The rise of the electric vehicle (EV) has thrown some automakers for a loop. The operational sturm und drang afflicting many of them can hardly be considered surprising. After all, most of these companies were built to reflect internal combustion engine (ICE) technology. The capabilities and limitations of ICE technology have informed everything from design architecture to manufacturing process.
Confronted with the reality of EVs, many automakers have been forced to play catch up after years of neglecting the issue. Even early adopters of EV technology have found their already substantial investments in the segment to be insufficient to the ask. A few, however, have been moving forward with tremendous confidence. Among the automakers making big moves into EV of late is the Toyota Motor Corp. (TM, Financial).
The advent of an entirely new vehicle technology and design architecture can devastate even the most robust of industry stalwarts. Yet, so far, Toyota has not been sweating the rise of EVs. Indeed, the venerable automaker has started making aggressive moves to achieve mastery of the technology, as well as dominance of key infrastructure and supply chains.
Of particular interest is Toyota’s recent moves to tie up control of one of the most important suppliers of electric drivetrains.
If the future is to be electric, then Toyota will be electric, too.
The start of a beautiful friendship
In 2017, Fukuta, a Taiwanese manufacturer of electric vehicle motors, had found itself in quite a bind. A crucial partner failed to hold up its end of a 2016 supply arrangement. Left sitting on unutilized production capacity it had built out in expectations of massive order from 2018 onward, Fukuta found itself in need of a new dance partner, preferably a seasoned automaker with robust demand for its electric drivetrains.
Enter the Toyota Group, Toyota’s parent company. Fukuta was evidently more than willing to step into Toyota’s open arms, and promptly handed over its sales and marketing functions to the Japanese giant.
A deepening partnership
Toyota has been quietly expanding its grip on the EV components and systems supply chain for some time. Indeed, Toyota has been so diligent in its circumspection that barely anyone knew the company had control of Fukuta’s marketing arm until this summer. The arrangement has evidently been in effect since 2017, to the surprise of sector analysts and journalists alike.
This March, Tsuho, another Toyota Group subsidiary, took an ownership stake in Fukuta, once more to little public fanfare, despite the Japanese company’s issuing a press release at the time. It took nearly two months for auto journalists and analysts to cotton on to the deal.
Dominating the drivetrain
It is now abundantly clear that Toyota has every intention of deepening its relationship with Fukuta, securing access to a best-in-class drivetrain platform. The significance of this tightening relationship cannot be overstated. Combining its unfettered access to Fukuta’s drivetrain capabilities with its existing deep partnership with Panasonic, Toyota will be able to transform the EV market landscape. This was auto analyst Edward Niedermeyer’s take on the situation:
“Between its stake in Fukuta and its partnership with Panasonic, Toyota is bringing together some of the key partners behind Tesla's vaunted electric drivetrains and will make their technologies available to the industry at large.”
Toyota is poised to bring the Fukuta drivetrain, which is currently a signature feature of a few high-end vehicles, to a far wider audience. A high-quality commoditized drivetrain could have far-reaching consequences for the burgeoning EV market.
Verdict
Toyota has its hands on a recipe for serious disruption of the EV segment. Its relationship with Fukuta, combined with its far-reaching partnerships and relationships throughout the EV supply chain, could make the venerable Japanese firm a truly dominant player.
Disclosure: No positions.
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