As I write this, I'm posted up in a hotel room in Seoul after driving an electric vehicle from one of the few non-Chinese automakers that actually seems to be making progress in that world in 2024. The rest haven't been so lucky, and that's what we're going to cover on this Friday edition of our Critical Materials news roundup.
On tap today: Toyota, ever the electro-skeptic, dials back its global EV output forecast for 2026 but accepts a new glut of government subsidies for batteries; the German auto industry faces challenges on multiple fronts; and South Korea takes action on EV battery transparency after a spate of fires.
30%: Toyota Walks Back 2026 EV Plans, But Japan Has Battery Handouts
Lately, Toyota has seen incredible success as hybrid sales grow among buyers not ready to go fully electric and as global emissions and fuel economy rules get tougher and tougher every year. However, it increasingly seems to see all-electric cars as more of a long-term play than an immediate one. And the fact that EV sales this year have proven to be uneven globally seems to be vindicating its plans somewhat, leading to a cut in EV production goals in 2026, according to Nikkei Asia.
That year is significant because it's when Toyota was due to begin a big push of new EV models:
Toyota Motor plans to significantly slow its production of electric vehicles, cutting its global output forecast for 2026 to 1 million cars, some 30% lower than the previously announced sales forecast for the same year, Nikkei has learned.
The Japanese automaker's decision to cut EV production was prompted by the slowdown in the global EV market. Toyota has notified its parts suppliers of the decision.
Under the new plan, Toyota aims to produce a little more than 400,000 EVs in 2025 and to more than double production the following year.
At the same time, Japan is genuinely spooked by China's utter dominance of the battery sector (not to mention how well South Korea's automakers are doing in the EV field.) As such, the Japanese government is announcing a new raft of EV subsidies for its automakers. Here's Reuters today also:
Japan will hand out more subsidies for electric-vehicle battery production, pledging as much as $2.4 billion in support for related projects by Toyota Motor and other major companies, as it seeks to strengthen its battery supply chain.
The government will support 12 projects for storage batteries or those for their parts, materials or production equipment by up to 350 billion yen ($2.44 billion), Minister of Economy, Trade and Industry Ken Saito told reporters.
"We hope that these efforts will strengthen Japan's storage battery supply chain and the storage battery industry's competitiveness," Saito said.
A growing number of automakers, including Ford, Volvo and others, are pushing their previously aggressive EV plans back to the latter part of this decade or the start of the next one. Many seem to be hoping that tariffs will keep China's automakers out of key markets like the U.S., or at least slow them down in places like Europe. The U.S. presidential election also has many of them in "wait and see" mode since so many investments in the world's second-biggest car market are driven by Biden Administration policies that could get the axe if Donald Trump is reelected.
All of this is to say that the auto sector is in an incredibly chaotic place as we approach the final quarter of 2024—far more chaotic than was the case a year or two ago. Pretty much all of the automakers realize the future is eventually all-electric, but getting there with the right costs, customer demand and charging infrastructure without getting their lunch eaten by China's car companies is proving to be an incredibly difficult mission. And it's not one that all of them will survive.
60%: Germany's Headaches Include China, EVs And Post-COVID Economics
Other than all of that, everything is going great.
You probably read the headlines this week about how Volkswagen is looking at its first potential factory closures in almost 90 years, or how the company's top leadership is warning of emergency spending cuts as its presence in China evaporates and demand in Europe plummets as well. It's an incredibly bad situation; the original "pivot to EVs" automaker is reckoning with the previously inconceivable idea that it may just not survive such a transition.
Part of the problem is that VW, like other automakers, assumed it could stay a dominant power in China forever. Instead, that country's car companies are making better EVs at far cheaper prices that VW simply cannot compete with. More on this looming disaster from CNBC:
“We are facing multiple challenges,” a spokesperson for the German Association of the Automotive Industry (VDA) told CNBC. That still includes the aftermath of the Covid-19 pandemic, they said, as well as “geopolitical tensions and high bureaucratic requirements at national and European level.”
But the two topics that emerge time and time again in the debate around the German car sector are China and the shift to electric vehicles — and their overlap.
“We still have a very disruptive situation in that EVs are doing worse than expected,” Horst Schneider, head of European automotive research at Bank of America, told CNBC in a translated interview. Demand has been lower than anticipated, while competition has increased, he flagged.
While the market for autos has been recovering in China, German automakers have not felt that effect of that rebound as the competitors have taken on market share, Schneider said. It is also a question of price, he added, noting that German EVs are simply too expensive, while Chinese products are better in some ways, as well as more affordable.
“The German producers are very exposed to trade politics, previously 40 or 50% of earnings were made in China and the Chinese market is starting to close a bit. … At the same time we have a higher percentage of EVs that are not as profitable as combustion motor cars by a long way,” Schneider said, adding that this has created a “double issue.”
“If China earnings were still as high as they once were, you could cope quite well with the EV profitability dilemma, but because that isn’t the case and the Chinese earrings are also easing, there is general earnings pressure and margins are shrinking,” he said.
A KPMG analyst said a "glimmer of hope" is that hybrid vehicles may be needed longer than once expected, which could play into VW's favor. Then again, it doesn't even offer one in the U.S., which is a more important market than ever for VW (and one it's never taken all that seriously) now that China is a non-starter.
It's hard to find a silver lining to any of this.
90%: South Korea Mandates Battery Transparency
Meanwhile, South Korea's automakers may be advancing more quickly than most on the EV front. But the whole country is spooked after a handful of battery fires, which have led to declining sales and heavy discounts. Many Koreans live in high-rise residential apartment complexes, and even as those add chargers in parking garages down below, the thought of one EV causing a chain reaction fire in such a building is... well, not pleasant.
So how do EV owners know their cars' batteries are safe, up to current standards and made by top-quality manufacturers? Battery disclosures are the answer, according to Bloomberg:
South Korea will make it mandatory for electric car makers to disclose the names of their battery suppliers and manufacturing technology in an effort to alleviate concerns over EV battery fires.
The measures aim “to resolve public concerns and to secure the safety of electric vehicles” after an EV caught fire last month in an underground carpark in Incheon, west of Seoul, the Ministry of Trade, Industry and Energy said in a statement Friday.
The full disclosure of EV battery manufacturers is a rare move by carmakers as the information is typically kept confidential around the globe.
The government will also bring forward testing of a certification system for EV batteries to October from a previously scheduled start date of February 2025. In other steps, it will expand the range of EV battery inspections to mandatory car inspections which owners need to get on a regular basis, and push to raise insurance subscriptions by EV manufacturers and battery charging operators.
I say more transparency is always a good thing.
100%: How Do You Make Sense Of The EV Chaos?
What a collection of stories today, am I right? So tell me: based on everything we're seeing now in September 2024, where does the industry shake out in, say, five years? Who figures this out and who doesn't?
Contact the author: patrick.george@insideevs.com
