred to as “fire ice”.
These ice crystals hold a tremendous amount of natural methane which can be converted
into even more hydrogen.
It’s estimated that just one cubic meter of methane hydrate can produce 160 cubic meters
of methane gas which can then be turned into hydrogen.
And given that Japan has an exclusive economic zone that stretches to both sides of the country,
they have access to plenty of “fire ice”.
Now, it’s not all sunshines and rainbows given that it’s not easy to extract “fire
ice”.
First, you have to voyage out deep into the ocean where the sea floor is a 1000 meters
under the surface.
From there, you have to drill hundreds of meters into the sea bed to actually retrieve
the “fire ice”.
Japan has been working on a new drilling method that can potentially extract “fire ice”
from shallower locations and then send them through underwater pipelines, but this is
still a work in progress.
It’s not clear if this new process will work out, but it doesn’t matter whether
it does or not.
For the first time in a long time, Japan actually has an alternative form of energy.
And if this process doesn’t work out, they’re just gonna keep trying different processes
until they figure out something that does work.
For them, this is not a matter of, “oh let’s switch renewable energy because it’s the
right thing to do and it’s trendy”.
No, for them, this is a matter of “we have to figure this out ASAP if we want to save
Japan from the energy crisis.”
So, they’ve obviously taking this extremely seriously, and as Japan’s largest company,
Toyota is obviously doing everything they can to support this vision.
And yes, that includes lobbying other countries to slow down EV adoption.
When you look at it from the western perspective, it seems like Toyota are the bad guys who
are teaming up with the oil giants like Shell and Exxon to stall this wholesome movement
towards EVs, but that’s not really the case at all.
Toyota isn’t against renewable energy or EVs, they’re simply trying to promote the
form of energy that would be most beneficial for their own country.
ONE SHOT: Global energy changes don’t happen often.
If anything, they might happen once a century.
So, we’re truly living through historic times, and Japan only has one shot at getting
this right.
Either they convince the world that hydrogen is worth perusing right now, or they get left
behind as the entire world switches to EVs.
If this happens, Japan would just become even more dependent on the rest of the world for
energy imports.
Also, allocating a significant portion of their electricity towards running electric
cars will simply increase their chances of a blackout even more.
So, that’s the last thing Japan wants to do.
Something else that we should note is that Japan is not even the country that would benefit
most from a switch to hydrogen.
It’s not like Japan has so much hydrogen that they would become the next Saudi Arabia
or something.
Rather, a trend towards hydrogen would simply alleviate their dependency for energy.
The country that would really profit from this shift is China who is the leader in hydrogen
production and consumption.
China’s current hydrogen usage comes in at a whopping 24 million tonnes per year.
Now, it should be noted that most of this hydrogen is “grey” hydrogen meaning that
it’s produced using fossil fuels.
But, China is setting up loads of “green” hydrogen plants as we speak, so they would
be the ones that would benefit most from such a transition.
So, in the end, why is Toyota refusing to jump onto the EV bandwagon despite pioneering
the industry?
Well, their home country, Japan has been struggling with energy for decades, and there has been
a glimmer of hope with hydrogen.
So, they’re trying their best to leverage this opportunity and maximize the benefit
for Japan, but only time will tell if this gamble will be worth it.
Now that you see it from Japan’s perspective, do you think Toyota is doing the wrong thing?
Comment that down below.
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