Toyota opens $14 billion battery war chest

TOKYO — To critics who believe Toyota has been dragging its feet on electric vehicles, the Japanese giant's new plan to plow nearly $14 billion into battery output offers a clear sign of its determination to go electric.

The investments will give Toyota a battery production capacity of 200 gigawatt-hours a year — compared with just 6 GWh today — and expand its battery-making network to 70 assembly lines from only two lines now.

The ramp-up, outlined last week, underscores Toyota's rapidly evolving outlook for soaring EV sales. But it also reflects a conservative approach to investment, as well as the automaker's continuing commitment to hybrid vehicles — the segment it pioneered by introducing the Prius in 1997 and still its go-to green technology.

Despite the major leap forward in its battery capacity, Toyota's expansion will be done in incremental steps for flexibility.

Toyota's move comes as rivals increasingly make big-block investments into battery supply.

Tesla's planned battery-cell factory near Berlin, for instance, will have initial capacity of 100 GWh a year and could ramp up to as much as 250 GWh.Fellow EV startup Rivian has announced plans for a 50 GWh cell plant in the U.S. And Daimler said in July it will invest about $47 billion in EVs through 2030, including global battery capacity of 200 GWh. Stellantis is targeting supply of 260 GWh by the end of the decade.

But Toyota sees more demand on the way. It expects its global deliveries of electrified vehicles to quadruple to 8 million by 2030, from 1.96 million in 2020. About 2 million of the target figure will be zero-emission vehicles — hydrogen fuel cells and battery-electrics — though full-electric vehicles should account for the lion's share.

A difference in battery types sheds light on Toyota's math for future supply.

Hybrid-vehicle batteries are designed for high-power discharge but don't have big capacities. Toyota's Prius, for example, has a 0.74-kilowatt-hour lithium ion battery, while its fuel cell Mirai has a 1.24-kWh battery. By contrast, Toyota executives have said the coming line of full-electric vehicles will have batteries in the range of 50 to 100 kWh. Those will require more factory firepower.

Toyota's plans give it some flexibility in an uncertain EV market.

If, for example, Toyota produces 6 million hybrids in 2030 with Prius-sized batteries, that product mix would require about 4.4 GWh of annual battery supply. Toyota would still have more than 190 GWh of factory capacity left to dedicate to EV and fuel cell batteries.

That would allow enough wiggle room to supply nearly 2 million EVs, even if each had a large-sized 100-kWh battery.

In typically conservative Toyota fashion, the company plans to build the new capacity incrementally, over a period of years, in 10-line installments. That gives Toyota better flexibility to adjust to changing demand, said Chief Production Officer Masamichi Okada in outlining the strategy.

"Based on lessons learned from our experience during the financial crisis, we will do this through building small units," Okada said. "At that time, we realized being aggressive and making large investments during our growth stage can be a weakness when situations change. We want to make sure we control risk even when we are expanding."

While Toyota's total investment in battery development and production through 2030 will reach $13.7 billion, about $9.1 billion of that will go toward production and capacity, building lines both in-house and with partner suppliers.

The balance of outlays will fund R&D. Toyota is promising big improvements in cost and performance of its upcoming batteries.

The company will roll out a next-generation lithium ion battery as well as a high-capacity nickel-metal hydride one. It is also on track to introduce a solid-state battery around 2025.

Further gains from nickel-metal hydride batteries will come with a new bipolar structure intended to double power density. That technology debuted this year in the redesigned Toyota Aqua compact hybrid. Chief Technology Officer Masahiko Maeda said the increased performance of the new design can give nickel-metal hydride an extended lease on life by being also deployed in plug-in hybrids and full-electric vehicles.

The breakthrough could help Toyota eke more gains from its long-standing investment in the nickel-metal hydride technology, a chemistry it has been using since the first-generation Prius.

Safety, durability and affordability are key benchmarks for Toyota's batteries, Maeda said. The battery to be used in Toyota's upcoming all-electric crossover, the bZ4X, will be able to maintain 90 percent of its battery performance after a decade of use.

"Little by little, we need to make incremental improvements," Maeda said.

At the same time, Toyota expects to halve the cost of batteries in the second half of the decade.

The battery in the bZ4X EV, which arrives next year, will realize a 30 percent reduction in cost by using less-costly materials and structures and through a reduction in the amount of energy the vehicle consumes. Toyota aims to build on this by cutting battery costs an additional 50 percent by 2030, compared with the power pack in the bZ4X.