What does the 2030 combustion ban mean for UK Toyota factories?

Toyota’s statements to the government as part of its lobbying to ensure those conditions stay favourable are remarkably consistent. As early as 2002, it said it believed that fuel-cell vehicles (FCEVs) would “be the mainstay of the future”, with hybrids developed alongside. The strategy was to replace the ICE with a fuel cell, keeping the hybrid part.

But the promise of fuel cells has yet to materialise as the cost of both vehicle and infrastructure technology remains stubbornly high. Toyota has admitted fuel cells are probably better suited for bigger vehicles such as trucks and buses in the medium term.

For cars, battery-electric is now the de facto zero-emission choice, and this presents a problem for Toyota. While its hybrid cars are incredibly popular now, the increasing popularity of EVs would require a complete rewriting of its long-range industrial forecast.

Toyota takes the same long-term view of its supply chain, and even now, a full 12 years after making its first hybrid in Europe, it still imports the batteries from Japan. Toyota prefers to keep its high-value manufacturing at home.

The company employs the Japanese ‘keiretsu’ strategy, meaning it invests with its (mainly Japanese) suppliers in lockstep into locations outside Japan. As other car makers have found, an EV supply chain is fundamentally different to an ICE car one, and rebuilding with favoured suppliers in the right locations at the right price is incredibly difficult. 

Walker told the same committee back in 2018 that it “would be a huge challenge to change over from a production base that makes many internal combustion engines to be able to make batteries and electric motors in this country”. 

Toyota has now begun to sell BEVs, starting with the bZ4X SUV, and dramatically unveiled 15 electric concepts last year to illustrate its intention to sell 3.5 million BEVs and FCEVs – about a third of its output – by 2030.

But it’s running out of time to convert its UK and European plants to electric. The post-Brexit trade agreement with the EU has made that harder by stating that UK and EU-built cars sold in either jurisdiction must have a local (either UK or EU) parts content of 55% by value or face tariffs. Toyota therefore needs to localise its battery production (the largest part by value for an EV) in this region or continue to import cars from Japan, and the latter would be a lot easier.

Despite December’s big unveiling, Toyota remains sceptical about BEVs.

“The mistake being made now is that some people think EVs are the silver bullet,” Gill Pratt, the head of the Toyota Research Institute, told Autocar in June. He cited the possibility that ambitious EV targets might not be met by an adequate supply of battery raw materials to build the case for a longer shelflife for hybrids.

“Until we know, I believe it’s often better to use the batteries we have as often as possible – and that’s where hybrids have an advantage,” he said.

Toyota achieved a healthy 6.8% market share in Europe (including the UK) in the first half of this year, according to European automotive lobby group the ACEA, as it capitalises on the growth of hybrids. But Europe remains a comparatively small region for the giant, accounting for just 12.3% of its global revenue from April to June. It spends even less here: the brand’s European capital expenditure accounted for just 6% globally for the same quarter.

Toyota Europe has been clever in the way that it designs the look of its cars to suit the region, but that expenditure doesn’t really extend to drivetrains. As the region moves to battery-electric as its dominant solution to zero emissions, the company fast needs a new industrial strategy that focuses on local EV development, production and sourcing. If not, and it looks extremely unlikely, Toyota’s UK manufacturing arm could follow Honda out of the door.

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