ABG: In production applications Toyota were obviously the pioneers in bringing hybrid vehicles to the mainstream and everybody is scrambling to catch up and get their own hybrids and other alternative drivetrains to market. Moving forward, obviously, you have applied your hybrid synergy drive to a wide a variety of Toyota and Lexus vehicles. Let's start by talking a little bit about where you are today and where Toyota is going in the next five to ten years?
BC: Okay, where we are today. Six hybrids, three Toyotas, three Lexus. We are really pleased with the progress. Total we did 278,000 units last year. Prius had a tremendous increase, up 67 percent. We had a 44 percent increase overall in hybrids. We first brought Prius to the U.S. in 2000. As you are aware Prius was actually introduced in Japan in 1997.
There were a lot of people who were just scratching their heads. They did not really understand it. A lot of criticism on hybrid, why they are doing that. Back in 2000, fuel prices were under $1.50 a gallon and there was not nearly the concern on supply and concern on the environment was there but was not really, in my view, embedded in the society the way it is today.
We introduced the first generation. It did well. It attracted the early adoptors that we were primarily interested in environmental impact. We also had people that were attracted by the technology. What is so encouraging to walk around this show is when we look at 2007, the 278,000 hybrids, it has gone beyond the initial adoptors. It's starting to embed itself within the general market and 11 percent, I am talking in terms of Toyota division which I represent, of our total sales last year were hybrid. Yet less than 2 percent of the industry was hybrid.
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BC: So we have more hybrid applications in, more focus on this area. It gives us even more confidence that this is going to develop. So as we look forward, one of the things behind hybrid that is really not understood generally is how flexible it is. It is really going to be our core technology in the future. In this application you will see us applying high-efficiency gasoline engines to it, but it gives us the ability to explore other technologies towards fuel cell stacks, clean diesels, E85 and we are looking at all the solutions embedded underneath that.
Our hybrid system is what really gets us there. In the future, you are going to see us continue to expand hybrid. Mr. Watanabe in Detroit mentioned that we are going to be introducing two new hybrids next year in Detroit, all new, ground up. That will take us to a total of seven (since there are currently six and two new hybrids make seven, one will almost certainly be the new Prius). So we are seven along the two franchises. You are going to see us continue in the path we are going right now. You will continue to see us build fully-dedicated hybrids whereby, Prius for example, that's the way it comes. It comes with a hybrid.
You will also see us continue to develop the optional powertrain strategy. On a Camry for example, you can get a four a six or a hybrid. We think there is room is the market for both and you will see us continue down both paths.
ABG: When the Lexus hybrids first appeared it seemed like there is a bit of an emphasis on promoting it, at least in part as a performance enhancement without sacrificing efficiency. Sales of the Lexus-branded hybrids have not been as strong as the Toyota-branded hybrids where there was more of an efficiency emphasis. Now, you have launched this "Power of h campaign." Where do you plan to go with the marketing of hybrids and the Lexus brand?
BC: Well, I no longer represent Lexus. I now have responsibility over Toyota, so I hesitate a little bit to be the Lexus spokesperson. I was there for a number of years. What is not understood on hybrid is you can get a tremendous amount of performance off the line with your electric motors. There is no wind up of the motor required. So it does provide performance. Where we positioned initially Lexus was as an alternative to a large V8. You can have a six-cylinder. You can get six-cylinder or large four-cylinder efficiency out of it, but you can get V8 performance and still have the same SULEV (super-ultra-low-emissions-vehicle in California) environmental benefits.
There is room in the market for that, but clearly the market acceptance on an efficiency based... I refer to an MPG based hybrids versus power based. The market is larger on MPG based so you are going to see Lexus continue down both paths, the GS and an LS. You have to have a minimal acceptable level of performance in those cars. But you may see Lexus also going down the path of offering more dedicated hybrids that emphasize the efficiency. You will see both of that. You may see both for Toyota, too, eventually down the road. We showed concepts of the...
ABG: The FT-HS sports car last year.
BC: Yes. That is 0-60 in 4 seconds and it is just a fun car to go. It is just a different way for us to show how flexible hybrid is.
ABG: Moving forward will Toyota start combining other engine types with the hybrid synergy drive, such as flex-fuel engines or diesels?
BC: I will jump in first. We're developing them. Do we have any production announcements today? No. We can throw clean diesel on there. There is a challenge. It is going to take more development. As we advance hybrid, we've got a couple of visions. One, we want to do a million hybrids annually. We have done a million hybrids collectively through the years, but the goal is to do it annually. We will do that with no fixed time frame. We are still working those plans but that will happen sometime in the 2010s, in the next decade. Two, is we want to have hybrid as either dedicated or an optional powertrain in everything we sell.
