Doing its best to make up for lost time, Toyota Motor (TM 1.00%) on Dec. 6 announced its intention to construct an electric vehicle (EV) battery factory in North Carolina. The explosion of EV popularity has caught Toyota flat-footed in recent years, and now the Japanese company is working to catch up with a new facility it says will be able to make around 800,000 EV batteries annually, with future expansion to manufacture around 1.2 million batteries already planned.
Toyota's action would have been considered a strong move three years ago. But these days there are already at least two other major automakers that would consider Toyota's announcement old news. Their efforts may have already left Toyota in the rearview mirror.
Image source: Toyota Motor.
Toyota's bold (but belated) move
According to the press release, Toyota has earmarked $1.29 billion for its North Carolina project. Dubbed Toyota Battery Manufacturing, North Carolina (TBMNC), the factory is also referred to as the Greensboro-Randolph Megasite in company literature, perhaps echoing Tesla's (TSLA -4.03%) "Gigafactory" designation for its large production facilities. Toyota Motor North America CEO Ted Ogawa said North Carolina offers "infrastructure, [a] high-quality education system, access to a diverse and skilled workforce, and a welcoming environment for doing business."
The company's also getting incentives from the state, ranging from tax breaks to cash, which will stack up to around $430 million if it goes through with its construction plans. Toyota has approximately $2.1 billion more set aside for further EV and battery manufacturing capacity in the United States.
Taken with no further context, Toyota's plans look like a vigorous entry into electric car manufacturing. Unfortunately for the company's competitive position, it's coming to the game very late. The factory won't start producing batteries until sometime in 2025. The automaker also said when it unveiled the concept vehicle for its all-electric bZ4X sport-utility vehicle (SUV) in June that its "future lineup will feature 15 dedicated BEVs" (battery-electric vehicles) in addition to 55 hybrid models due out no sooner than 2025.
With approximately a four-year delay before Toyota EVs are in showrooms, assuming no production delays or other problems, the Japanese automaker is clearly lagging behind the competition. At least two other companies are flexing their electric muscles right now, and are likely to have millions of cars on the road before the first consumer-ready Toyota EV rolls off the production line.
Tesla is still in the lead
While offbeat entrepreneur Elon Musk's Tesla remains a favorite target for negative commentary and "doom and gloom" pundit predictions, the company remains stubbornly successful overall. It's had a couple of bad days recently, but its valuation remains above $1 trillion, and its sales have skyrocketed 87% over the past 12 months.
Tesla has a first-mover's advantage that's hard for rivals to challenge, let alone beat. It has positioned itself as the EV market leader at a time when a historic pivot from internal combustion engines (ICE) to electric vehicles looks extremely likely in the near future. It has a very prominent name despite having close to zero advertising budget, and it is investing in massive factories aimed at meeting surging demand, and likely to help capture market share once the electric metamorphosis "takes off."
Tesla's sales in Germany spiked 234% in November, a month when German auto sales dropped 32% market-wide. Simultaneously, rumors out of Germany indicate approval for Gigafactory Berlin to start operations may come in the immediate future, with 1,000 Model Ys built weekly starting in January 2022 and manufacture ramping up from there. In China, another vast potential market, Gigafactory Shanghai is already producing EVs at an annualized rate of 450,000, with planned expansions likely to soon increase this to 1 million vehicles, or even 1.5 million, per year. Tesla's Gigafactory Austin, where it recently relocated its headquarters, is a billion-dollar facility expected to come online by 2021's end, which will supposedly be capable of producing 500,000 vehicles annually.
Tesla has nearly completed building manufacturing capacity much greater than Toyota's, with deliveries likely to rise 50% in the coming year. While Tesla's American EV market share has dropped to 66.3% versus 2020's 79.5%, it still has a dominant position, is now beating Daimler AG (DAI 1.10%) subsidiary Mercedes-Benz in the luxury car sector, and has surging international sales.
Ford is accelerating into the EV fast lane
Ford (F -0.15%), which surpassed 150,000 orders for its soon-to-be-released F-150 Lightning pickup truck, recently cut its ties with EV company Rivian (RIVN -2.26%). The Blue Oval is now confident enough in its own advances in design and production capability to "go it alone" on EV manufacture without Rivian's help, and it could score a major cash windfall if it decides to sell its significant stake in the much younger company.
Ford has also made a massive joint investment (in partnership with a South Korean EV battery company) of $11.5 billion to build a series of battery factories across the U.S., with the biggest, Blue Oval City, located in Tennessee. Together, these new plants will crank out 86 gigawatt hours of batteries annually once they come online in 2025, the same year Toyota plans to have its North Carolina facility operational.
However, Ford's electric car plans are proceeding much faster. In a recent tweet, CEO Jim Farley noted the automaker should be manufacturing double its originally planned number of EVs by the end of 2023, or about 600,000 per year. "And that's BEFORE [Blue Oval City] & other EV sites come online," Farley added. In short, Ford expects to be nearly matching Toyota's planned 2025 production capacity in 2023, and it will have a vast manufacturing expansion go operational in the same year Toyota is just getting started.
When it comes to carving out leading market share in the mushrooming EV sector, the rubber is already hitting the road with Tesla's existing lead and Ford's huge, rapidly advancing initiative to break into the market. Toyota's tardy entry into the EV market is likely to limit its gains in the sector, and both Ford and Tesla are better picks at the moment for those investing in electric car stocks.
