Toyota has broken sharply with tradition and struck a partnership with two Chinese battery producers as Japan’s biggest carmaker aims at a grand global rebalancing towards electrified vehicles. Under the groundbreaking tie-ups, Toyota will buy batteries from Contemporary Amperex Technology (CATL) and BYD, sourcing the critical component from Chinese manufacturers for the first time. CATL, only an eight-year-old company, already has a relationship with Honda and other global carmakers and has been the world’s largest supplier since 2017 when it overtook Panasonic by sales.
Toyota will also expand its domestic battery supply deals beyond its longstanding relationship with Panasonic to include GS Yuasa and Toshiba. The decision highlights Toyota’s expected massive demand for batteries and the reality that its current arrangements may encounter what senior executives described as a “a gap” between the impending supply and demand. Those concerns echo those of rival global carmakers who have recently unveiled a wide variety of strategies to invest in battery manufacturing and diversify their source of supply.
Projections for electrified vehicle sales – a broad category that includes gasoline hybrid, plug-in hybrid and battery electric vehicles – have had to be fundamentally redrawn over the past year as global carmakers have scrambled to adapt their line-ups of new cars to meet stricter emissions rules, especially in Europe. General demand for electric vehicles is on a far steeper trajectory than Toyota and others had expected, which could leave the Japanese company’s existing strategy of producing batteries on its own and with Panasonic looking inadequate.