The company will also be offering 70 new models in total by 2025, including electric, hydrogen fuel cell, and gas-electric hybrids.
In order to scale this massive addition to its lineup, Toyota will use a flexible platform, which it designed with Subaru, to flexibly and efficiently produce many variations of the same model.
As the world's largest automaker, Toyota entering the ring may as well be interpreted as the sounding of the bell for the countless EV startups which aimed to take advantage of the fast growing and seemingly wide open market for electric vehicles.
In 2019, Toyota amassed control of 10.24% of the global market for automobiles, which was considerably higher than second place Volkswagen (VWAGY), who had 7.59% and was nearly double third-place Ford’s (F) 5.59%. For reference, Tesla (TSLA) had a market share somewhere between 1 and 2 percent after having delivered 367,000 vehicles that year. That is 38.8% less than the 509,737 vehicles that Tesla delivered in 2020.
So while Toyota’s entrance into the EV market is a huge win for the market and the environment, especially after announcing its goals for achieving carbon neutrality by the year 2050, we can’t say the same for the seemingly endless list of EV-related startups and SPACs.
Toyota is not nearly the first, nor will it be the last, legacy automaker to make this announcement. But with each one, the likelihood that another Tesla will emerge decreases.
For starters, the market share that these companies compete for just decreased massively. This is key because in Toyota’s first year producing any one of their new cars, they will have the ability to out-deliver pretty much every EV maker, with the exception, perhaps, of Tesla.
Currently, persons ordering a new Tesla Model 3 can expect to wait 7-10 weeks to receive their car. This is because Tesla has a huge backlog of orders that is being compounded by a semiconductor shortage. So, as more legacy carmakers enter the market, not only will they be fighting for people just entering the market for an electric car, but they will also be looking to snag the ones that seemingly already made their choice.
Currently, Tesla requires a non-refundable $100 deposit for new cars, and a $500 deposit for used-cars, in order to be moved through the process and receive a credit check to secure a loan. While you won’t get that back from Tesla, in the grand scheme of things, when talking about a car priced between $30,000 and $100,000, it’s not that much money. There will be ample opportunity for Toyota and other large car companies to entice customers to cancel their order with Tesla and place it with them.
How? Well, for starters, you can cancel your Tesla order up through delivery day at no extra charge. So just like how AT&T will buy you out of your existing Verizon contract, Toyota will surely offer a similar incentive and will deduct that cost from the price of a new Toyota, if you decide to cancel your Tesla and buy a Toyota. And while we know that Tesla fans are indeed superfans which border on cult-like behavior, there is no doubt that many EV enthusiasts will change course, especially as a cheaper alternative comes along.
Another advantage that Toyota has over Tesla and its many less advanced competitors is that it likely won’t amass a backlog like Tesla to begin with. Tesla and other new EV car companies have so many hurdles to overcome in order to scale up, as they must build factory after factory just to have a chance to compete. For a company like Toyota, which already has a massive global supply and distribution network, changing the product won't be nearly as hard as building that global network from scratch.
Besides the fundamental reasons that haunt EV startups, there exists another which may prove too big. With Nissan, GM, Volkswagon, and others quickly flooding the market, customers will no longer have to turn to unproven companies for cars using new technologies and alternative fuels.
When given a choice between buying and maintaining a car from an unproven company and a proven one, most consumers will likely err on the side of caution and go for the company that they know already has service centers around the country and easily accessible replacement parts.
Tesla is kind of exempt from this one, as the company has surely developed enough of a reputation that consumers will mostly trust that the company will be here for the long haul, but the later waves of entrants will surely not be held in the same light by potential customers, especially those on a budget.
So when all is said and done, the only venture that will have had a shorter run than the countless EV startups and SPACs is the Super League.