The following is the speech given by Larry Hutchinson, president and CEO of Toyota Canada, as he opened Toyota’s participation in the 2020 Canadian International Auto Show.
There are excuses given for going slow with BEVs (not unexpectedly) but, nevertheless, some good, logical arguments for how continuing with Toyota's electrification plan -- a mix of hybrids, plug-in hybrids and EVs making up half of all vehicle sales by 2025 -- is good for the environment (and better than full-speed ahead on all EVs).
I still think that Toyota (including Lexus) is missing an opportunity by not offering more EVs and PHEVs, the vehicles that are eligible under Canada's Incentives for Zero-Emission Vehicles (iZEV) Program (up to $5000 for EVs and $2500 for PHEVs).
Back in December, it was announced that EV sales in the province of Ontario during the first half of 2019 had plummeted by over 55% compared to the same period in 2018, due to the cancellation of Ontario's EV incentive program. Then last month, it was announced that Canada's EV incentive program used up half of its 3-year budget in just 8 months.
So, it looks like there is demand for EVs (and PHEVs) but retail prices are just a bit too high. Give buyers some incentives, however, sales pick up (and conversely, take away incentives and sales fall).
Toyota's master plan for a low-carbon future
There are excuses given for going slow with BEVs (not unexpectedly) but, nevertheless, some good, logical arguments for how continuing with Toyota's electrification plan -- a mix of hybrids, plug-in hybrids and EVs making up half of all vehicle sales by 2025 -- is good for the environment (and better than full-speed ahead on all EVs).
I still think that Toyota (including Lexus) is missing an opportunity by not offering more EVs and PHEVs, the vehicles that are eligible under Canada's Incentives for Zero-Emission Vehicles (iZEV) Program (up to $5000 for EVs and $2500 for PHEVs).
Back in December, it was announced that EV sales in the province of Ontario during the first half of 2019 had plummeted by over 55% compared to the same period in 2018, due to the cancellation of Ontario's EV incentive program. Then last month, it was announced that Canada's EV incentive program used up half of its 3-year budget in just 8 months.
So, it looks like there is demand for EVs (and PHEVs) but retail prices are just a bit too high. Give buyers some incentives, however, sales pick up (and conversely, take away incentives and sales fall).
Toyota's master plan for a low-carbon future
Motor Mouth: Toyota's master plan for a low-carbon future
Toyota is the greenest automaker on the planet, and their plan for reducing tailpipe emissions is ambitious
by David Booth | 1 day ago
2019 Toyota RAV4 HybridNick Tragianis / Driving
This will be a Motor Mouth unique in the 20-plus years of Driving. Rather than presenting my view on the most pressing topic affecting the auto industry — the most efficient path to a lower carbon future — I’m going to present the speech (abridged, but mostly verbatim) Larry Hutchinson, president and CEO of Toyota Canada, used to open Toyota’s participation in the 2020 Canadian International Auto Show.
Toyota, if anyone needs reminding, is the industry leader in electrification — 13 million hybrids, and counting — and if you judge environmental-friendliness by how much carbon dioxide has been eliminated from the atmosphere, the greenest automaker in existence. So, without further ado, here is how the biggest, most successful, and most environmentally conscious traditional automaker thinks we can reduce the greenhouse gasses in our atmosphere most quickly.
— David Booth
Two years ago, I spoke about climate change at this same dinner introducing Toyota to the Toronto auto show. Over that short timeframe, it seems almost everyone — governments, businesses and consumers — has thankfully strengthened their resolve to save the planet. Collectively, we’re working to slow ‑— and hopefully stop — climate change by reducing our carbon emissions.
As an industry, we’re making some progress. But frankly, we’re still not on track. This is becoming a bigger issue every day and we need to do more.
Over the past few years, battery electric vehicles (BEVs) seem to have grabbed the majority of the electrification spotlight. As zero-emission vehicles available to purchase now, they’re an enticing proposition to policy-makers looking for a potential solution to carbon emissions.
It would be easy, then, for governments to develop zero-emissions vehicle or “ZEV” rules that simply mandate automakers to build more BEVs and then try to convince drivers to buy them. And, if the objective is just to sell more battery electric vehicles, that approach might work.
But, if overall carbon reduction is our true goal — and we think it should be — then public policy needs to embrace, not discourage lower cost, potentially [more efficient] solutions using already available technology. And here’s why: Carbon reduction can only be achieved by consumers deciding to spend their own money in ways that deliver a practical return for themselves.
Right now, zero-emissions vehicles account for less than three percent of new vehicle sales in Canada. With the recent end of Ontario’s BEV incentives, we saw ZEV sales drop sharply in this province last year. In the U.S., we’re also seeing a decline in ZEV sales, this at a time when there seems to be widespread consensus that we have to do something about our emissions.
Why is this happening?
