Is Toyota's Prius Being Dumped On The US Market?

Implications: It has always been a mystery to OEM American automotive industry financial analysts how Toyota could afford to build and sell the Prius, and any other hybrids, without seemingly taking into account the escalating costs of the nickel metal hydride battery, NiMH, packs due to the commodity metal supercycle that has taken place entirely during the product life of the Prius. The raw materials for the NiMH battery pack used in the 1999 Prius, 60 lbs of nickel, 24 lbs of lanthanum, and 3 lbs of coablt cost a total of less than $400.00 then. The same battery today has a raw material cost of $1600.00. The added costs of manufacturing the components and assembling them, along with a built-in computer management system at least doubles the cost of the final 'battery.' Are the batteries recycled? If so, where? Perhaps the solution to these mysteries plus the answer to the question "How much were the development costs of the NiMH battery?" is simple; the answer,for Toyota, may be zero.

Analysis: The development of the vehicle power train size nickel metal hydride battery, NiMH, began in the US at the small company which invented the NiMH battery, Energy Conversion Devices, Inc., in Troy, Michigan.

The mass production of vehicle power train size NiMH batteries, defined as the production of up to 1000 per day, did not take place, first, or ever, in the USA, however. This goal was achieved, in Japan, by a joint venture between Matsushita (best known in electronics for its Panasonic branded products) and Toyota, Japan's largest auto maker.

The Prius, originally and still using NiMH batteries, was the world's first mass produced hybrid, and it has been believed up until now that Toyota, much against the grain of Japanese risk-averse culture, went ahead with the development of the NiMH battery as a gamble. One that paid off when GM dropped its EV1, lead-acid, battery powered car when California backed off on requiring zero-emission cars as 2% of sales in the late 1990s. Toyota, it has been believed, stepped into the void to establish its green credentials without any competition.

Toyota has never been forthcoming on the question of whether or not the Prius was, and perhaps still is, a 'loss-leader,' i.e., that it was being sold for less than its cost of production in order to establish a market.

One reason that Toyota could not answer this question is simple enough: Under WTO rules such loss-leading sales might well be determined to constitute 'dumping,' or selling below the actual cost of producing the product in its home country, which is considered a predatory pricing scheme, which gives an unfair advantage to the dumper and can be punished by special import duties and fines to level the playing field.

No domestic American company produced a hybrid until 1994 and then it was built with a power train licensed from Toyota and with batteries bought from Matsushita or Sanyo, each of which were building batteries that were utilizing technology 'licensed' from the Toyota-Matsushita joint battery development venture.

There has been in the US a relatively anemic government backed national battery consortium to do research and development of battery chemistries for hybrid and all electric (battery powered) cars, but government backed R&D in the US has always been of a general nature and certainly never intended to give a competitive advantage to just one of the companies involved, nor has such R&D, except in the case of the military, ever been intended to give a US company or industry a competitive advantage over foreign companies or industries.

One cannot help but notice that today GM having failed, along with its Detroit Three colleagues, to get $500 million of US government funding for a battery 'Manhattan' project has elected to spend nearly 1 billion dollars, so far, of its own money to hedge its bets by building a 'pilot plant' to produce electric cars of all types in limited 'mass' production while investing more than 100 million dollars, so far, in a mix of new and old battery development shops, such as A123 and SAFT, for example, while selecting just one global size battery manufacturer, Johnson Controls, International, to do the manufacturing engineering development for whichever battery type(s) is(are) chosen finally for mass production.

The question now becomes: Is the playing field between Toyota and GM level? Or, has Toyota had the advantage of having the Japanese taxpayer pick up the bills for the NiMH battery it and everyone else, except GM, uses today, and for the sale of each of which a license fee is being paid to Toyota(?), leaving it free to go down the lithium battery road with more cash than it should be able to do?

I am beginning to wonder if, in fact, the entire lithium battery development agenda in Japan, which Toyota's rival, Honda, is conspicuously not following, is a sham designed to deflect attention from an unfair deal struck by Toyota with the Japanese government for NiMH development  to allow it to build hybrids only in Japan using Japanese labor and components while selling the cars almost entirely in the US.

Note also that NiMH batteries are critically dependent on rare earth metals obtained today only in China, and that the Japanese government has a stockpile agency, which maintains a supply of rare earth metals, and many others, at no carrying cost to Japanese companies to ensure that Japanese industry has supplies to bridge any interruption.

Until the existing one American mine, at Mountain Pass, California, shut down, its current owner says, by low prices of rare earths, in 1994 reopens, and the new rare earth mines in Idaho, Saskatchewan, and British Columbia are brought into production it will be impossible to manufacture rare earth containing products without being entirely dependent on China. Toyota has always used this excuse for continuing to make NiMH battery powered cars only in Japan.

I propose to the US OEM automotive industry, GM, in particular, that it get directly involved in bringing American rare earth metal mines into production, so that NiMH batteries and small powerful electric motors using rare earth magnets can be built here in the US using domestic raw materials. The job of the Defense Stockpile Agency would then be only to buy and hold as a buffer against interruption of supply the rare earths metals critical to OEM automotive and military production needs. I further propose that such stockpiled metals be mandated by law to be first offered to domestic American companies for their needs, and only if and when such needs are satisfied could stockpiled metals then be sold for export. This is exactly what Japan, China, and Korea do now.

Such a program and policy as outlined above would, in my opinion, cause non-Chinese manufacturers of batteries and electrical devices dependent on rare earth metals to move to the US en masse, just as American companies in those businesses have moved to China.

I further think that a case should be brought within the jurisdiction of the WTO by the OEM American owned and operated automotive industry demanding evidence that the Japanese government did not subsidize the development and the manufacturing of NiMH batteries for any Japanese company, and demanding if it is shown that they did that a fine be levied against that company, Toyota(?), for every hybrid ever made by it in Japan and sold into the US market, and that further, no such cars be further allowed to be sold in the US, which are not made substantially in the US using domestic American raw materials if they are available.

Is that too much to ask? Japan, if it did what is charged, did it out of fear of losing markets to the Chinese. Japanese companies would be thrilled to be able to buy domestic American produced raw materials such as rare earths, and undoubtedly make hybrids here in the US if they could buy raw materials domestically for dollars.

Is anyone listening at GM headquarters or in Washington, DC?