EVs are coming from Japan, but some automakers are thinking bigger

TOKYO — The common story among Japanese automakers at last week's Tokyo Motor Show was their lockstep focus on electric vehicles. Nearly every make had some sort of EV on hand.

But a stark divide is also becoming apparent.

In one camp are the brands that focused merely on creating EV models; in the other, those that are now focusing on how to create real EV business models.

Toyota Motor Corp. and Honda Motor Co., in particular, broke from the pack with big-picture approaches to the big question confronting the industry: How can automakers make money as rivals race to rush out costly battery-powered cars that have yet to generate any profits?

Their answer is to focus less on individual cars and more on the ecosystem around them.

That means rolling out personal mobility devices, branching into "mobility as a service" fleets, propagating charging networks and expanding maintenance businesses. Also on tap are new ways of using and recycling the expensive batteries for these vehicles and gadgets.

The goal is bigger scale, lower cost, new revenue and, automakers hope, a quicker path to profitability. Driving the shift is the uncomfortable realization that selling EVs the traditional way just won't cut it.

"We need to switch from just simply selling the product as an end," Toyota Executive Vice President Shigeki Tomoyama said of the new strategy at the Tokyo show. "If we want to secure the traditional margin of profitability, we need to think from a package perspective.

"We have to change the business in this direction," he said. "This is the challenge we face."

For Toyota and Honda, it also means forging a future beyond cars — a common mantra at the Tokyo show.

Honda's display centered on the redesigned Fit subcompact that was unveiled with a new two-motor hybrid drivetrain. Honda's exhibit also featured electric scooters, its new E electric city car, its swappable battery system and recharging technology.

Toyota's stand was devoid of traditional cars altogether. It was instead populated by futuristic robotic runabouts under the theme "mobility theme park." Among the offerings was the six-wheeled Micro Palette automated electric delivery vehicle and the e-Chargeair, a self-driving battery that can provide an on-the-go recharge to other EVs. Also on display was the boxlike e-4me, a single-seater envisioned for future fleet use.

By comparison, even automakers that introduced new EVs, such as Mazda Motor Corp. and Nissan Motor Co., stuck with the time-honored approach of lining up cars, cars and more cars.

Mazda unveiled its first mass-production EV, the compact crossover MX-30. Deliveries start next year in Europe; plans for the U.S. are unclear. Nissan showed its Ariya EV crossover, a concept that previews an all-wheel-drive entry that could arrive in the U.S. in 2021.

Other electrified concepts were floated by Mitsubishi Motors Corp., which presented a funky open-top plug-in hybrid buggy that would run on a variety of fuels, including kerosene and alcohol.

Lexus pulled the wraps off the showstopping LF-30 Electrified, an aggressive, wedge-shaped all-electric concept that envisions Level 4 automated driving and next-generation solid-state batteries.

Even electrification laggard Suzuki Motor Corp. joined in with its Waku Spo plug-in hybrid concept. But none spelled out a wider EV strategy quite as Honda and Toyota did.

"There has been a shift in thinking to more of a holistic approach," said Jeff Schuster, a forecasting analyst at LMC Automotive. "Infrastructure and everything else that goes along with it need to be dealt with before the mass market really considers EVs."

Toyota and Honda are uniquely positioned to diversify in an era where traditional metal benders strain under the onslaught of nimble entrants from Silicon Valley, China and beyond.

For starters, both have a rich tradition in robots, a cornerstone technology of future mobility. Honda's business spans everything from motorbikes and marine products to power generators and airplanes. The Toyota Group, meanwhile, draws on products ranging from boats and forklifts to semitrucks, and it can loop in units such as Toyota Home to connect smart homes with smart cars.

In Tokyo, CEO Takahiro Hachigo underscored Honda's future beyond cars by unveiling a strategy called e:Technology, an umbrella term for Honda's electrified products. It covers everything from electric motorbikes, scooters and buggies to the upcoming E electric vehicle.

It also envelops Honda's power products division. The company has long been known for its reliable fuel-burning power generators. But in the new era, it is rolling out charging stations, inverters and a system of swappable batteries that can run Honda's growing lineup of runabouts.

In Asia, Honda is already introducing a range of personal mobility products such as scooters and minivehicles that run on these interchangeable batteries. The black, 1-kilowatt-hour rechargeable batteries, called Mobile Power Packs, are about the size and weight of 1-gallon milk jugs.

Vending machinelike recharging stations dot certain markets, allowing motorbike drivers to simply drop off a spent power pack and pick up a new one.

"By connecting these electrified motorcycle and automobile products through our power products and energy, we can further advance our value creation," Hachigo said while announcing the e:Technology initiative. As part of the push, Honda is rebranding its latest two-motor hybrid system e:HEV. The more compact setup debuts in the fourth-generation Fit that will go on sale next year.

But branching out this way can bring risk.

Toyota, for example, plans to expand into fleet sales. That marks a huge departure for a company that has long preserved handsome profit margins and a sterling brand image by shunning fleet volume to maintain its retailer-to-consumer sales.

Toyota's new fleet approach will partly center on electric new mobility vehicles. For starters, a dozen or so electric e-Palette people movers will hit the streets next year during the Tokyo Summer Olympics to help transport athletes. Tomoyama said Toyota will next deploy "a large number" of the automated box cars at the 2022 Winter Games in Beijing.

But Toyota's real goal is to commercialize the e-Palette in the first half of the 2020s, he said.

In the meantime, Toyota will expand regional partnerships with established ride-hailing companies such as Uber in the U.S., Didi in China, and Grab, a popular service in Southeast Asia.

The idea is to not only sell vehicles into those fleets but to also secure contracts for maintenance, insurance and other packaged services. The fleets aren't made up of EVs yet, but they likely will be when Toyota has some ready for market. And when self-driving cars come of age, Toyota will deploy those, too.

Toyota envisions new revenue from such fleets because of the heavy use those vehicles will get, requiring as much as 10 times the maintenance as privately owned vehicles, Tomoyama said.

Toyota is betting it can apply the streamlining principles of its Toyota Production System to fleet maintenance garages, delivering big improvements in efficiency and margins.

The numbers add up. Toyota vehicles already account for 85 percent of the Grab fleet alone, Tomoyama said.

"This will be increasing," he said. "We've seen a significant drop in the cost of maintenance and a reduction in the amount of downtime. We are seeing real effects already."