Shigeki Terashi Executive Vice President, Member of the Board of Directors
Shigeki Terashi
Executive Vice President, Member of the Board of Directors*
*Title as of December 2019

With the environment as one of management's highest priorities, Toyota has advanced initiatives in line with its basic policies of conserving energy, addressing fuel diversity, and contributing to sustainability through the proliferation of eco-cars. As part of the Toyota Environmental Challenge 2050, launched in 2015, we set for ourselves the New Vehicle Zero CO2 Emissions Challenge, under which we aim to reduce by 90% Toyota's global average new vehicle CO2 emissions during operation by 2050, compared with the 2010 level. Since launching the Prius hybrid electric vehicle (HEV) in 1997, Toyota has sold approximately 14 million electrified vehicles around the world (as of July 2019), helping to cut CO2 emissions by more than an estimated 113 million tons.

In 2017, Toyota announced milestones for 2030 in the Toyota Environmental Challenge 2050 that target new vehicle sales totaling 5.5 million electrified vehicles, including at least 4.5 million HEVs and plug-in hybrid vehicles (PHEVs) and more than 1 million battery electric vehicles (BEVs) and fuel cell vehicles (FCEVs). Sales of electrified vehicles have recently been growing at a pace that exceeds these targets.

Over the past few years, the frequency and extent of damage caused by abnormal weather, such as torrential rainfall, and natural catastrophes has grown worldwide. We can wait no longer to find solutions to the problem of global warming. Our problems will multiply unless we come up with fixes for air pollution and energy issues. Addressing these global problems will require taking on fresh perspectives and looking through the lenses of our hometowns, home countries, and home planet. We must pass along to future generations a deep sense of responsibility to care for these homes, instilling a love for the towns and countries in which we were born and raised as well as a love for the planet that is the home of everyone in the world. Toyota is working on these environmental issues with the mindset that planet Earth is our only home.

Regulations Are Being Tightened, along with New Government Policies, to Combat Global Warming

Two major trends in automobile-related environmental regulations have drawn considerable attention lately.

The first is regulations on CO2 emissions and fuel efficiency. Corporate average fuel economy (CAFE) is the average fuel efficiency of the entire fleet of automobiles sold by an automaker, and governments have moved to regulate the automobile industry using this metric. Under this framework, which is increasingly being adopted by countries worldwide, the required level of cuts in CO2 emissions rises each year. In order to improve corporate average CO2 emissions and fuel efficiency, companies must not only pursue technological innovation, but also transition their mix of vehicle types toward models with better fuel efficiency. With regard to CO2 regulations in Europe, for example, Toyota led the industry in meeting 2017 regulatory values, and, although the current-generation Prius satisfies 2025 regulatory values, it is challenging for SUVs and other types of relatively heavy vehicles, even hybrid models, to clear this regulatory hurdle, necessitating the greater proliferation of PHEVs, BEVs, and FCEVs.

Response to European CO2 Standards

The second trend entails regulations for zero emission vehicles (ZEVs), which have come into effect in some parts of the United States and Canada, and regulations for new energy vehicles (NEVs) in China. Automakers above a set production threshold are obligated to ensure that vehicles like BEVs and FCEVs account for a minimum percentage of sales. This government policy basically aims to increase the number of vehicles on the road with zero CO2 emissions. Around the world, countries are projected to increasingly adopt similar regulations. Other government incentives include subsidies, car access restrictions, and priority car lane access.

To reduce CO2 emissions on a global scale, the fuel economy of entire fleets must be improved by rounding out the lineup of HEVs and PHEVs, while also quickly getting customers to favor ZEVs over conventional vehicles, even in the absence of government regulations and incentives. With a strong vision, Toyota is advancing various measures to increase the popularity of electrified vehicles.

Providing More Electrification Technologies and Systems to Reduce CO2 Emissions

Since introducing the first-generation Prius in 1997, Toyota has established mass production technologies while honing the core technologies essential for electrified vehicles for more than two decades. We have put into place a global structure for producing 1.6 million electrified vehicles annually. Our motors, batteries, and power control units (PCUs) are core technologies that are used in all kinds of electrified vehicles, including HEVs, PHEVs, BEVs, and FCEVs. The foundation that we have built to date is one of our main strengths, and where we can make a major contribution to the spread of electrified vehicles in the future.

