Toyota's Troubling EV Strategy: A Path to Decline?

Toyota, once the undisputed king of the global automotive industry, is making a series of decisions that could spell disaster for its future. In a time when electric vehicle (EV) sales are surging worldwide, Toyota is choosing to pull back rather than push forward. The company has not only delayed its plans for a battery factory in Japan but has also slashed its EV sales targets. This begs the question: Does Toyota truly believe in an electrified future, or is it simply incapable of competing in this space?

Toyota’s EV Struggles: A Reality Check

In 2022, Toyota set an ambitious target: 1.5 million EV sales by 2026. By 2023, that target was cut to 1 million, and now it's down to just 800,000. However, even this number appears overly optimistic. If Toyota manages to sell 500,000 EVs in 2024, that would represent only about 5% of its total vehicle sales. Meanwhile, in China—the world’s largest auto market—56% of all cars sold this year were electric, with 70% being fully electric.

Instead of investing aggressively in EVs, Toyota continues to push hybrids and even hesitates on battery production. The company initially planned to open a battery plant in Japan’s Youkawa Prefecture, but construction has now been paused indefinitely. While Toyota insists the plant will eventually be built, there is no clear timeline—maybe 2028, maybe 2029, or possibly never.

The Solid-State Battery Mirage

Toyota has long promised breakthrough solid-state battery technology. Initially, these batteries were expected to arrive in 2017, then 2018, then 2019, and so on. The timeline has been pushed back so many times that it's hard to believe Toyota has any real capability in this area. The latest claim suggests limited production by 2028 and a larger rollout in 2030, but history tells us to remain skeptical.

The Global EV Disruption

While Toyota hesitates, the rest of the world is moving forward at an accelerating pace. In Europe, EV sales have jumped over 30% this year. By 2035, the European Union will ban the sale of new gas-powered cars altogether. In Southeast Asia, China’s automakers are aggressively expanding, eating into Toyota’s market share in Thailand, Indonesia, and even Brazil.

China, in particular, is a massive problem for Toyota. Not only are domestic brands dominating the EV market, but they’re also expanding globally. While Toyota scrambles to figure out an EV strategy, Chinese automakers like BYD are already selling high-quality, low-cost electric cars in key Toyota strongholds.

Toyota’s Misguided Pivot to China

One of Toyota’s responses to its EV struggles has been to establish a new Chinese subsidiary under Lexus, focused on developing EVs in Shanghai. However, Toyota’s new "Chinese" EVs are not actually made by Toyota at all. Instead, they are rebadged vehicles from Chinese automaker GAC. This strategy suggests that Toyota is giving up on developing its own EV technology and is instead relying on partnerships to stay relevant. While this may work in the short term, it raises questions about Toyota's long-term competitiveness.

Toyota’s Tariff Problem in the U.S.

While Toyota faces mounting pressure in China, it is also staring down major challenges in the U.S., its most important market. The potential for a 25% tariff on imported vehicles under a future Trump administration could be devastating. Last year, Toyota sold 1 million imported cars in the U.S. If tariffs are implemented, those cars could become significantly more expensive, reducing demand. Furthermore, even vehicles assembled in the U.S. would be affected, as 40–65% of their components come from outside the country.

The Blind Loyalty of Toyota Fans

Toyota has a fiercely loyal customer base, but that alone cannot save the company from poor strategic decisions. Consider the Toyota Hilux, one of the best-selling pickups in the world. Despite its massive sales numbers, professional reviews consistently rank it below competitors in key performance areas. Yet, people continue to buy it based on brand reputation rather than objective quality.

This same dynamic could play out in Toyota’s EV strategy. If Toyota decides to slap its badge on Chinese-made EVs and sell them globally, many customers may still buy them simply because they believe in the Toyota name. However, relying on brand loyalty while failing to innovate is a dangerous game—one that could lead to long-term decline.

The Road Ahead

Toyota’s reluctance to embrace EVs, combined with external pressures in China and the U.S., suggests that the company is headed for rough waters. In the short term, Toyota might continue to sell millions of cars. But by 2030, its sales could drop significantly as EV adoption accelerates. If Toyota does not make drastic changes, it risks losing its position as a global automotive leader.

The world is moving toward electrification, and Toyota seems determined to resist. The only question now is: How long can Toyota hold out before reality forces its hand?