Toyota's Ted Ogawa: Better to buy credits than ‘waste' EV investment

PLANO, Texas — The CEO of Toyota Motor North America believes that battery electric vehicles will make up about 30 percent of the U.S. new-vehicle market in 2030, half the target the EPA sought last year — a goal the agency is reportedly reconsidering.

Because of that, Toyota will choose to follow natural customer demand and buy credits to close any gap, rather than "waste" money investing in EVs without consumers ready to buy them, Ted Ogawa said in an exclusive interview Monday.

"I know that EPA is now reconsidering what the regulation level should be. However, again, our starting point is what the customer demand should be. So, for example, 2030 regulations said the new-car market, more than half of it should be BEV, but our current plan is like 30 percent," Ogawa said. "We are respecting the regulation, but more important is customer demand."

Asked how Toyota might close the gap between what proposed light-vehicle emissions regulations require and what it actually sells when the regulations go into effect, Ogawa said, "That's a tough question. Regulation-wise, we would have to prepare something like credit purchase. It's difficult to say, but it's not better.

"Wasted investment is worse than the credit purchase," said the longtime Toyota executive, whose company is in the midst of building a $13.9 billion battery complex in Liberty, N.C., to power EVs and hybrids in North America. Since 2021, Toyota has announced investments of about $17 billion into its U.S. manufacturing operations to build future EVs and hybrids.

While others are planned, it now sells just one EV for each of its two brands in the U.S.: the Toyota bZ4X and Lexus RZ450e crossovers. Ogawa said that 2024 is the "starting year" of the company's plans to broaden its EV offerings in pursuit of its "multipath" strategy of offering consumers different degrees of electrification to fit their lifestyle. He said it was "one of my challenges this year" to begin realigning production in North America to accommodate EV plans.

Toyota has drawn heavy criticism for its strategy, especially from environmental groups that believe a faster conversion to an all-electric fleet will be more eco-friendly and slow climate change. Asked if that criticism was fair, Ogawa said it was — at least in part.

"Yes, of course, to compare the battery to Tesla, we are behind; that may be true. However, we are now catching up, not only the product but also the ecosystem surrounding the BEV area, such as the home charging or energy management," Ogawa said.

In other comments, Ogawa called the threat of China entering the U.S. through Mexico one of the biggest challenges Toyota and other manufacturers face this year, with the possibility that lower-priced Chinese vehicles will undercut existing automakers, as happened in Mexico.

"Their product is so competitive, including the tariffs," in Mexico, Ogawa said. "But China also saw, for example, labor cost is increasing [and] material costs as well. So that's why someday, they'll be in the same condition" as other automakers operating in North America.

"Our dealers ask us every day how [we will compete with China in the U.S.] Still, we have the better product. However, it's unclear how to keep competitiveness in terms of the MSRP or price area."

Ogawa, 64, will mark five years as CEO of Toyota Motor North America this year, including shepherding the company through the pandemic.

Ogawa spoke with Automotive News as part of the annual Talk from the Top series of executive interviews. A more detailed report of the hourlong discussion will be published this spring.

He now reports to Toyota Motor Corp. CEO Koji Sato instead of Chairman Akio Toyoda, who gave up the global CEO role last year to Sato.

Ogawa said he meets with Sato "three times a week," and while the "basic policy" or direction of the company remains unchanged after the leadership transition, the "communication style is quite different." He called Toyoda a "great and strong leader" but said Sato prefers a "team management" approach with "much more communication opportunities."