Over the past few years, Toyota has seen an increase in inquiries about its vehicle electrification systems from companies engaged in the development of HEVs and other electrified vehicles. Toyota believes now is an opportune time to cooperate with other companies in light of the growing need for electrified vehicles and, as a technological supplier of systems for vehicle electrification, is providing them with access to its growing library of technologies in the field. In principle, Toyota has an open policy regarding the handling of its intellectual property (patents), and has offered access to its patents for appropriate licensing fees upon receiving applications from third parties. In 2015, Toyota began offering royalty-free licenses to its proprietary fuel cell-related patents.

More recently, Toyota has decided to provide royalty- free licenses to its portfolio of patents (about 23,740 patents) related to vehicle electrification technologies, such as motors, PCUs, and system control―a legacy accumulated over more than 20 years of HEV development. Additionally, Toyota will provide technical support for the commercialization of electrified vehicles being developed and produced with its powertrain system.

Initiatives to Encourage Spread of Electrified Vehicles

If these initiatives accelerate the development of electrified vehicles at other companies, we will have helped hasten the reduction of CO2 emissions. With the support of our many stakeholders, we aim to contribute to the popularity of electrified vehicles around the world.

Toyota is Full Steam Ahead on Initiatives to Promote BEVs

The Toyota ZEV Factory is an internal organization created by bringing together the EV Business Planning Department, which began as an internal start-up, and the previously separate FCEV team. The Factory is charged with the planning and development of developing plans for BEVs.

Among electrified vehicles, Toyota is taking a broad approach to developing BEVs ranging from pedestrian- zone vehicles and ultra-compact two-passenger vehicles to compact and mid-size passenger cars. In December 2017, Toyota set itself the objective of making a full-scale entry into the BEV market, beginning in China, in 2020 before increasing its BEV models worldwide to at least 10 models in the early 2020s. Toyota has advanced preparations in line with this schedule, unveiling the C-HR/IZOA model at the Shanghai Motor Show in April 2019.

Zero Emission Vehicles (Including Development Concepts, Driving Demonstrations, and System Provision)

With a mind to further promote BEVs, Toyota has launched initiatives with the aim of building a new business model that, in the spirit of collaboration, openly includes business partners. This new business concept goes beyond the conventional model of developing and manufacturing BEVs for dealers who then distribute them to customers. To help make society better, we will create a new business model that is open to partners who share our aspirations.

BEV Business Models under Consideration

While improving product appeal by offering high-endurance, high-performance batteries, Toyota is maximizing the use of both BEVs and batteries from production until final disposal to tackle issues hindering the proliferation of BEVs. In addition to sales, Toyota is expanding leasing, ensuring the collection of used vehicles, assessing used batteries, and putting used vehicles back on the market while getting the maximum use out of batteries through reuse as supply parts and in non-vehicle applications. Furthermore, we offer peripheral services optimized for BEV owners, such as charging and insurance, so they can drive their BEVs without worrying about these details. We are keen to create new business models like this with our business partners in other fields as well.

JapanStart Building a New Business Model for Ultra-Compact BEVs

In Japan, Toyota sees new business opportunities in compact, short-distance, and corporate-use BEVs. For starters, in 2020 we plan to unveil an ultra-compact two-passenger BEV smaller than a conventional light vehicle (which is already smaller than a standard passenger vehicle) and capable of traveling about 100 km on a single charge. This car will make it easy for young people who have just got their driver's license and elderly people to get around on a daily basis. Our even-smaller i-ROAD threewheel BEV is undergoing pilot testing on public roads for possible use in car sharing services in urban areas and tourist destinations.

Our pedestrian-zone BEVs, for use in areas where people walk, are being prepared for a 2020 launch. In addition to a ride-while-standing model, we plan to release a ride-while-sitting model and a wheelchair-linked model in 2021.

By offering a diverse lineup of such BEVs, we will provide a means for safe, worry-free transportation in tune with the life stage of each customer. In order to see such BEVs gain popularity, we are engaged in talks with business partners in various fields and local governments interested in using BEVs, with the intention of creating integrated business models covering development and sale through final disposal.

Together with diverse like-minded stakeholders, we are taking steps to support lifestyles in tune with the needs of communities and our customers.

Development of BEVs for China, the United States, and Europe

For markets with strong demand for BEVs, Toyota is efficiently developing reasonably priced models in a sufficient variety to meet diverse customer needs. Concretely, we are developing specific types of vehicles to meet specific customer needs. We are planning and developing these various models in collaboration with partner firms, such as Subaru Corporation, Suzuki Motor Corporation, and Daihatsu Motor Co., Ltd., to leverage to their respective areas of expertise. Toyota has signed an agreement to jointly develop BEVs with BYD Co., Ltd., and the two parties are developing BEVs and batteries with the aim of bringing to the Chinese market a BEV under the Toyota brand in the first half of the 2020s.

