It's 1997, and Toyota released the ugliest car in the world - the Prius.

This hybrid moved the market; cheap, reliable and eco-friendly, it just couldn't stir your soul. Considering it was downright fugly (Google it), you knew it wouldn't win any beauty pageants, but it delivered 5 million sales. 

Beauty, it would seem, is in the eye of the beholder.

Prius, did, however, embody Toyota's core values

• Quality

• Ceaseless innovation

• Respect for the planet

Beauty didn't make the cut. 

However, 30 years ago, this was one of the most cost-effective and environmentally friendly cars money could buy. It became so cool that Hollywood celebs would leave their chauffeur-driven, pimped-out Cadillac Escalades at home just to be seen virtue-signalling in a Prius.

However, to be a green automaker today means going fully electric. 

So, when Toyota decided not to bet everything on EVs, the company got a lot of pushback. The market commentary ranged from slightly doubtful to downright offensive.

Instead of investing all their money in the basket labelled 'electric,' they diversified their portfolio into EVs, hybrids, and hydrogen-powered cars.

Others mocked. How dare they!

But who's laughing now? 

With 10.3 million cars sold in 2023 (+7.7% YOY), Toyota should feel vindicated in its position. Considering the recent drop in sales, production cuts, and the gloomier outlook for EVs, their direct competitors are going into reverse, leaving Toyota in the driving seat. 

Fancy a road trip to find out why?

Buckle up, we're going to China.

Dragon's Charge: Decoding China's EV Supremacy

More than half of all-electric cars in the world are on the streets of China. In 2022, China accounted for 60% of global EV sales.

It should not be surprising that most aren't Tesla but BYD or other homegrown EV brands.

BYD (Build Your Dreams), the largest producer of EVs in China, doubled its sales in 2023. It electrified 3 million vehicles - 1.4 million hybrids and 1.6 million fully electric.

But whisper this to yourself: Tesla (484,000) was outsold by BYD (526,000) in the final quarter of 2023.🤫

There's a reason why 90% of BYD cars sell on the domestic market.

The Chinese government started prioritising electric cars in the early 2000s. EV technology was seen as a 1-2 knock-out punch to address a rather significant air pollution problem and help the economy after the 2008 crash.

From 2009 to 2022, the Chinese government spent more than $29 billion dollars on tax breaks and subsidies. Western governments followed suit years later.

Reducing The Voltage

Several companies, including General Motors and Ford Motor, have announced they're slowing down their electric car production due to declining demand and challenging economics.

With the magic money tree that is government subsidy waning, neither companies nor consumers can afford this green alternative. 

"The green economy is here", they said. "No, it ain't!" consumers said.

Once early adopters got their EVs, demand slowed down. The hefty price tag, expensive insurance and low reselling value didn’t help. After three years of owning an EV, it will lose 52% of its value. That's a soul-crushing loss!

And that was before Hertz had a fire sale of 20,000 almost new Teslas into the second-hand market due to a lack of rental demand.

Meanwhile, China's tidal wave of less pricey EVs is flooding the market. And consumers are voting with their wallets.

Infrastructure is a significant roadblock for mass electric car adoption. One billion people lack reliable electricity; for the rest, range anxiety is real. No one wants their car to stall miles from the next charging station. Even when you get to a charging station, there's a queue at peak times.

Time to get a coffee whilst you wait?

Nope, it's time to get a room!

Pulling the Plug on Subsidies

The high upfront cost of EV development has manufacturers hooked on government subsidies. And the governments are the dealers.

Once the subsidies are reduced or suspended, commercial reality hits harder than a pissed-off Mike Tyson.

Subsidies artificially lower the cost of adoption.

In the UK, the government ceased subsidies for EVs in 2022. It decided to focus its funding on building more charging stations, but it failed to build enough.

The mood music has changed.

Behind The Wheel at Toyota

It takes around five years to develop a new car model. A lot can change in five years. 

The EV dream was shattered into pieces with the ending of subsidies, poor charging infrastructure and the sudden rise in the cost of electricity. Fuelled by inflation (another pun that's wholly intended!).

That's why Toyota adopted a multi-pathway approach. They saw it coming and held the wheel in their position even though they're still investing a lot of money in the development of fully electric cars - $35 billion until 2030. 

But, critically, they're also dedicating only some of their time and talent to EV production.

Toyota realised their customers wanted to buy hybrids because they wanted options grounded in performance and price.

Nonetheless, the most significant barriers to EV adoption in the West are high prices and poorly distributed charging infrastructure.

Consider this harsh truth for a moment. A new, petrol-fuelled version of the Vauxhall Corsa - one of the UK's most popular cars – will set you back £19,000; the EV variant costs £34,000. What would you do?

As a consumer-oriented brand, Toyota understands this challenge for customers. They make practical cars but also think and act practically. For the marketer, it's a way of being.

Toyota's Performance Is Electric, But Only 1% Of Their Portfolio Is

Toyota sold 10.3 million cars in 2023. 3.5 million were hybrids, but only 104,000 were fully electric cars.

Through an old-fashioned grounded market orientation, Toyota knows it must make cars that make sense for its drivers worldwide. Still, of course, even a company of its size needs help to go against the grain of the market narrative.

Most consumers have yet to trust electric cars and with good reason. The cost to acquire and run them, the poor refuelling experience, and crushing depreciation hardly set the pulse racing.

Hybrid cars are the bridge. Customers get most of the EV benefits without any of the drawbacks. What's not to like?

Time For A Driving Lesson

While their direct competitors try to avoid running over the edge of the EV cliff like lemmings, Toyota knows that the mass market is not ready for electric cars, and the insight for marketers and businesses alike is clear:

Toyota used hardnosed market orientation to map the market and its commercial realities without relying on government cash falling off the magic money tree.

They know that the EV market has been artificially enhanced with government money, and if there's one thing we know about government money, it is that when the political will runs out, so does the money.  

Totoya went their own way. They dared to be different, knowing that the required business results could not come from the early adopter EV market.

EVs are still at the early adopter stage and must double their market share to cross the chasm.

Despite their increasing popularity with early adopters, electric cars accounted for around 17.8% of all new vehicles sold in the UK in 2023. Petrol was the most popular fuel type, with a 40.7% market share (774,484 new car sales), diesel taking a 3.8% share or 71,501 cars (excluding hybrids).

Market orientation, together with diversifying the portfolio, helped the world's largest auto manufacturer drive uphill at full speed in a challenging market.

EVs are meaningful but not actionable regarding mass market adoption.

And herein lays the rub. Governments do not create or manage markets. 

Toyota knows the adoption curve, has placed meaningful and actionable bets in its portfolio, and will play the waiting game on EVs whilst harvesting Hybrid and Petrol.

It's the ultimate 'Eat Whilst You Dream' analogy, coined by the late, great Jack Welch.

While all their competitors went long, Toyota went short and long and reaped the rewards. This is a winning principle for any business.

Like Fleetwood Mac did in 1977, Toyota chose to go their own way.

Keep on rockin’ 🤘

Harvey.

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