Toyota May Not Make The Transition To EVs and This Is Very Difficult-To-Swallow Reality

Toyota's transition to electric vehicles may not be a choice as not every transition is a choice.

A few days ago when I published my story, titled "I think this is Toyota's Kodak moment that killed the company, unless Toyota does something really big with EVs," I got a very interesting comment from Farooq Butt, founder of FMB Consulting, who wrote that Toyota may not make the transition to EVs and it's not always a choice. 

Farooq in particular wrote,

People need to understand that not every company can make the transition. This is a very difficult to swallow reality. It's very easy to say "hey Kodak go make digital cameras and move fast into digital!", it's quite another being the CEO who knows she's going to be fired for tanking the stock price by doing this.

We need to understand that not every transition is a choice that can be made and requires only a bit of courage. Shareholders quickly get rid of CEOs when the stock price plummets because they're investing in a brand new technology and the current one is running out of gas.

This is why we have startups.

Giant companies often simply cannot make the switch.

Now as to whether Toyota is making the right choice, that's hugely debatable. Toyota satisfying a market demand that it knows will exist for decades to come, especially in parts of the world where EV infrastructure is not likely to happen for decades (Heck, EV infrastructure is terrible in even some of the richest countries today...).

Now, I understand that the automotive industry will remain fossil fuel-based (with hybrid technologies to lessen consumption of fuel) in vast parts of the world for decades to come, and that Toyota sells a lot of cars there. However, what will Toyota do in a few decades? The time flies very fast. 

Farooq says, "It's not always wise to put everything on one spot on the roulette wheel. If the bet is wrong, you're screwed. The leaders of Toyota are simply doing their jobs well by hedging. They have EV technology should EV become THE technology. They're not anti-EV they're just not EV evangelists. They've decided to play the path of a fast follower."

I think his opinion highlights a fundamental issue in business transitions: the challenges established companies face when pivoting to new technologies. It’s a valuable perspective, especially in relation to legacy automakers like Toyota, as they navigate the EV landscape.

Let’s break it down. Yes, transforming a company like Kodak into a digital powerhouse would have required a drastic shift in strategy, which often entails short-term sacrifices for long-term gains. However, in many large corporations, CEOs are under enormous pressure from shareholders to deliver quarterly results. This creates a vicious cycle: the need for immediate profit stifles the ability to invest heavily in long-term, innovative projects, especially ones as capital-intensive as electric vehicles (EVs). So, for a company like Toyota, pivoting away from internal combustion engines to electric might not just be a challenge in engineering or production—it’s a test of shareholder patience and the corporate willingness to accept potential short-term losses in favor of securing a future in EVs.

Startups, on the other hand, have an advantage in these emerging markets precisely because they aren’t burdened by legacy technology or large groups of stakeholders with varying expectations. Companies like Tesla were able to make big strides because they didn’t have to answer to investors tied to an existing, successful product line. Toyota, like many legacy automakers, has built its brand identity on reliable internal combustion engines, especially hybrids, which they believe still have a place in many markets around the world.

Toyota’s decision to continue focusing on hybrids, and to a lesser extent on hydrogen technology, shows that they’re banking on a slower transition to full EV adoption globally. There’s no doubt that EV infrastructure is lacking in many parts of the world, and Toyota's strategy might make sense in regions where the cost of electrifying transportation is still prohibitively high or where EV charging networks are sparse.

That said, it’s still a risky stance. While Toyota believes it’s wise to cater to regions where ICE vehicles will remain relevant for the foreseeable future, it could find itself behind in the long run if EV technology continues to accelerate. Startups and other automakers that are aggressively investing in EVs now may corner the market in regions where infrastructure does improve rapidly, leaving Toyota to play catch-up.

To answer the question of whether Toyota is making the right choice: it’s complicated. Toyota’s electric vehicle strategy allows it to continue meeting current consumer demands and turning a profit, but the gamble lies in whether they can afford to ramp up EV development fast enough if and when the global market tips more decisively toward electric.

Armen Hareyan is the founder and the Editor in Chief of Torque News. He founded TorqueNews.com in 2010, which since then has been publishing expert news and analysis about the automotive industry. He can be reached at Torque News Twitter, Facebook, Linkedin, and Youtube. He has more than a decade of expertise in the automotive industry with a special interest in Tesla and electric vehicles.