After a series of product recalls, how is Toyota regaining its footing in the U.S. auto market? During today's OnPoint, Tom Stricker, vice president of technical and regulatory affairs and energy and environmental research for Toyota North America, discusses his company's plans for hybrids and electric vehicles. He addresses concerns over more stringent fuel efficiency standards and discusses the profitability of fuel-efficient vehicles.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Tom Stricker, and is vice president of technical and regulatory affairs and rnergy and rnvironmental research for Toyota. Tom, thanks for coming on the show.
Tom Stricker: Thanks for having me.
Monica Trauzzi: Tom, Toyota is introducing its new family of Prius at the DC auto show. Why does Toyota believe that hybrids are a better option at this point compared to electric vehicles? Many of your competitors have some electric vehicles coming out on the market this year.
Tom Stricker: Right and we went with electric vehicles as well. It's not necessarily an alternative between hybrids and electric vehicles. As you mentioned, we did announce that we are expecting new members in the Prius family. We announced that in Detroit at the international auto show last month. We have sold over a million Prius hybrids here in the U.S. and we've learned an awful lot from that customer base and we were getting feedback that while they love the technology, they love the fuel economy, they're also interested in a few more options on that vehicle. So, we announced actually three new Prius family products. One is called the Prius V and it's more of a midsized wagon. It's similar to the current Prius with a slightly extended rear, 60 percent more cargo space, aimed at young families with children perhaps, with a fuel economy of 40 miles per gallon. And we also heard, from our customers, that they're looking for-some of them looking for something a little bit smaller than the current Prius. So we also announced what we call the Prius C, which right now stands for concept. And that vehicle is aimed more at an urban type, young, single or married with no kids.
Monica Trauzzi: So, did all these Prius options compete then with the Chevy Volt and the Leaf, the other vehicles that we're seeing on the market?
Tom Stricker: Well, I think all of these advanced technology vehicles ultimately will compete with each other. We are also pursuing a plug-in Prius that will be in that plug-in vehicle space that you're referring to. That vehicle will be powered-it will be basically a conventional Prius with a lithium-ion battery that will allow the vehicle to operate in electric-only mode for about 13 miles, at which point it will switch over and operate as a normal Prius.
Monica Trauzzi: And when are you expecting to release that?
Tom Stricker: That will be on the market next year in 2012.
Monica Trauzzi: OK, with a new set of recalls happening this week and all of last year's recalls that we saw coming out of Toyota, how is Toyota going to rebound? And what are you doing on the PR front and the technological front to make sure that the vehicles are both efficient, but also safe?
Tom Stricker: Well, my bailiwick is on the technical side and specifically with respect to the energy and environmental issues and not so much on the safety side. But one of the things that we're doing is, you know, we want to be a leader in technology. And I think with our Prius family, with our plug-in Prius hybrid we have a partnership with Tesla to produce a battery electric RAV4 EV powered by Tesla, as well as a small city commuter, IQ, vehicle. And it's called the IQ that we're looking at, which is more geared for an urban commuter, electric-only vehicle. So I think one of the things that Toyota can do is to maintain its technological leadership on the energy and environmental side.
Monica Trauzzi: So, compare the profitability of the standard vehicles versus these cleaner, more fuel-efficient vehicles. Are they more expensive to produce and does that mean you guys are making less money?
Tom Stricker: Advanced technology certainly costs more without a doubt. And so what we need to do is find ways to reduce the costs of those vehicles. Scale and getting them out into the market is certainly one thing we need to do. When it comes to electrification in particular, there's three things that I think industry and government can do together. And I refer to them as the three C's. One is cost, one is the customer and one is can I plug it in? That's the third C. On the cost side, we need to bring down the battery cost of these vehicles. Lithium-ion batteries are not cheap. Toyota has established an advanced battery R&D center. We're doing work both in North America and in Japan on battery technology, including batteries beyond lithium-ion as well. On the customer side, of course, there is an existing tax credit federally for these plug-in vehicles up to $7500. I think 19 states right now also have some sort of customer-based incentive, whether it's a tax base or deferring of the sales tax or elimination of the sales tax on those vehicles. We're working with states on model legislation for HOV access for these advanced vehicles. So we're doing a lot on the customer side as well to promote the vehicles and bring down the cost by getting them out into the market. On the can-I-plug-it-in side, of course I'm referring to infrastructure.
Monica Trauzzi: Right.
Tom Stricker: Which is really one of the keys for these vehicles. At Toyota our focus is on the early adopters. You know, a million plug-in vehicles, which has been talked about, we can't get to a million until we get to 500,000 first. We can't get to 500,000 until we get to 100,000. We need to focus on the early adopters and we think the best place to do that on infrastructure is 110 and 220V home and workplace charging access.
Monica Trauzzi: And Toyota is also trying to develop an electric motor that doesn't use rare earth metals, which could be valuable for the U.S. because China really does have a tight hold on these materials. So, how critical would this new technology be in terms of U.S. competitiveness and innovation in the U.S.?
Tom Stricker: Well, certainly the rare earth issue is one that reared its head recently of course. And looking long-term into the future, to the extent we can reduce rare earths, that, you know, could potentially be a good thing in terms of cost. We are looking at alternative types of motors. They're motors that have been around for a long time, electric motors, induction motors. They're simple compared to some of the permanent magnet motor designs out there now. They use fewer rare earth metals. The reason they haven't found their way into very many automotive applications is they require more sophisticated computer controls to make them work efficiently. But we are looking at those types of motors and other options in the future for reducing those kinds of metals.
Monica Trauzzi: On fuel efficiency, there's some controversy over what the next round of efficiency standards may hold. Are there safety concerns that we're hearing about valid?
Tom Stricker: I think that they have to be looked at, certainly. The U.S. EPA, Department of Transportation and the State of California are working closely with the auto industry on fuel economy standards for 2017 to 2025 model year. That's a very long time into the future and there's a lot of uncertainty there. And the current technical analysis from the agencies indicates some potential for down waiting, as well as increased hybridization. And the role of Department of Transportation, and this is specifically in that process, will be to help understand what the impacts of that down waiting might be on safety. There's a lot of study ongoing right now. We don't have the results back yet, so it's kind of too early to say what the impacts really are, but it's certainly a key issue that we'll be looking at.
Monica Trauzzi: OK, we're going to end it right there. Thanks for coming on the show.
Tom Stricker: Great, glad to be here.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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