ABG: Across the board, even up to vehicles like the Tundra and Sequoia?
BC: That is the vision. We have actually said it is going to take into 2020s to get there. Where hybrid is today on a heavy duty application for Tundra and Sequoia, for example, where you have payload capacity ratings and towing is very important. Today, with where the technology stands today, clean diesel is a better short term application than hybrid.
The current system depending on electric is not perhaps as applicable to towing 10,000 pounds as the diesel would be. So you are to see several solutions but certainly we are developing the technology where there is potential to put a plug-in on a small clean diesel into hybrid. One of the challenges is cost because diesel in itself is a premium to produce. The particulate traps that everyone is developing under today's technology are expensive. And then you have the cost of the hybrid system.
So, while it is technically feasible today it cannot be done at a marketable cost. Perhaps that is a challenge today but the third vision we have on hybrids is as every generation comes out we want to reduce the size, reduce the weight and reduce the cost. So, actively developing that, you may have heard our R&D in this area is a million dollars an hour, 24/7, 365. That is the kind of financial resource.
ABG: Toyota puts a lot of money into R&D and that is obviously what it takes to develop new technologies. It is not a trivial matter to do that. Watanabe-san talked about having a larger test fleet of plug-in Priuses with lithium batteries in 2010. A few months ago there was some discussion online and some speeches from Toyota executives about the whole area of extended range electric vehicles or series hybrids, whatever terminology you prefer to use. Has anything changed in Toyota's perspective regarding that type of configuration compared to what was being said last September.
JC: I would not say so. I think we do fundamentally differ in the extended range electric vehicle concept and that we believe you can get the same fuel economy benefits with a smaller battery. The benefits are lower cost, less compromise of space and vehicle. There is not a need for external charging equipment, shorter charging time. So we think that you can get the majority of the benefits with a shorter EV range and have those electric miles spread over the drive cycle versus coming on at the beginning. So it is a different approach.
So we do think that the majority of the benefits can be had in what we call a blended strategy with smaller batteries which lowers cost, lower charging time and there is not a need for an external charger. We found in our driving that those were all impediments for consumer acceptance. We tried to take what we learned there and apply it to the Prius plug-in.
ABG: Would it be correct to say that at least in the near to medium terms, the next five to ten years Toyota doesn't necessarily see either pure battery electric vehicle or a range extended electric as a viable option, particularly the battery electric. I don't know how much of the market there is, but there are definitely a lot of people out there who are still clamoring for a straight up mainstream battery electric vehicle.
JC: Right and that is an area we are looking at as well. If you are talking about battery sufficient to give you a range of 40 miles that is probably better to do as a dedicated EV that is a small city commuter car. If you are talking about plug-in hybrid we think that there is a difference in the application that one is all electric. Again, maybe more suited for a particular urban environment. If you are talking about a car that needs to both handle short distance electric driving and high speed conditions, then a plug-in with smaller batteries with some level of EV range that is not 40, maybe it is in the 10 to 20 range, that is more viable for that application.
ABG: Going back to internal combustion for a moment. Toyota announced that the 2009 Tundra and Sequoia will be getting a flex-fuel engine option. Is there a plan to expand flex-fuel capability beyond the full-size trucks into smaller vehicles or is that an application you want to keep just for the bigger vehicles.
BC: Well, if you go out longer, 10 years, 2020 for example. The other thing that Watanabe said in his speech that was significant is not only do we support CAFE - there was some confusion in the market on our position on CAFE - not only are we supportive, we also said we will hit the 35mpg fleet average well before 2020. The commitment is there. But the position of Toyota is that there is not going to be at least at this point in time one solution. There is not going to be one technology that gets everybody to where we need to go. There is quite possibly going to be different solutions for different segments in the market and different solutions even perhaps regional.
Still nobody really knows the future of ethanol and where it is going to go and the viability of it throughout our agricultural system. Certainly there maybe a regional application for it. So what you are seeing from us is that R&D is covering all bases. You are also going to see and everybody wants to be first to market and Toyota is no different. We love to be first in market. But it is much more important that we be best in market. I will give you an example. On the earlier conversation we introduced Prius. It took some heavy lifting to get that technology to be accepted as a core technology within the car business. My mother drives a Prius. She doesn't understand the technology. She just knows it gets great gas mileage. She loves the car and it is environmentally friendly. What goes on beneath the hood, she has no idea.
ABG: I think that is the case for the vast majority of people.
BC: Well, fortunately, the technology has proven to be extremely bulletproof. The concern of what if at 50,000 miles I've got to replace the battery or something. We have gotten beyond that. The market has accepted it because it is very reliable. It is what people expect out of us. So, when we are talking about these different technologies and going to lithium, we have to be absolutely sure that it is ready for prime-time.
