17 July 2023

Note to Toyota and Stellantis: resisting technological change is a loser

People of my age often grew up in "Ford" or "GM" (or, less often, "Chrysler/MoPar") households, where, usually the dad, was a dedicated customer of one of these, time after time. In the 70s lots of people gave up on the Big 3, buying Japanese or German cars, leading to a good deal of brand loyalty, especially towards Honda and Toyota. The reason? Economics. The cars were better and cheaper to operate. 

Now, decades later, after being bailed out by the government (twice in the case of Chrysler), the Big 3 are really the Big 2, with Chrysler a subsidiary of the European company that's a merger of Peugeot group, Fiat, and Chrysler (which is mainly Ram and Jeep nowadays). And, interestingly, the likely future biggest US automaker, Tesla, draws the largest groups of its customers from former customers of Honda and Toyota, which have entirely missed the boat on the market disruption to EV dominance. Ford and GM are trying mightily to make this conversion, but the Japanese and Stellantis aren't. GM and Ford are trying to hold on to some market share. But what are Toyota and Stellantis (Chrysler+) doing? They are trying the political road, trying to lobby the US govt. to back off its industrial policy to encourage the switch to zero emission vehicles so they can go on making gas cars according to their outdated paradigms. 

This strategy is doomed. If Toyota, Honda, Nissan, Mitsubishi, Subaru, Suzuki (notice a theme?), plus Stellantis and BMW all just give up on EVs and try to use public policy to save themselves, they will fail. Tesla and at least 18 Chinese manufacturers are already at the point where their cars will soon be cheaper than gas cars, and while the buildout of the charging infrastructure is slow and incomplete, it is happening. Batteries are better and better, and cheaper, and use less and less rare materials. People are already abandoning outdated technology for  the simple reason that, very soon, per mile driven, EVs will be substantially cheaper, not to mention far less polluting, than internal combustion. And Toyota, Nissan and Honda's sales have collapsed in China (the world's largest car market) already, and are down now everywhere. Particularly Nissan, which is already experiencing sales falling off a cliff, not just in China, but in the US as well. And Honda and Toyota sales are slack and looking bleak as well. What new cars do you see more and more of? Tesla. In Europe (not here due to tariffs) ... Chinese manufacturers like MG (not British anymore), Volvo (also Chinese). Sales of legacy automakers' gas cars have peaked across the board and are very clearly on the downslope. Everywhere in the world. A totally predictable development. 

Toyota and Stellantis are firmly on the side of the dinosaurs, with the asteroid bearing down. Not to give financial advice, but I wouldn't touch their stock. They're doomed. Radical to say the largest automaker in the world, Toyota, is doomed? I don't actually think so. They've failed to invest seriously in battery technology, failed to develop a single practical EV template, much less electric cars anyone would buy, and are chasing ridiculous technologies like hydrogen powered V8s. (Not fuel cells, actual internal combustion engines powered by hydrogen, for which no infrastructure exists or is planned anywhere in the world). They're spreading outright lies about battery technology and new EV manufacturing methods which have already proven themselves. These legacy companies are almost literally tilting at windmills. Bah bye, Toyota, we knew you when. (When you made economical and practical cars while America's makers were the ones floundering). No longer so. And I'll make an easy prediction: when the dust settles, in a decade or so, the biggest automakers will be Tesla, those legacy makers like Daimler, Volkswagen (maybe), Hyundai group, Ford, and GM, which are maybe late to the party but are at least working on the conversion to an EV future. And the Chinese, probably winnowed down to Geely (Volvo), BYD, and a few others. The laggards and denialists, Stellantis, BMW, and all the Japanese companies, will be scrambling, or, in the case of Stellantis, I'd say probably already bankrupt and gone within ten years. Toyota has huge resources, you say? Yeah, but the two biggest corporate debts in the world, in order, are Toyota and Volkswagen. VW is at least working on the problem. Toyota is fat, but not happy, and is whistling past the graveyard while watching their gas powered empire beginning its inexorable collapse. 

Their strategy of going after regulation and industrial policy cannot work, because while these things are helping to bring about the conversion to EVs, what's really driving it is vastly improved technology. And, sadly, the Japanese in particular, and Stellantis most among the Western makers, are just not doing it well enough or fast enough to emerge as major players when the dust settles. 

We suffer more in imagination than in reality. 
-- Seneca 

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