TOKYO — When engineers at Toyota recently conducted a teardown study of the Tesla Model Y, it did more than expose key technological secrets of the popular American-made, full-electric crossover.
It also tore away a moldering complacency at the Japanese automaker.
What laid underneath the Model Y’s sheet metal was a masterfully simplistic vehicle structure built with an advanced manufacturing prowess that would be the envy of any old-guard automaker.
“Taking the skin off the Model Y, it was truly a work of art,” said one Toyota executive who scrutinized the Tesla part by part. “It’s unbelievable.”
Numerous executives described Toyota’s new approach to Automotive News with the understanding that they would not be identified discussing internal planning.
But the grudging admiration that reverberated through Toyota’s top engineering corps came with a stark realization: Toyota Motor Corp., the world’s biggest automaker, for all its expertise in electrification going back to the first Prius hybrid in 1997, needs a great leap forward for the new era of full electric vehicles.
Now, Toyota is getting ready for that jump with a new “EV-first” mindset.
The gambit is not only forcing the sprawling, sometimes hidebound company to work much faster and nimbly. It is forcing a rethink of basic design-for-manufacturing processes at a company that built a sterling reputation for efficiency on its Toyota Production System.
A new leadership team under incoming CEO Koji Sato is working on a wholly reengineered, next-generation platform dedicated to battery electric vehicles arriving in 2026.
Toyota executives and engineers familiar with the push tell Automotive News that it aims to incorporate the best of breakthroughs by the likes of Tesla with the safety, quality and reliability that are the hallmarks of Toyota — all while delivering dramatic cost and performance improvements.
“To deliver attractive BEVs to more customers, we must streamline the structure of the car, and — with a BEV-first mindset — we must drastically change the way we do business, from manufacturing to sales and service,” Sato said here this month while previewing the EV strategy he plans to pursue after taking the helm from outgoing boss Akio Toyoda on April 1.
“Now that the time is right, we will accelerate BEV development with a new approach.”
Sato, the veteran engineer who leads the Lexus International premium division as well as Toyota’s Gazoo Racing motorsports arm, pledged that Toyota will stick with the diversified powertrain strategy pioneered by Toyoda. The company will keep churning out its trademark hybrid, plug-in hybrid and hydrogen-powered cars in addition to its pursuit of EVs.
The Lexus premium marque, for example, already has a goal of going fully electric worldwide by 2035 and selling 1 million EVs globally in 2030. Toyota as a whole targets global sales of 3.5 million EVs in that time frame.
But getting there will require a rapid climb.
In 2022, Toyota sold only 24,466 full electrics worldwide. That compares with 2.60 million hybrids moved in the same period.
“We have come to see the kind of BEVs we are aiming for,” Sato said. “Specifically, we will develop next-generation BEVs for Lexus brand by 2026, with everything from the battery and platform to how a car is built optimized for BEVs, while expanding our current BEV lineup.”
Sato’s redoubled focus on EVs also comes with a new sense of urgency in the boardroom.
In fact, the shift was long underway even before Toyoda announced, in a surprise January news conference, that he was shifting to the chairman role and handing daily operations to Sato.
Engineers at technical centers in North America, Europe and China have been pitching their own visions and needs for the next-generation EV platform since early 2022. Toyoda assigned R&D legend Shigeki Terashi to kick off the EV reboot.
Terashi, 68, is an executive fellow and a former executive vice president who oversaw a wide range of operations, from powertrain and EV development to advanced R&D and supply chain issues.
Sato’s new NEV team, short for “next-generation EV,” traveled to North America from Japan for a three-week EV deep dive. After touring the Chicago Auto Show, they were set to benchmark and drive rival EVs at Toyota’s proving ground in Fowlerville, Mich., before heading to its regional headquarters in Plano, Texas, and then on to EV ground zero in California.
California illustrates the challenge ahead for Toyota. The automaker has long dominated the state’s eco-car-friendly market. For years, its stalwart Camry sedan was the state’s bestselling passenger vehicle. But last year, the Tesla Model 3 usurped the Golden State’s car sales crown, and for a second straight year, the Model Y edged out Toyota’s RAV4 as the top-selling crossover.
Tesla is on pace to displace Toyota as the state’s top-selling brand in as little as one or two years, analysts say.
To better tackle EVs, Sato is reshuffling the leadership formation.
Playing a key role is Takahiro Ishijima, who takes over April 1 as chief officer in charge of Toyota’s ZEV Factory, a boutique standalone R&D center for developing EVs.
Toyota wants future EV development to be independent of its legacy products.
Another leader will be Takero Kato, the top Toyota engineer at its joint venture with Chinese EV heavyweight BYD Co., which has eclipsed Tesla as the world’s top-selling EV manufacturer. Having worked with BYD to co-develop the full-electric bZ3 sedan for China, he returns to start as president of Toyota’s important vehicle development center. He can be expected to import a lot of Toyota’s learning from BYD, which helped Toyota roll out the bZ3 in two-thirds of the time it normally takes to develop a new vehicle.
Also anchoring the team will be Masanori Kuwata, the company’s chief compliance and risk officer. Kuwata will take charge of electrification at the Lexus premium marque, which will be the first to deploy the next-generation EV platform.
To hammer out a more efficient and cost-effective production process, Kuwata will become an executive at Toyota’s Lexus manufacturing hub in Kyushu as part of the job.
The Tesla teardown taught Toyota that the Japanese car company’s famed designed-for-manufacturing expertise had been one-upped in many ways. The latest versions of the Model Y, Toyota discovered, looked the same on the outside but had been completely revamped underneath.