ABG: That you are not going backwards.
BC: We stand a chance if we brought out lithium before we're absolute confident that the durability is there and the performance is there. We could set back ten years of work on Prius. You are going to see us driving the market. I am confident that we are going to lead and we will be the first to market but at the same time, you are not going to see us come out there if there are any concerns about lithium, if lithium doesn't have the durability of the nickel metal hydrides. So, that is what we are driving for. It is not too far in the future, these advanced technologies but when we bring them out, we are going to make sure that the market and consumers are as confident in that technology as they are with what we have today.
ABG: Looking a little further out now, for the most part Toyota has been relatively quiet in the media about their work on fuel cells until around the time of LA Auto Show and just before that, when they announced, first of all, the run between Tokyo and Osaka in Japan on a single tank of hydrogen, and then the run from Alaska to British Columbia. Obviously, Toyota is doing a lot of work on fuel cell technology. Based on what we learned about the vehicle, the company has achieved a high level of efficiency with fuel cell. What do you see as the production viability of the fuel cell technology? Obviously the biggest stumbling block aside from the cost which, once we get to higher volume applications can start to come down, is the infrastructure issue. Is there anything that Toyota and other carmakers can do to help move that forward and do you think that carmakers should be involved in that area?
JC: It is a definitely a shift in thinking. The automakers have thought of themselves as automakers and the fuel providers are the fuel providers. Obviously things are changing and things have changed quickly. So there is a lot more that needs to happen in terms of collaboration. Watanabe talked about our system strategy which we have had for a long time but as he said we kept it outside of public view and we are trying to be more open about our vision and what it takes to achieve sustainable mobility.
One of those is the energy issues that you touched on. For example, the infrastructure and the other part of that are the partnerships that are going to be required. So there are definitely new collaborations that will need to happen between automakers, government, regulatory policy and fuel providers. So in the short term, for the vehicles that we are road-testing we actually have built some stations.
We got a station at our headquarters. We work with some of the universities and built stations there. Se we are having to broaden our idea of being just a vehicle manufacturer to, in the short term, enable the infrastructure for these vehicles. Obviously that is not viable on the long term basis or on a large scale basis.
BC: I look at this way. Talking about fuel cells, the vision for fuel cells has been around for quite some time. There have been some real significant hurdles on fuel cells. Efficiency and range, we've tackled that. We have been getting improved range out of the vehicles. Cold weather viability is always problematic. Anytime you have a by-product of water, how it performs in cold weather, we've tackled that.
There are other issues that need to be tackled. Cost still needs to be tackled. We are working on those areas. The infrastructure you bring up is still a major question. The durability, the range, the cold weather usability. We have gotten over those hurdles. There are still some major hurdles out there. As Jaycie just mentioned it is going to take partnerships, before a lot of work could be done in the industry on these partnerships you have to make sure that the technology is getting better and more viable.
I think the way you are seeing not only from us, you are seeing the whole industry that technology is getting better and better. The cost has to be justified. The fuel source, not only its infrastructure but the energy required to produce hydrogen is still not clear. When you look at how many advances have been made, I am fully confident that those issues will be tackled, but it's unclear. You look at the fuel cells, hybrids and technology, I still consider us in the Model T stage of development. A lot more advancement can be done.
ABG: Do you think the U.S. market will be a leader in bringing hydrogen technology to the main stream or do you that is more likely to happen somewhere else and a lot of people have talked about potentially China as actually being the more likely place where we will see hydrogen go mainstream first because they are still more on the developmental stage of their auto industry. It seems like a more likely place where the infrastructure could get build up first.
JC: My guess that we in the United States wouldn't lead in terms of mass application. I know Norway is very ahead in this area. It takes a commitment from a lot of different sectors, fuel providers and also regulatory policies. I know that the regulatory policy there is heavily supportive of putting in infrastructure, enabling the technology, helping to cover some of these risks. That would be my guess, that where there is more alignment across those areas, it is going to be easier for the spread of this technology. I am not sure that we will be the leaders in that, the U.S. in terms of mass application.
ABG: So far the test vehicles that you have shown are based on existing platforms modified with the fuel cell technology. Is Toyota actively working on a dedicated fuel cell optimized vehicle the way Honda has done with FCX Clarity and GM has got some work in progress in a couple of different areas. Can we expect to see anything like that from Toyota in the near future?
BC: Perhaps. The effort has been to develop technology. It is just being shown in this case in the current Highlander. The Highlander itself is just a mule to operate the technology itself. It is not indicating that we would necessarily do a fuel cell in the Highlander. We are not to that point. We will focus on the technology itself and then what platform is actually applied to is still another question.
