Japan's Automakers Shift Into Crisis Mode Over The EV Race

I was born in the 1980s, so for most of my life, it felt like all the best stuff was made in Japan. The most advanced electronics, the coolest video games and certainly the best cars. But the recession of the 1990s, the devastating earthquake in the early 2010s and a series of industry-wide technological choices have left Japan's auto industry scrambling to get ready for the electric vehicle future, despite being early pioneers in that field. Don't think the so-called EV sales slowdown is changing that situation one bit. 

Plus, we hear more about how Ford is sounding the alarm over China, and the Volkswagen Group's new Scout Motors brand is looking for cheap batteries. You'll find all of those stories on today's Presidents' Day edition of our Critical Materials news roundup.

(Fun fact: George Washington never once drove an electric car. Really makes you think.)

30%: Japan's Catch-Up Plan Also Involves Infrastructure, Green Energy

Sure, the Japanese automakers—Toyota in particular—may be spiking the football over the slowing rate of EV adoption and hugely successful year of hybrid sales in 2023. But they aren't stupid. Far from it. America's fast-growing EV market is one thing, but what has them really spooked is their eroding market share in China and that country's homegrown EV industry getting into the export game in force.

Basically, everyone's gangster until BYD sets up a factory in your preferred backyard. 

So what does Japan do here? Automotive News says a plan is forming among the Japan Automobile Manufacturers Association, a powerful lobbying group representing the big automakers (Toyota, Honda, Nissan, Mazda, Subaru and Mitsubishi.) And they want some government help to do it. 

It's easy to balk at that, but EV growth has certainly been helped along by U.S. tax incentives and initiatives, and China's government basically bankrolled that stuff for years. If a government wants to protect one of its most important industries and employment sectors, it has to invest and get protectionist. 

For Japan, that means extra collaboration among rivals; building up a local battery and semiconductor industry; and expanding green energy sources, because the country is inherently wary of plug-in cars after the Fukushima nuclear disaster showed both the weaknesses of its grid and drove a pivot back to fossil fuel power sources. From that story: 

This year, new labor regulations restrict the work hours of truck drivers. Combined with an overall labor shortage, this pinches Japan's finely tuned just-in-time production system. Automakers are looking to alleviate the shortage and introduce mobility businesses that might keep the factories running like clockwork. The focus will be on electrification, software-defined vehicles and better energy management.

[...] Efforts to go carbon neutral will only be successful if the industry's energy is clean. That means finding eco-friendly fuel to power vehicles and the factories that make them. Japan must pivot to renewable resources such as wind and water. And it must tap new ideas such as ammonia-fired thermal power plants, industrial scale hydrogen electrolysis and carbon dioxide recirculation. 

JAMA is still pushing hydrogen, interestingly enough, and wants to promote "hydrogen stops for fuel cell vehicles and even hydrogen combustion vehicles." A lot of that is due to the immense strength of Toyota, the world's largest carmaker, and how it continues to play the long game on that technology. Worth a read in full. 

It's an ambitious plan and one that needs to start moving immediately. I'd love to see another 1980s-style boom in Japanese automotive technology, but the country isn't running on free money anymore. 

60%: Ford's EV COO Says 'We Don't Have A Future' If It Doesn't Get Ready To Battle China

I've said before that despite its many challenges and wider skepticism, Ford Motor Company is doing more and better on the EV and software front than it gets credit for. But clearly, it has no business getting complacent. 

If EV adoption goes in waves, we may be seeing the ending to one—the rollout of the volume-selling Tesla Model 3 and Model Y, more and better new cars available, the start of record sales and the buildup of a charging infrastructure—before a second one begins. I think that next wave will start in the next year or two, and it will be marked with the race to solid-state or cheaper batteries, cheaper EVs all around and the entry of companies like BYD into the U.S. market. 

At a panel last week, the chief operating officer of Ford's EV division didn't allude to Round Two directly, but he alluded to the fierce competition headed our way soon. From The Detroit News: 

"That's coming here eventually," Marin Gjaja, Ford Model e's COO, said during a panel on disruptive technology held by the automaker."So, we better get fit now and better get going on EVs, or we don't have a future."

[...] “I don't know exactly the timing, but I think they're going to end up here,” Gjaja said, “just as the Japanese ended up here. The Koreans ended up here. The Germans ended up here. It's a big market.”

“The size of the market in China is so big that those players are going to be in a position to go potentially dominate the world, unless we as Ford and other OEMs can respond,” Gjaja said. “Think about all of the capital: the human capital, physical capital, financial capital that’s built into these ecosystems to build vehicles — that is all being massively disrupted, because this technology is progressing so fast.”

Ford is smart to get ready for this. There's still a lot of lingering skepticism about the EV future in America's auto industry in general—and a gulf between what executives say publicly and what they really believe—but they are increasingly freaked out by BYD. 

If the Chinese automakers serve as this kind of Baba Yaga figure to scare ours into action, then so be it. Because if America were to slow down the fuel economy rules that were driving greater EV adoption, the auto industry would be extremely foolish to take that as a pass to just make more gas trucks and SUVs forever. 

90%: Scout Motors Needs Cheaper Batteries

Don't think this EV sales slowdown (which, again, I think is overblown) means a slowdown in EV investments. The Scout Motors factory in South Carolina is a very big deal for parent company Volkswagen Group; we'll have more on that this week at InsideEVs. 

In the meantime, the electric Scout SUV and pickup truck need cheaper batteries. The ones built by SK Innovation in Georgia for the VW ID.4 won't work for that new Scout platform; I know this because I asked about it. 

Where those batteries will come from remains a mystery. Here's Bloomberg:

Scout Motors Inc., the new US electric vehicle brand backed by Volkswagen AG, is seeking out low-cost battery technology so it can reach mainstream buyers with the sport-utility vehicle it has coming in three years.

With American buyers balking at the high price of electric vehicles, Scout has been scouring battery sources for the most cost-efficient options as it prepares to build 200,000 SUVs and plug-in pickup trucks at a new $2 billion factory it broke ground on Thursday in South Carolina.

“We’re in this startup position and we’re able to pivot,” Scout Chief Executive Officer Scott Keogh said in an interview. “We are looking at battery chemistry and different battery options to decide what to go with and what’s going to give us the best trade off of range and cost.”

The first Scout Motors EVs are expected to roll off the assembly line in late 2026, so as they work on the factory and the cars, they may have time. Two-and-a-half years will be a lifetime in battery development in the U.S., both in terms of sourcing and chemistries.

100%: Which Japanese Automaker Is Best Positioned For An Electric Future? 
Toyota has been disappointing to a lot of EV fans, but I wouldn't count out its electric plans—even as I wish it'd do more to make its current lineup a bit more competitive. It also owns or part-owns damn near the entire Japanese auto industry supply chain, so I think it's positioned to do well in the future if it acts now. Subaru and Mazda will probably get led by whatever direction Toyota takes.  

As for Nissan, who the heck knows; it still seems to be steeped in chaos these days. Honda is the wild card here.