It's only a week away from Sato-san officially taking over as CEO of TMC. What presents in front him is the horror show of BZ4X sales figure in its biggest market China:
BZ4X sales figure in ChDM, Nov 22 to Feb 23
FAW: 499, 660, 287, 1049
GAC: 137, 1487, 767, 500
Officially the FAW-Toyota BZ4X is at 30% discount and the GAC version at 15% discount over MSRP but at dealers the discount can be up to 50% for the top trim AWD model. They built two factories each capable of producing 100k BZ4Xs a year, selling them at 50% discount and still can't get more than 4-digit sales figure for a factory utilization rate of less than 9%. If BZ4X is losing them money priced at $43k in the U.S. I can't imagine how much money they lose selling at $21k. BZ4X is now a contender for the biggest flop of the decade.
The recent Munrolive teardown video is very hard to swallow because I was expecting much much more from the engineering team. The BZ4X is no different from a compliance EV from 2018. It's not just the specs, but down to all the minor details and mindset of how a BEV should be made and what consumers demand, Toyota got something right but most wrong.
If I were Sato-san I would pause all HEV/ICEV programs with due date after 2025 to focus all resources on fixing the BZ4X to be at least on par with other EVs from 2020, and demand results by the end of the year. Either the production cost needs to be 15% lower or the car needs 15% more range, each year, whatever it takes because otherwise every BZ4X sold would incur a greater loss than the full price of a Corolla. Investors would be fuming when they see the financial results so Sato-san needs to be decisive and layout a concrete plan on the first day of his job. There is no chance to wait for the new platform in 2026 and pray competitors stand still. They needs to start catching up today.
Secondly, Sato-san needs to address the PHEV supply problem ASAP. The RAV4 Prime was a hit especially in NA seeing how ridiculously overpriced they are in the used market ($55k for a RAV4 can you believe it?). The NA market definitely prefers a car that uses electricity for daily commute and still use petrol for long trips and PHEV has a very good fighting chance here. But Toyota dragged their feet on expanding PHEV battery production for two years. They only had 2 GWh capacity (enough for 110k vehicles) in 2022. That number needs to be at least 4x higher so all the Primes they planned to introduce this year (Prius, Harrier, RX, TX) could actually reach customer. And not only that they need to think about range-extension with newer battery cells ready in at most 2 years. We are seeing more competitors moving to 20+kWh battery packs with 50 mi+ EV range to attract people with longer commutes. They cannot afford to use the same battery spec for 6 years without upgrades like they did with the original Prius Prime.
This is not about whether EVs are going to replace ICEVs. Last year BEVs reached a monumental 15% global automobile market share with over 10 million sold. BYD and Tesla are selling more Song Plus and Model Y in a day than Toyota sells BZ4X in a month and making money hand over fist. BEVs are profitable now. It's a foregone conclusion. Toyota has already committed to the all-electric Lexus strategy so there's no room for them to turn back. I still believe 30% global market share by 2030 is optimistic because eventually growth will plateau, but 30% is 21 million cars. You don't simply scoff at 21 million cars and call that a bad business case.
BZ4X sales figure in ChDM, Nov 22 to Feb 23
FAW: 499, 660, 287, 1049
GAC: 137, 1487, 767, 500
Officially the FAW-Toyota BZ4X is at 30% discount and the GAC version at 15% discount over MSRP but at dealers the discount can be up to 50% for the top trim AWD model. They built two factories each capable of producing 100k BZ4Xs a year, selling them at 50% discount and still can't get more than 4-digit sales figure for a factory utilization rate of less than 9%. If BZ4X is losing them money priced at $43k in the U.S. I can't imagine how much money they lose selling at $21k. BZ4X is now a contender for the biggest flop of the decade.
The recent Munrolive teardown video is very hard to swallow because I was expecting much much more from the engineering team. The BZ4X is no different from a compliance EV from 2018. It's not just the specs, but down to all the minor details and mindset of how a BEV should be made and what consumers demand, Toyota got something right but most wrong.
If I were Sato-san I would pause all HEV/ICEV programs with due date after 2025 to focus all resources on fixing the BZ4X to be at least on par with other EVs from 2020, and demand results by the end of the year. Either the production cost needs to be 15% lower or the car needs 15% more range, each year, whatever it takes because otherwise every BZ4X sold would incur a greater loss than the full price of a Corolla. Investors would be fuming when they see the financial results so Sato-san needs to be decisive and layout a concrete plan on the first day of his job. There is no chance to wait for the new platform in 2026 and pray competitors stand still. They needs to start catching up today.
Secondly, Sato-san needs to address the PHEV supply problem ASAP. The RAV4 Prime was a hit especially in NA seeing how ridiculously overpriced they are in the used market ($55k for a RAV4 can you believe it?). The NA market definitely prefers a car that uses electricity for daily commute and still use petrol for long trips and PHEV has a very good fighting chance here. But Toyota dragged their feet on expanding PHEV battery production for two years. They only had 2 GWh capacity (enough for 110k vehicles) in 2022. That number needs to be at least 4x higher so all the Primes they planned to introduce this year (Prius, Harrier, RX, TX) could actually reach customer. And not only that they need to think about range-extension with newer battery cells ready in at most 2 years. We are seeing more competitors moving to 20+kWh battery packs with 50 mi+ EV range to attract people with longer commutes. They cannot afford to use the same battery spec for 6 years without upgrades like they did with the original Prius Prime.
This is not about whether EVs are going to replace ICEVs. Last year BEVs reached a monumental 15% global automobile market share with over 10 million sold. BYD and Tesla are selling more Song Plus and Model Y in a day than Toyota sells BZ4X in a month and making money hand over fist. BEVs are profitable now. It's a foregone conclusion. Toyota has already committed to the all-electric Lexus strategy so there's no room for them to turn back. I still believe 30% global market share by 2030 is optimistic because eventually growth will plateau, but 30% is 21 million cars. You don't simply scoff at 21 million cars and call that a bad business case.
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