Because government rebates or tax incentives for purchasers of electric vehicles are being capped or rolled back. Here’s the reality: In order to achieve carbon reduction with a costly single technology, you have to incentivize that technology into the marketplace. No matter how motivated the consumer, there is a price point or premium beyond which people will not opt for the cleaner product because the payback is intangible, and it often requires compromises in comfort and convenience.
BEVs are expensive. So, to encourage their adoption, governments have had to offer significant financial incentives to would-be buyers. We’d also need to build expensive infrastructure to support that technology. So, there are enormous up-front capital costs that have to be paid by somebody. And so far, we’ve seen consumers alone are not prepared to pay those costs. The bottom line is this: To have any impact with a zero-emission vehicle mandate, the cost to government would be extremely high. And sadly, we’d still miss our overall carbon reduction targets.
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We also need to consider resource efficiencies. There’s a finite global supply of in-the-ground materials required to produce battery cells and a rising demand for batteries, not just from the transportation sector. It’s vital, therefore, that we use these resources as efficiently as possible, both to lighten the environmental impact of extracting battery materials and to ensure that we can cost-effectively produce low or zero emission vehicles.
So, here’s something most people don’t know [about the engineering efficiency of greenhouse gas reduction]: The average battery capacity in a BEV is about 60 kWh. The average battery capacity in a Toyota hybrid is 1.4 kWh. In practical terms, that means you could build 42 Priuses in place of the 60 kWh battery in one BEV. Forty-two Priuses — each reducing greenhouse gas emissions by 30 per cent — would have the impact of 12 ZEVs. So, the question is this: For the same resources — the same total number of battery cells — do you want the GHG reduction of one car? Or 12? And that’s 12 vehicles without range anxiety, government incentives, or even any infrastructure investment.
Please don’t misunderstand me: I have a lot of respect for the work that Tesla and others have done in creating an aspirational market for zero emission vehicles. But the current approach to building EVs is not a silver bullet that will solve the environmental impact of the transportation sector. So close your eyes for a minute and imagine its now the year 2030. All of Toyota’s cars have had an electrified option for the last five years. And, I’m happy to report that Toyota Canada has sold 300,000 vehicles.
Now, there was a time the government wanted me to attain a 30 per cent reduction in carbon by selling 90,000 ZEVs. Fortunately, saner heads prevailed, maybe because they ran out of incentive money. Instead, I sold 300,000 hybrids and reduced emissions by the equivalent of 90,000 ZEVs. And actually, we went way beyond that because some of those 300,000 vehicles were plug-in hybrids and fuel-cell electric vehicles. But let’s keep this dream simple [and stick to just counting on straight hybrids]: I used 90 per cent fewer finite raw materials for batteries, didn’t inconvenience any consumers, and saved the government deficits as no government incentives were needed.
My point is, if Canada truly wants to achieve meaningful carbon emission reductions from this sector by 2030, a single-minded focus on zero emission vehicles is likely to cause us to miss that objective. It’s too expensive, too consuming of finite resources, and it entirely misses the point that carbon emissions are the result of the total number of carbon-powered kilometres travelled by the entire on-road fleet each year.
I believe that the best approach for Canada is to continue to focus on regulatory strategies that aim to produce overall carbon reductions. Done properly, policies that aim to achieve year-over-year improvements in carbon emissions from the entire new car fleet will yield much bigger results than the ZEV mandates and incentives currently being pursued.
Governments have their environmental goals. So does Toyota. The government has a carbon reduction objective: 30 per cent by 2030. Toyota wants to get there, too. In fact, we want to go further. And we have a solid, practical plan to get there.
Twenty years ago, when we introduced Canadians to hybrids, we sold 225 of them in the first year. Last year, we sold more than 34,000 across the country, representing almost 15 per cent of our overall sales in 2019. More importantly, we project electrified vehicles will, by 2025, be 43 per cent of our sales. That means hybrids — and plug-in hybrids — are playing the biggest role in helping Canada achieve its emissions targets.
So how do we popularize electrified technologies at a rate that consumers are prepared to pay for, while the rest of the work goes on to prepare for the next generation of advanced technology?
If governments want to speed up the adoption of electrified vehicles, we need a comprehensive, long-term strategy geared toward overall carbon reduction. One that includes a variety of technology options and encourages consumers to make choices that drive meaningful reductions in carbon emissions across the entire fleet of vehicles on Canadian roads, not just a few niche vehicles. And, if we want to move sales of advanced technology vehicles beyond their natural demand curve, there is definitely a role for government incentives but they should be technology neutral. In other words, [governments] should incentivize emissions reduction — not specific technologies.
Done properly, zero emissions vehicles would then naturally enter the market, but would also join a much larger fleet of low and near zero emissions vehicles, each of which is doing its share of the heavy lifting.
In short, our message to government is this: Set the goal posts, but don’t call the play. Because we automakers know best how to drive down costs and get competitive [low-emissions] vehicles into the market.
