Toyota already operates 14 manufacturing plants in North America, nearly all of them in the United States, and that number will increase as the industry giant responds to a newly enacted inflation-control law, a senior company official said Thursday.
The IRA features a number of provisions that will affect the auto industry, including new incentives to sell battery electric vehicles. Automakers will be encouraged to source raw materials and then assemble vehicles either in the United States or in countries with favorable business relationships.
Jack Hollis, newly appointed executive vice president of sales for Toyota Motor North America, said Toyota will “completely” expand US production. “Yes, it (the company) has been stimulated and you’ll see more.”
While Hollis won’t discuss specific plans, there are reasons to expect Toyota to set up one or more plants to produce what Hollis described as a “large number” of battery electric vehicles it is developing. To qualify under the revised electric vehicle incentive program that takes effect next year, manufacturers will not only have to produce them within limits set by the IRA, but also rely on locally sourced raw materials and fully assembled batteries.
More Electric Vehicles Coming in the US
Toyota has already indicated that it will eventually produce battery-powered cars in the United States, Last October, he announced an investment of $3.4 billion for 10 years to what she called an “electrified future”.
The automaker recently launched its first long-range BEV, the bZ4X. But the model got off to a rough start. It recently recalled the first 260 crossovers sold in the US when it was discovered A manufacturing defect may cause a wheel to fall off.
Sales have stalled as well, although the bZ4x “will be back soon” in Toyota showrooms, Hollis said Thursday during a meeting of the Motorized Press Association in Detroit.
It’s not clear how problems with the new BEV will affect Toyota’s electrification strategy, but the automaker has been more reluctant to switch to pure battery power than major competitors such as General Motors, Ford or Volkswagen.
In the long term, Hollis said, Toyota expects an “all-electric” industry. But, “(a) as much as everyone wants to talk about electric vehicles, the market is not mature enough and (there is) no ready enough infrastructure.”
The new Toyota sales chief added that the numbers being pushed by electric car proponents — the Biden administration is targeting 50% of the new car market by 2030 — look closer than they should be. “Is the consumer being pushed into something they don’t want?” asked Hollis. If so, he warned, we could see “consumers pull back”.
Don’t argue, just warn
It’s not that the biggest Japanese automakers are against electrified powertrain technology. Its global president and CEO Akio Toyoda has repeatedly argued that the best solution in the near-to-medium term is to see a mixture of conventional hybrid vehicles and hydrogen fuel cell vehicles, as well as pure electric models.
Toyota is one of the few automakers that currently sells fuel cell vehicles (FCVs), Her Mirai model is limited to a few areas, including northern and southern California, due to the limited hydrogen distribution network. As this system grew, Hollis said, so did the demand for Mirai.
But Hollis agreed with a reporter who suggested that one of the most promising opportunities is to use fuel cell technology to power heavy trucks. He noted that hydrogen could provide a longer range and faster refueling times than today’s Class 7 and 8 semi-auto batteries.
Hollis spent more than an hour with the Detroit-based press group, marking his first extended session with reporters since taking over the sales job last month. He has covered a wide range of topics with many questions focusing on the persistent shortage of semiconductors and stock problems that have arisen.
While the lack of semiconductors was a huge problem, Hollis noted that there were all kinds of shortages disrupting global automobile production. “It’s like whack a mole. We keep asking ourselves what’s going to happen next.”
For Toyota, the situation is so bad that its average American dealer barely has a 36-hour inventory of vehicles on hand. The industry standard is closer to 60 days.
While many in the industry had hoped the crisis would be over now, Hollis predicted “we’ll deal with this for another year.” Manufacturers won’t finally be able to run their plants smoothly enough to outpace deliveries until around the third quarter of 2023.
Dawn of a new day
But Hollis stressed that he does not see the industry, particularly Toyota, returning to business before the pandemic as usual. The industry has realized that it is “more efficient” to hold lean stocks on dealers’ stakes and sell to MSRP, rather than reverting to the bargaining approach that was the norm before the coronavirus hit.
If anything, new-car buyers seem comfortable with this approach, many customers prefer to pre-order vehicles that are customized to their specifications.
But not everyone was pleased with the new standards, Hollis recalled, noting that many merchants were handling thousands of dollars in increments. Toyota’s head of sales admitted that’s a problem. But he said that when he hears about a merchant’s greed, he quickly calls him and reminds him of the long-term impact.
a The study released by GFK Automotive earlier this month I found that buyers who are forced to pay more than the MSRP are more likely to change dealers the next time in the market. And a large number of researchers told that they would also change brands.
The semiconductor crisis and subsequent inventory shortages contributed to a spike in new car prices, which averaged $48,182 in July, according to Kelly Blue Book. That was $139, or 0.3% on a monthly basis. The average transaction price is $5,126, or 11.9%, from July 2021.
Hollis acknowledged that “the issue of affordability and access to transportation must be addressed.”
With stock levels eventually returning to normal, that should help, he suggested, adding that automakers may also have to ramp up production of phased out sedans. They are generally less expensive than the SUVs and CUVs that dominate the US market today.
Somehow, Hollis said, “If we don’t find an answer” to the price hike, “we could have a big problem.”