toyota powers ahead, page-5

Toyotas Lithium Treatment.

By Matthew DeBord
Wednesday, January 20, 2010
http://www.thebigmoney.com/blogs/shifting-gears/2010/01/20/toyota-s-lithium-treatment

What is Toyota (TM) doing in the lithium-ion battery game? Last September, the company, which currently uses nickel metal hydride batteries in its Prius hybrid, indicated that it was moving away from li-ion technology, which is viewed by many in the auto industry as the next wave in electric and plug-in hybrid propulsion. Li-ion battery packs can hold more juice and are lighter, kilowatt per kilowatt, than their NiMH brethren. But on Wednesday, Toyota well, a partly owned supplier, anyway announced that was establishing a joint venture with an Argentine lithium supplier. So what gives?

It could be that Toyota, now the worlds largest carmaker, is playing both sides of the li-ion action. By securing its own supply, it positions itself to participate way upstream in the supply chain, should a significant move into li-ion packs for electric cars commence in the next few years. But the company doesnt actually have to commit to the non-commodity-oriented downside: the complex production of costly vehicles from which manufacturers may struggle to recoup their investment. Under this analysis, Toyota wont compete, but it will control an essential raw material and should be able to influence pricing, as well as assist its battery-development partners.

Toyota also ensures that it will have easy access to lithium supply should it decide to change its EV and hybrid strategy. This is a throwback play bent through a modern business lens. Toyota is going for vertical integration, but it isnt really trying to buy a lithium-mining operation; rather, its partnering with a lithium supplier by providing capital investment.

After a spell during which ToMoCo has been rocked by sales declines, lawsuits, and safety recalls (not to mention management changes and the debut of a $350,000 four-wheeled plaything under the Lexus brand), this is the first truly smart more the company has made. If nothing else, it will potentially own enough lithium to supply the consumer electronics market, should the bottom fall out of EVs. And as li-ion batteries look as if theyll be with us for some time, Toyota could always sell its stake later, for a tidy profit.

Matthew DeBord has written about the auto industry for the Washington Post, the Los Angeles Times, the Huffington Post, and Car Design News.