Toyota's Long range Planners Are Once Again Using General Motors' Short Sighted Thinking To their Advantage

Implications: Toyota only builds the Prius hybrid, the world's best selling hybrid, in Japan even though nearly 80% of the Prius production is sold in the USA. Why is this so? And, why, now that Toyota is committed to nearly tripling the production of Priuses worldwide by 2011, is it that the batteries and power trains for the Prius, as well as for every other hybrid Toyota, will be built only in Japan even if some of the hybrids are assembled outside of Japan, for example in California?

Analysis: Japan has learned from General Motors that it is foolish and possibly fatal to a corporation to simply give away technology,which it has spent hundreds of man years and billions of dollars to develop, or to 'share' it with others, especially if one of the others is China, or, from Toyota's perspective, America.

General Motors developed the EV1, battery powered car, in the 1990s in order to meet a California requirement that by 1999 2% of all of a manufacturer's cars sold in California must have zero emissions of certain gases including carbon monoxide, carbon dioxide, and unburned or partially burned hydrocarbons.  The EV1 was a battery powered, electric, car which used rechargeable lead-acid batteries as its power source. It had a range of less than 100 miles on an overnight charge and a top speed of around 60 miles per hour.

After intensive lobbying by the American car companies California rescinded its 2% zero emission rule just before it was to take effect. GM reacted immediately by taking the EV1 off the street. Leases were not renewed-no EV1s had been directly sold-and all 1000 of the EV1s were retrieved and scrapped by GM to the dismay of the leaseholders most of whom had offered to buy the cars outright. But GM didn't want the cars to be visible or to provide parts or service so they were simply eliminated. GM had no interest in its 'green' image except as that color pertained to money.

Toyota had been also experimenting with ideas to meet the California rule, but its most promising result turned out to be with cars with hybrid, i.e., a combination of electric and internal combustion, powertrains, and it was planning to lobby California to allow it to submit very low emission hybrids to meet the zero emission rule by bending it. As a last resort also Toyota had been looking at a then recent invention, the nickel metal hydride battery, which provided almost twice the power and energy storage as the lead acid system. The problem was that nickel metal hydride batteries required then uncommon, and therefore expensive, on board computer controlled management to keep them going, because they were prone to lose their ability to take or hold a charge if they weren't maintained at a ceratin minimum level of charge and also operated in a fairly narrow temperature range.

The nickel metal hybrid batteries did not lend themselves to power electric cars on their own, but as components of hybrid power trains they were a quantum leap over lead acid batteries in term of performance and range achievable.

Toyota believed that GM was going to introduce a nickel metal hydride powered hybrid to replace the EV1. After all the nickel metal hydride battery was actually invented by a Detroit area firm and GM had invested in its development.

Toyota went ahead with the introduction of the Prius using nickel metal hydride batteries it had developed with Matsushita, Panasonic, to try and get around the American patent.

Toyota was shocked when GM did not introduce or even show any signs of having a hybrid ready to launch much less one using the nickel metal hydride battery.

It is now almost a decade since the introduction of the Prius and whereas GM made around 9000 hybrids last year, all using nickel metal hydride batteries, which were made by Cobasys, a j/v between Chevron and Ovonic Battery Systems, the company that holds the original patents on the NiMH battery, Toyota made 300,000 hybrids all using its own NiMH battery technology made only in Japan. Moreover GM recalled 100% of its NiMH batteries from Cobasys. Toyota, I believe, didn't recall any of its batteries.

Toyota does not want to share or even show its proprietary NiMh battery and battery manufacturing technology to anyone outside of Toyota, so it has just this last week announced that it will upgrade one and build an additional plant in Japan to expand its NiMh battery manufacturing capacity to one million units a year by 2011. ln addition it will build a pilot plant with a capacity of some 'tens of thousands" of lithium ion batteries also in Japan.

Why then would Toyota even consider assembling hybrids such as the Prius in a plant in California that it shares with GM?  The answer is simply contained in the word "assembly.' Toyota may assemble hybrids at the NUMMI plant in Fremont, California, but it will never build NiMH or lithium batteries in California; these will be shipped from Japan preassembled into the electric or perhaps even the entire hybrid power train ready to be installed in the chassis, which will be made or assembled in California from parts made elsewhere.

I am going to guess that in return for participating in such an arrangement GM will get the right to buy a few thousand NiMh powertrains a year to use in place of the substandard NiMh battery hybrid powertrains that are the best that GM's current supplier can do.

GM has not yet accepted that the competent mass production of a reliable economical battery of any kind requires years of trial and error to get right after the battery technology has been shown to be reproducible. GM's management are not only not 'car guys' they are not even in the running as 'battery guys.' 

Toyota may well never have to use or have a use for the 'tens of thousands' of lithium batteries it will build in Japan for a marginal plug-in hybrid or high end roadster that not many people will ever pay the premium to drive. It will undoubtedly be able to sell those batteries to its California assembly plant partner for use in the overpriced Volt, which will never be a threat at 45,000 each to the 25,000 or even 30,000 Prius.

GM is no longer a threat to Toyota except in the Chinese market, and if GM is true to form it will contract with a Chinese partner to manufacture for GM using GM technology any electric or hybrid car it chooses to produce for sale in China. Hopefully by acquiring the latest GM technology one or more Chinese companies will be set back so far as to not be a threat in the US domestic market to any OEM American suppliers still making cars by the middle of the next decade.

GM has bet its future on lithium technology; Toyota is hedging its bets on lithium and betting on NiMH. if results are what count then the outcome is not in doubt.