Tesla’s use of giga casting eliminated countless parts and brackets by essentially casting the vehicle’s front and back as two giant modules.
Also, instead of plunking the battery into a frame between the axles, the latest Tesla battery layout acts structurally as the floor itself.
By one Toyota estimate shared with Automotive News, Tesla’s approach eliminated hundreds of parts and up to 220 pounds, while boosting the vehicle’s battery range and slashing overallcosts.
“It’s a whole different manufacturing philosophy,” one executive said.
“We need a new platform designed as a blank-sheet EV,” said another.
Caresoft Global Technologies, a Michigan-based engineering company that does digital and physical benchmarking and cost reductions, reckons full-EV startups such as Tesla have a significant first-mover advantage because they rethink engineering challenges from scratch.
Tesla, for example, replaced the industry’s traditional 3.5 mm thick powertrain cooling hoses with 1.5 mm ones manufactured with a lower-cost material. Tesla was able to do so because the cooling fluid for electric vehicles doesn’t get as hot and does not need to be as highly pressurized to prevent boiling as it is used for internal combustion engine cooling.
In some vehicles Caresoft has analyzed, that saves at least $25 and 11 pounds per vehicle.
The same approach applies to Tesla’s frunk, using the front engine bay for trunk space while hiding away such components as the inverter under the rear seat.
Legacy makers such as Toyota and Nissan, even in their latest EVs, still pack the old engine bay area with components, potentially missing an opportunity to wow customers with new features.
“It’s that outside view of not being part of the industry,” Caresoft CEO Mathew Vachaparampil said of new EV makers. “An outsider typically disrupts the traditional industry with a better idea.”
Meanwhile, battery cost is another battleground.
BYD is especially competitive on batteries. That’s partly because BYD makes its own. The bZ3 gets a lower-cost battery using lithium iron phosphate for a range of more than 370 miles under China’s testing cycle.
That battery was newly designed for the bZ3. But internally, Toyota argues that BYD’s standard power packs don’t match the high safety and durability standards pursued by the automaker.
“We cannot immediately compete in terms of cost of manufacturing and batteries with companies such as Tesla or BYD,” said one Toyota executive familiar with the new EV plan. “If BYD tests their batteries to a life span of 100,000 kilometers, we test ours to 200,000.”
To make sure it can secure proper battery capacity ahead of the rollout, Toyota has partly delayed development of a next-generation dedicated EV, one source said. Toyota is expected to announce a new global tie-up with an international battery maker in the coming months, he said.
Meanwhile, Toyota plans to start making EVs in Kentucky as early as 2025, Japan’s Nikkei business daily reported. It will update an existing factory and start with monthly output of 10,000 crossovers, the newspaper said. That puts annual output at around 120,000 vehicles.
Toyota’s current e-TNGA vehicle platform, introduced as the automaker’s next big thing to make its manufacturing more competitive, looks old-fashioned in comparison to a giga pressed one. The architecture, which underpins the bZ line of EVs including the Toyota bZ4X crossover and its Lexus counterpart, the RZ, is an evolution of the TNGA platform that was first prepared for internal combustion vehicles and hybrids in 2015.
Manufacturing e-TNGA modules requires many more separately forged and cast parts and brackets and fasteners. Under the Tesla approach, they could all be molded as one. Another limit is the inability of the existing layout to accommodate bigger batteries between its axles and side beams.
Then there is the manufacturing engineering. The vaunted TNGA platform was a cutting-edge accomplishment when first introduced. Tooling and machinery to make TNGA-based vehicles are still being installed at Toyota plants around the world, at considerable expense.
But that production equipment is geared around internal combustion vehicles and gasoline-electric hybrids, as well as the new e-TNGA bZ variants. A big question, Toyota sources say, is to what degree those lines can be repurposed for a new dedicated EV platform.
In outlining plans to “drastically change” the way Toyota approaches EVs, Sato conceded the company is still weighing how to best develop a next generation of EVs that can better channel Toyota’s brand identity and its prowess as a low-cost, efficient manufacturer.
“The competitiveness and cost of BEVs is going to be a very big challenge,” Sato said. Thermal management, electricity management and aerodynamics are all areas of study.
Once a direction is set, it could take six months to a year to churn out a prototype.
In the meantime, Toyota is pushing pause on the rollout of some bZ electric vehicles, several insiders said. The slowdown is meant to give Toyota time to rethink its approach.
“Can we change our manufacturing situation, which is a kind of hindrance to the future?” one executive said. “We have to plan for the next 20 years, not just the next five, and make sure that the right vehicles are in the right place and the right time.”
Toyota won’t abandon the bZ lineup, previewed to much fanfare in December 2021, when Toyoda unveiled a full lineup of future full electrics, from pickup trucks to sports cars.
Toyota needs the EVs to meet strict emissions regulations in certain markets such as Europe, one source said. Toyota must also recoup the investment already made in the bZ vehicles, said another. Timing of the switch to next-generation EVs partly hinges on that cost equation.
Thus, e-TNGA is still expected to be Toyota’s main EV platform from 2024 to 2026.
But jumping to a more competitive architecture requires more than just cutting-edge technology and a flood of costly investment, Caresoft’s Vachaparampil said.
“When you’re faced with revolutionary change, which is what’s happening, the old rules of continuous improvement and kaizen will be too slow,” Vachaparampil said.
“Because this pace of change is so fast, you will struggle to keep up with the competition. The struggle will not be merely technical or financial. The biggest struggle will be cultural.”