The Emergence of ‘Toyota 2.0’ in 2012
Toyota has suffered one of its toughest years in its history, the Japanese earthquake back in March severely affected Toyota’s global production capacity for many months and is only now starting to get back to some form of normality. Toyota was obviously not the only company to be impacted by the earthquake and they, like other companies have spent many months this year reviewing their supply chain strategies to ensure that production is never impacted so severely again in the future. Increasing supply chain resilience has been a topic of conversation at many logistics related conferences this year and the recent floods in Thailand have only highlighted this issue still further.
Now whilst many industry observers have been focusing on Toyota’s production issues, Toyota has been working quietly behind the scenes on expanding their partner eco-system. Japanese companies have always been very protective and reluctant to share engineering expertise with other companies but I believe that Toyota is reversing this trend and is becoming more open with who they work with and more importantly who they share their engineering expertise.
In earlier blog entries I highlighted how the automotive and high tech supply chains have been converging in recent years and I think we are reaching a tipping point now because Toyota is a good example of an automotive company fully embracing the product innovations emerging from the high tech space. It is also interesting to note that as soon as new technology hits the markets, whether it is downloadable apps or social networks, Toyota will evaluate it to see if it has a place in their automotive strategy and if so they will then partner with the leading providers in the industry.
I thought it would be useful to try and map out some of Toyota’s recent partnerships, some have been running for a few years now, but a significant number of technology related partnerships or joint ventures were signed in 2011. As highlighted by the diagram below I do believe that we are seeing a new Toyota emerging, one which fully embraces consumer trends whilst at the same time allowing them to show off their engineering prowess with other automotive leaders around the world. VW may be looking to topple Toyota from the top spot from a vehicle production point of view but with all these partnerships that Toyota has established I would expect to see Toyota leading the industry from a revenue perspective for many years to come. In a way, Toyota is almost taking the Apple approach of locking in key partners to help them develop their future vehicles. Toyota has spent years getting its lean manufacturing techniques into nearly every car manufacturing plant in the world, now Toyota must take a different tact if they are to remain number one.
So let me start this analysis by looking at some of the more important automotive industry partnerships or joint ventures that have emerged over the past few years. Some will regard this as a form of co-opetition, ie working with a competitor to achieve new revenues and I strongly believe we are seeing a different Toyota emerging from the various natural disasters that have impacted their global supply chains in 2011.
As with many automotive manufacturers, Toyota has been supplying engines to the Lotus Sportscar Group for many years, these particular engines are used in their Elise, Exige and Evora range of cars. Lotus recently announced that they would be developing their own range of engines, now that they have additional investment in their business, and so I would expect to see the Lotus relationship continue but may be in a slightly smaller capacity over the next few years.
Toyota announced a joint venture with Ford to develop a rear wheel drive hybrid powertrain. To date much of the hybrid development work undertaken by Toyota has been on their passenger cars. This new partnership with Ford will help to develop hybrid systems for their respective range of SUVs. The SUV market is a huge money spinner for both companies, especially in North America and this partnership will allow both companies to sell large engined SUVs into this particular market whilst at the same time improving fuel economy and lowering c02 emissions.
Toyota announced a partnership with BMW at the Tokyo Motorshow last week. They will work together on new hybrid and electric vehicle technologies and at the same time BMW will share its clean diesel technology with Toyota. BMW is certainly in catch up mode when it comes to hybrid and electric vehicle technology and this partnership will certainly help to address this. Toyota stands to benefit by having access to some of the best diesel engine technology available. Toyota’s development boss said last week that he acknowledged that BMW had superior strength in clean diesel technology.
Toyota took the unusual step of donating a complete car platform to Aston Martin who were looking around for a suitable donor city vehicle that they could ‘tweak’ with a number of Aston Martin design cues. The thinking was that the owner of an Aston Martin would likely have the disposable income to purchase a luxury city car as well. Of course one of the main reasons for Aston Martin downscaling their car range was to reduce c02 emissions across their entire range. The Toyota IQ based Aston Martin Cygnet is selling very well at the moment and of course from Toyota’s perspective the partnership helps to re-enforce the quality aspect of their cars.
Finally, also announced at the Tokyo motorshow were two new sports cars co-developed by Toyota and Subaru. Toyota owns a 21% share in Fujitsu Heavy Industries, Subaru’s parent company. Both car brands were looking for a new 2 seater sports car that could act as the ‘halo’ sports vehicle for their respective car brands. Both cars were launched this week to resounding approval from the world’s motoring press. It should also be noted here that Toyota also owns a 51% stake in Daihatsu, Toyota has focused their involvement on this brand in the emerging automotive markets of south east Asia.
So let me now focus on some of the technology related partnerships that have emerged this year.
Last month Toyota announced a new partnership with Intel to develop their next generation of infotainment systems. Toyota launched their own ENTUNES system earlier this year however Toyota needed to find a way of staying ahead of the curve in this very much consumer driven area and at the same time compete against Ford who had setup their own partnership with Microsoft to develop their SYNC based infotainment system. This particular partnership will be interesting to watch as more and more consumers are demanding easier ways to connect their mobile devices to their cars and once in the cars get access to in car WiFi hotspots to allow seamless connectivity to the internet.
Toyota also announced a partnership with Microsoft to leverage their Windows Azure platform to help develop next generation telematics systems for monitoring all the systems within their cars. Using Windows Azure, Toyota plans to have a cloud based telematics platform in operation by 2015. No small feat considering the amount of integration work that will be required in both their cars and also their global service centres that will be accessing a lot of the information that is shared across the Azure platform. It just goes to show how Toyota is thinking about improving the whole customer experience with partnerships such as this one.
In May 2010, Toyota announced that they planned to invest capital into Tesla, the upcoming electric vehicle company. Tesla has come from nowhere to being one of the leading providers of electric vehicles. Toyota purchased $50M of Tesla stock. Interestingly, in August this year Tesla announced that they would be providing the electric powertrain and batteries for Toyota’s EV4 vehicle which is based on their RAV4. Perhaps Toyota are doing this to see how their own technology compares, performace wise, with Tesla’s. Either way, Tesla now has backing from the largest car company in the world and Toyota gets access to Tesla’s industry leading electric vehicle technology.
Only last week Panasonic was signed up as Toyota’s main provider of lithium ion batteries to their plug in hybrid Prius car , these new generation of batteries are a key component of future electric vehicles. The design of future batteries will make or break the entire electric vehicle industry as consumer interest in these cars is mainly driven by the range available. Range anxiety is one of the biggest barriers to increased adoption which is why Toyota decided to partner with one of the leading providers of batteries.
Not to miss out on the increasing popularity of social networks, Toyota announced a partnership with Salesforce.com to use their Chatter social networking tool. Toyota plans to develop ‘Toyota Friend’ a private social network for Toyota customers and their cars. Toyota Friend will initially be available in Japan across their new range of electric and plug in hybrid vehicles. More importantly Toyota Friend will allow the consumer to connect their cars to their dealer to help identify any problems or notify them of an impending service. Once again, Toyota is leading the way with this particular application of social networks.
These partnerships only go to illustrate how complex Toyota’s global supply chain is likely to become in 2012, and to fully exploit these partnerships and maintain industry leadership Toyota will have to ensure that their B2B infrastructure is capable of supporting these diverse partnerships. I will discuss this in more detail in a future blog entry.