Only nine months after the earthquake and tsunami of March 2011 struck Japan, Toyota engineer Yoshikazu Tanaka was told by his bosses to develop a fuel-cell vehicle. For Toyota, the project represented a big hydrogen gamble and its timing was far from ideal.
The Japanese car group had seen its net profit halved as it grappled with disrupted supply chains, higher electricity costs and the yen’s surge to record highs. General Motors and Volkswagen had overtaken it in cars sold.
Tanaka, who was in charge of the Prius plug-in hybrid at the time, also questioned whether it made sense for the company to take on an enormous risk in such an unfavourable environment. Soon afterwards, though, he reached a different conclusion.
“Dinosaurs became extinct because they could not adapt to the environment,” Tanaka says. “I realised not taking the risk would be a bigger risk for us. There is only extinction ahead if no action is taken.”
The apocalyptic forecast from Tanaka echoes a general sense of crisis shared by the global auto industry as it wrestles to build cars that do not harm the environment. Auto executives say the race to develop greener and safer vehicles is likely to generate the biggest technological revolution in the industry since the birth of gasoline-powered cars more than a century ago.
“We have no time to lose,” says Takeshi Uchiyamada, chairman of Toyota and also known as the father of the Prius hybrid car. “With the existing pace of transformation, we will not be able to keep up with the speed of destruction of this beautiful and diverse planet.”
To stem the damage from global warming, Toyota is making a significant bet on vehicles powered by hydrogen rather than petroleum. With some two decades of research into fuel-cell vehicles, costs to the company are hard to estimate, say analysts, but are likely to top Y1tn ($8.8bn).
Such commitment is at the heart of Toyota’s plan, unveiled in October, virtually to erase the carbon footprint of its vehicles and factories by 2050. That would mean petrol and diesel engines being nearly eliminated from its fleet by then.
To achieve that vision, the automaker last year launched its fuel-cell vehicle, the Mirai — meaning “future” in Japanese — in the European and US markets. Powered by two high-pressure hydrogen tanks and an electric motor, the Mirai emits only water.
The Toyota scheme comes as rivals such as Tesla and Nissan are banking on battery-powered electric vehicles. Volkswagen had placed a heavy bet on clean diesels, which now face a backlash after the German manufacturer admitted to cheating in US emissions tests of its diesel vehicles.
The Mirai has brought fuel-cell vehicles to the forefront of Toyota’s efforts to achieve what it calls “sustainable mobility”. But even at the Japanese company, fuel-cell vehicles had long been regarded as low priority compared with the Prius gasoline-electric hybrid, which established Toyota’s image as a pioneer in fuel-saving technology.
Since the first Prius debuted in 1997, the group has sold more than 8m hybrid cars and the model has reached its fourth generation. The Prius, including plug-in hybrids, accounts for nearly half of the company’s sales at home.
Toyota’s research into fuel-cell vehicles dates to 1992, although technological problems and production costs long impeded their commercial launch. Despite being developed in the same building as the Prius, the hydrogen cars rarely sparked the same excitement within the company as the hybrids.
So when Tanaka was assigned in 2012 to develop the Mirai as chief engineer, the decision prompted scepticism inside Toyota. With the company’s financial conditions tight, the message from his bosses was also clear: the spending budget should be kept as small as possible.
“The hurdle was already very high to commercially launch a fuel-cell vehicle,” Tanaka says. “But we had to beat our brains to achieve that as efficiently and with as little money as possible.” To deal with the stress of the situation, Tanaka maintained a disciplined regime of running 5km each day before having his lunch in the cafeteria.
Looking back, the Mirai’s chief engineer now says the challenge actually helped to draw the company together. He asked for help from a wide range of departments to make sure his team could produce results using as few prototypes as possible to keep the costs down. From research that began with about three engineers in the 1990s, the Mirai project has expanded to include about 800 employees at Toyota.
“By raising the hurdle, everyone inevitably got pulled into the project,” he recalls. “In that sense, it really became a company-wide project.”
Toyota executives concede that sales of the $57,500 Mirai are just one part of the way towards the company’s goal of building a “hydrogen society”. Mass market penetration of fuel-cell vehicles cannot be achieved with the efforts of the company alone. To expand the market, Toyota released its fuel-cell patents last year, echoing a similar move by Tesla on electric vehicle patents.
One of the biggest problems is the lack of refuelling stations. The infrastructure has been slow to develop because hydrogen stations are far more expensive than petrol stations to build.
Toyota hopes the pace of infrastructure construction will pick up as more rivals enter the market. Honda, which has been collaborating with General Motors, plans to release its fuel-cell car later this year while a Nissan vehicle, jointly developed with Daimler and Ford, is expected in 2017.
Not taking the risk would be a bigger risk. Extinction lies ahead if no action is taken
For all the advanced technology packed into the Mirai, the vehicles were initially hand-assembled by a small team of 13 workers at the Motomachi factory in central Japan — the same plant that built the first-generation Prius. Now, Toyota assembles about 10 Mirai cars a day, triple its daily capacity of three cars in the initial phase.
By 2020, the company has a bold target to sell more than 30,000 hydrogen-powered vehicles annually worldwide, 10 times its 2017 production target.
But Toyota’s vision does not end there. The world’s biggest carmaker is targeting a 90 per cent cut in average carbon dioxide emissions from its vehicles between 2010 and 2050. In a further challenge that will test the resolve of its suppliers and parts manufacturers, Toyota is aiming to make all of its factories carbon free in the same period.
As a first step, it wants to deliver zero-emission Mirai cars in the full sense — that is to say, including its production in the factory, where at present the manufacturing process is not carbon free. To rectify that, Toyota will look to produce hydrogen from renewable sources, such as wind and solar. Its plants in Brazil already generate electricity using locally produced wind, biomass and hydroelectric power.
The unveiling of such ambitious environmental goals is unusual especially at Toyota, where its chief executive, Akio Toyoda, rejects the use of aggressive numerical targets to drive its employees. Toyoda’s caution lies in his belief that a pursuit of breakneck expansion in previous years led to quality lapses.
“Once I give a numerical target, everyone will chase after it and they will become very short-sighted,” Toyoda says.
In the case of Toyota’s environmental targets, though, officials say an outward message was necessary not only for employees, but also to involve other players such as parts manufacturers and the government in the effort. That consensus was reached only after a gruelling debate that lasted for more than a decade on whether or not the commitments should be publicised.
“There was significant internal struggle,” one person familiar with the debate said. Proponents inside Toyota said an external target would encourage wider participation of players, while sceptics worried about the consequences of failing to meet the targets.
Once I give a numerical target, everyone will become very short-sighted
The environmental blueprint by the Japanese group underlines the urgency with which the global auto industry is moving to tackle greenhouse gas emissions. Missing those targets is increasingly unfeasible and rising costs to build low-carbon technology have bounded the industry closer than ever.
The climate question is also uppermost as Toyota and other carmakers worldwide are grappling with an industry shift towards automation and self-driving vehicles. That transition has pitted traditional car manufacturers against software giants such as Google and defied conventional notions of what a car is all about.
Four years since Tanaka was put in charge of the Mirai, Toyota has regained its crown as the world’s top-selling carmaker and is heading towards its third straight year of record profit.
Yet Toyoda reminds employees that the Mirai is only “a small first step” to achieve Toyota’s long-term vision and the challenge has just begun.
“For the last hundred years, gasoline engines have occupied the mainstream, but if you look forward a hundred years it will not just be gasoline, but diesel, electrics, plug-in hybrids and fuel cell vehicles,” says Toyoda. “We don’t yet know which will be chosen.”