BEVs for Global Deployment

Development and Supply of World-Leading Batteries

Batteries are a core technology used in all electrified vehicles and have a significant impact on vehicle performance. Toyota has finely honed this core technology over the course of developing and marketing more than 14 million HEVs. For example, Toyota's HEVs are highly efficient systems that, even with only a small battery capacity, achieve low fuel consumption. In terms of durability, a factor that has an outsized impact on BEV performance, and residual capacity after a long period of use, Toyota batteries have demonstrated industry-leading performance with regard to units used in its first-generation Prius PHV, which was launched in 2012, as well as its secondgeneration Prius that was unveiled in 2017. We aim to achieve even higher levels of battery durability in the BEVs we plan to launch in 2020. Toyota continues to carry on battery development with an eye on achieving world-leading performance when it brings BEV models to market globally.

Durability of Batteries

The promise of electrified vehicles has exceeded our initial expectations, and we must now prepare for the full-fledged proliferation of BEVs that will require higher-capacity batteries than those used in HEVs and PHEVs. To cooperate on battery procurement, Toyota jointly established Primearth EV Energy Co., Ltd. with Panasonic Corporation in 1996, and we have signed an agreement to create a new joint venture by the end of 2020.

To rapidly meet the diverse needs of regions around the world, Toyota has put into place a structure for procuring the batteries needed to make electrified vehicles more popular, while coordinating and collaborating with Contemporary Amperex Technology Co., Ltd. (CATL), BYD Co., Ltd., GS Yuasa Corporation, Toshiba Corporation, and Toyota Industries Corporation.

Framework for Battery Procurement and Collaboration

In preparing for the spread of BEVs and to win over customers to our BEVs, we have a long list of initiatives to follow through on, including developing vehicles, ensuring the stable supply of batteries, improving the durability of batteries, and preparing for the reuse of older batteries. Toyota has been making steady progress on building business structures, including the creation of new business models. With an eye on helping to create a better society, we are open to working with a wider range of business partners than ever before, and intend to accelerate our efforts with partners who share our vision for the future.

Aiming to Expand Ultimate Eco-Car FCEVs

Toyota views hydrogen as a promising energy for the future, and came up with the concept of the Ultimate Eco-Car as an FCEV that will be key in a sustainable society. With the aim of encouraging the spread of FCEVs and realizing a hydrogen-powered society, Toyota intends to spur demand for hydrogen by leveraging the synergistic effects of introducing FCEV passenger cars and commercial vehicles. For starters, we are developing an FCEV version of massproduction passenger cars while continuing to improve performance and bring costs down. We will then apply these FCEV technologies to commercial vehicles, which are fewer in number but use larger amounts of energy per vehicle. As demand for hydrogen expands, the price of hydrogen should decrease and create incentives to expand related infrastructure.

In the passenger car market, Toyota has taken the initiative in encouraging the spread of FCEVs with the 2014 launch of the Mirai, which has sold approximately 10,000 units in total around the world. In late 2020, Toyota plans to release the next-generation Mirai with a 30% longer cruising range than the previous generation, thanks to a completely revamped fuel cell (FC) system, drastic improvements in performance for a FCEV, and a larger hydrogen tank. We will greatly increase our production capacity for FCEVs along with the launch of this next-generation Mirai.

Mirai Concept (Exhibited at the Tokyo Motor Show 2019)
Mirai Concept (Exhibited at the Tokyo Motor Show 2019)

Turning to commercial vehicles, Toyota plans to introduce 10 FC commercial heavy-duty trucks for a project being promoted by the Port of Los Angeles that aims to achieve zero emissions in cargo transportation with the use of FC technology. Toyota plans to construct a Tri-Gen* facility to generate electricity using carbonate fuel cell power generation techniques that extract hydrogen from waste biomass. This facility will be used to refuel these 10 FC commercial heavy-duty trucks. Plans also call for using the hydrogen fuel in non-transportation applications.

In 2020, the Olympic and Paralympic Games will be held in Tokyo. As a Worldwide Partner, Toyota plans to give the world a glimpse into the hydrogenpowered society of the future with around 500 FCEVs, the SORA FC bus, and FC forklifts.

* Tri-Gen is short for Tri-Generation, the production of water, electricity, and hydrogen.

December 2019
Shigeki Terashi
Executive Vice President, Member of the Board of Directors