Hybrid Expansion

With cool precision, Toyota Motor Corp. is managing the sizzle of a hot hybrid market it helped create.

With each successive generation of its hybrid technology, Toyota is getting better, faster and more cost-efficient, on a path to fitting gasoline-electric powertrains into just about every type of vehicle in the lineup — including high-volume sedans.

The auto maker already can't boost production fast enough to meet demand, and talk of establishing a manufacturing and supply base in North America is mounting.

It's a far cry from introduction of the original '98 Prius in Japan and modified '01 model for North America, which were rolling testbeds on a dedicated platform for early “pioneer” buyers. No one followed Toyota's lead in 1998 when it developed a separate hybrid division to compete with the conventional powertrain engineers to power future products.

Back then, it was all a crap shoot, says Don Esmond, senior vice president and general manager-Toyota Div., Toyota Motor Sales U.S.A. Inc. But it was also justified as a bridge to future fuel-cell vehicles.

Today, the settlers are overwhelming the pioneers. There remain about 20,000 unfilled orders for the second-generation Prius. Production at the Tsutsumi, Japan, plant was boosted early in 2004 to 50,000 units from 36,000, and in first-half 2005, output will be added at a second, unnamed Japanese plant to bring the total to 15,000 units a month (180,000 units a year), with an additional 100,000 units slated for the U.S. in 2005.

Ward's learns the second plant is Tahara, one of the auto maker's newest and most modern plants outside the U.S.

Tahara, which builds the Lexus lineup (with the exception of the RX series) was chosen for its reputation for quality; its proximity to Toyota City, where the supply base is centered; and because it is Toyota's only seaside plant. Finished vehicles can be loaded directly onto ships bound for North America, says Paul Williamsen, curriculum development manager-University of Toyota.

Speculation about adding Prius production at New United Motor Mfg. Inc. in Fremont, CA, a joint-venture plant with General Motors Corp., is being dismissed by many Toyota officials due to capacity constraints at NUMMI. Nor is there extra capacity at North American sister plants that also assemble the Corolla and Tacoma, including the Baja California, Mexico, plant that will launch Tacoma this year, to free up space in Fremont.

Meanwhile, the Kyushu plant in Japan is preparing to build hybrid versions of the Lexus RX 330/Toyota Harrier and the Toyota Highlander/Kluger cross/utility vehicles already assembled there. Swelling demand for hybrids prompted a delay of the two vehicles from this fall to next spring to boost output of the new models at Kyushu to 60,000 units.

Job One for the '06 Lexus RX 400h hybrid now is March 7, with an on-sale date of April 15 and more than 9,500 handraisers in the wings. The '06 Highlander Hybrid will be added to the same assembly line in mid-March and has about 100,000 interested buyers to date.

Not surprisingly, Toyota already is exploring the possibility of further boosting output. And the auto maker will not stop there. To meet its stated goal of 300,000 hybrids on the road by mid-decade, high-volume products are expected to join the fray, including more light trucks.

First up, logically, is a high-volume midsize sedan, with the Camry the likelier bet and the Corolla a strong contender.

There is some urgency for Toyota to put a midsize sedan hybrid on the road before 2006 when its technology will bow on the Nissan Altima, under a licensing agreement with Nissan Motor Co. Ltd.

The Altima's 2.5L 4-cyl. engine is not expected to be fitted with the same Hybrid Synergy system Toyota designed for the 1.5L 4-cyl. Prius — or the newest system developed for the 3.3L V-6 CUVs.

A new hybrid system, designed to boost performance of the 2.4L 4-cyl.-powered Camry, would then migrate well for Nissan use and establish better economies of scale for Toyota's next-generation hybrids.

Once developed, this new system could work well in the Toyota Sienna minivan, which shares the Camry platform. Adapting the 4-wheel-drive technology used in the hybrid CUVs would allow the minivan to keep its all-wheel-drive capabilities and even add a fold-in-the-floor second-row seat, if desired.

