Toyota Cuts EV Output, Japan Responds with Battery Investments

Toyota has revised its electric vehicle (EV) production targets, planning to build 500,000 fewer EVs than initially forecast over the next two years. This adjustment reduces the company's global EV production target by one-third, now aiming to produce 1 million units by 2026, down from the original 1.5 million. 

Last year, Toyota sold just 104,000 EVs, representing about 1% of its total global sales, while focusing heavily on hybrid technology with successful models like the Prius and Rav4. "Toyota remains committed to expanding its hybrid offerings, as they have proven effective in meeting market demand," a company spokesperson stated.

In response to this shift, the Japanese government announced a US$2.4 billion subsidy package to support the development of EV batteries. According to Ken Saito, Minister of Economy, Trade, and Industry, Japan, the government will back 12 projects aimed at increasing the country’s annual battery production capacity from 80 gigawatt-hours (GWh) to 120 GWh. This initiative includes support for major automakers like Toyota and Nissan, along with collaborations with Japanese firms such as Panasonic, Subaru, and Mazda.

"This initiative will significantly boost Japan’s capacity to produce next-generation batteries, a critical component of future transportation solutions," Saito said in a public briefing.

Additionally, Toyota has received approval for a production plan focused on next-generation solid-state batteries, expected to launch by 2026. The company plans to manufacture up to 9 GWh of solid-state batteries annually, which are anticipated to improve the performance and competitiveness of future EV models. These batteries promise faster charging times and greater energy density, key elements of Toyota’s strategy to commercialize more advanced EV technologies.

Toyota’s shift in EV strategy comes as other automakers, including Volkswagen and Volvo, have scaled back their EV goals due to slowing demand and reduced government incentives in key markets like Europe. In Germany, the region’s largest auto market, EV sales dropped 37% in July 2024, contributing to an overall 10% decline in battery-electric vehicle deliveries across Europe.