JC: One of the promises of fuel cells is it really changes the amount of flexibility you have in the body structure.
ABG: Packaging and everything.
JC: And so it gives you almost a blank slate and that is one of the appeals of fuel cells in the vehicle application.
ABG: You get that flexibility from electrically driven vehicles in general where you can decouple the powertrain from the wheels. You only need a small motor to actually drive the wheels or even hub motors on some cases. What about doing larger scale field tests with your fuel cell vehicles? Are there any plans to do anything like that in the foreseeable future?
BC: We need to do a lot more field tests. We have plug-in hybrids, small fleets right now in California. Watanabe's comment was that what you will see is a major expansion in the test fleets of plug-in hybrids by 2010, lithium based. That is our short term initiative. We think that that is one of the quickest ways that we can advance where we want to go.
Beyond that everything is on the table. Getting it viable, making sure that the plug-in with lithium meets the consumer expectations in terms of performance and in terms of durability is the short term focus we have.
ABG: Do you have anything else you would like to add?
BC: Jaycie can add to this, but right now, a lot of the initiatives in terms of this area of efficiency and green have been on power terrain. That is important. I really do feel like we were still at the Model T stage, there is so much more than that. This vehicle that we brought to the auto show behind you, the 1/x, is another part. The other frontier that we are exploring is weight reduction. It's something that the entire industry needs to address. Now, that is obviously a concept, but that vehicle, as it sits, is a lithium-based hybrid that weighs 926 pounds. Compare that to a Prius today. Prius is 2,900 pounds.
Not suggesting that we are going to have 900-pound vehicles on the market anytime soon but weight reduction is really, extremely important frontier that the industry has got to address. Not only from the manufacturer to be able to produce, to make it repairable, to make it safe and then eventually recycle it.
So this vehicle has a lot of hi-tech plastics, a lot of carbon based fibers and there is another huge initiative within the company of how we can we get to where we want to be. You are going to see that technology come alongside with the powertrain itself.
JC: If you look at the full life-cycle impact of the vehicle, the majority of the impact does come in the driving stage and so therefore, how do we make the vehicle be more efficient? Part of that is the powertrain, but what is most correlated with efficiency is weight. We will start to use more recyclable and recycled parts in our production of vehicles, more bio based materials. In the Avalon we have the headliner and the door liner, so we are starting to, in our production vehicle incorporate some of those ideas of increasing recyclability at the end of the life of the vehicle, putting in more recycled parts and using more bio-based materials.
You will start to see the 1/x as a poster child of all of those concepts in one cute little package. Maybe you will start to see those concepts, the same ideas being brought into production.
ABG: How recyclable are the carbon fiber plastics, like the ones used in this concept?
JC: Currently, that is one of the issues.
ABG: Obviously, it is more expensive. It has great strength to weight ratio but it has never been really used widespread in a production application.
JC: Part of the recyclability, part of it is the energy that is required to manufacture more of it. So, again, Toyota does look at the full life-cycle impact and all these different stages of production and recyclability and vehicle use. Any vehicle that we would bring to market we would have to make sure that the life-cycle impact across all of those stages or in total is less than the Prius, for example, which is the lowest amount of impact we've ever had.
ABG: Realistically, how low do you think you could go weight-wise with these vehicles? A Prius-sized vehicle is 2,900 pounds now. Within the next five to ten years, how much could you reduce that without sacrificing the safety requirements that will have to be met regardless of what other requirements we have, such as efficiency and meeting customer expectations for features?
BC: Now, we are getting a little bit into the proprietary area, there are targets and we are aggressively going after those targets now. That (the 1/x) is 926 pounds. We are not going to see that in a showroom anytime soon. We have to cut weight. the industry has to cut weight. I only mentioned that from a standpoint that obviously we are showing some of the ideas that the company has. But that's one area in this whole efficiency, environmental question that I think it has been overlooked by a lot of consumers out there that they do not understand. They are struggling to grasp the powertrain efficiencies and so we are starting to talk about more of the weight reduction that is also important.
ABG: Certainly, if you take a holistic approach by looking at things like that, if you reduce the weight of the vehicle by 20 to 25 percent then all of a sudden you don't need as much power to achieve the same levels of performance and so you can cut that. You got a cascading effect from that.
BC: This vehicle is obviously to the extreme but this has acceleration performance equivalent to a Prius but it has got a 600-mile range with a four-gallon fuel tank. Again, it is the extreme, it's 900-pound. This is an execution of what could be possible.
ABG: Thank you very much.
- EVS23: We go for a ride in the plug-in Prius prototype (video) (feat. Jaycie Chitwood)