Esmond also wants a hybrid Tundra fullsize pickup, but that is further out as the next Tundra must prove itself in the market first.

For Lexus, “the decision has been made to use this technology on more vehicles than the 400h,” says Denny Clements, Lexus vice president and general manager.

Look for at least two in the next two to three years, he says. The flagship LS makes sense, as does the new GS.

The next step is to expand the manufacturing footprint. “As hybrid technology becomes core technology, it makes more sense to build them (hybrids) in North America,” Clements says. “Over time, it's a natural progression. The company is just very methodical.” Once Toyota starts selling high-volume hybrids, it becomes a “no-brainer” to have production on this side of the ocean, Clements says.

Hybrid versions of the Camry or Corolla “probably pushes the decision over the edge,” agrees Williamsen.

For now, there are compelling reasons for keeping hybrid production in Japan. The expertise and supply base are concentrated in Toyota City, and they are all in-house, following a decision in the early 1990s to pull in this know-how.

“There is no North American supplier base,” says Clements. “So you have to almost import the whole engine subassemblies.”

Many parts are completely unique to Toyota; no one else knows how to build them, says Williamsen, including motors, semiconductors and a heavy ceramic magnet structure for the motor. One of the few parts involving an outsider is the battery joint venture with Panasonic, and even that would require willingness by Panasonic to invest in a second set of tooling in North America. Panasonic also will supply General Motors Corp. hybrids.

But the day will come. While pure development work continues to be done in Japan, the U.S. is playing an increasing role in evaluation and some engine development work, says Dave Hermance, executive engineer, environmental engineering-Toyota Technical Center.

In the meantime, Toyota's hybrid technology, now in its fourth generation, keeps getting more cost effective, Clements says. “The front-end (research and development) investment is fairly significant,” he says. But Toyota now knows how to manufacture the components, continues to improve the cost equation through continuous improvement and can amortize the expense over an increasing volume.

While the original Prius was designed to accommodate the transmission, the newest design of the transaxle, with new planetary gear systems, is compact enough to fit in the footprint of a normal automatic transmission.

“We won't turn a switch and tomorrow we'll have hybrids in everything,” says Hermance. “There will still be a rollout of which models make sense and then some time to develop.” But it can be steady, and it is being whittled down from multiple years to about 18 months. The goal is to include hybrid development in the regular vehicle-development cycle.

The auto maker could adopt the strategy of introducing a new vehicle and then adding the hybrid version at the first major model change. That way the mainstream vehicle pays most of the bills, says Hermance.

“It could be, as costs come down, this could be the predominant powertrain,” Clements says.

Eventually, Toyota envisions buyers choosing a powertrain much as they pick trim levels today. Specially developed hybrids such as the Prius already have given way to a strategy of putting hybrids in existing products, Esmond says.

Toyota views hybrid technology as an operating system it wants to share with the world, Clements says. It is licensed technology (there are about 300 patents on the Prius alone), but it is for sale.

Licensing serves as a revenue source, and the extra volume helps amortize development costs. Toyota also is hoping the presence of more hybrids in the North American market will spawn a local supply base.

Ford Motor Co. licensed about 20 Toyota patents for its Ford Escape Hybrid SUV, but developed its own 4-wheel-drive system, Hermance says. The Toyota patents cover general areas in the hard parts of the transmission and software.

The Ford agreement is very different from the one with Nissan for the pending Altima hybrid. Nissan will purchase Toyota hardware, software and development aid, Hermance says. It is more of a joint-development program, with both parties committed to ensuring it works.

Porsche AG recently confirmed it may possibly build a hybrid version of its Cayenne SUV, adapting the powertrain Toyota is using in its RX 400h (see p.9). Toyota officials do not confirm the report.

Clements says the Hybrid Synergy Drive can be engineered for Prius-like fuel economy or 0-60 mph (90 km/h) in six seconds.