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Gaurav Agnihotri

Gaurav Agnihotri

Gaurav Agnihotri, a Mechanical engineer and an MBA -Marketing from ICFAI (Institute of Chartered Financial Accountants), Mumbai, is a result oriented and a business focused…

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Toyota’s Unique Investment Plan To Dominate The Green Car Sector

Toyota’s Unique Investment Plan To Dominate The Green Car Sector

Despite a decline in sales, the world’s biggest car manufacturer hopes to retain its top spot by issuing a new investment instrument in order to fund long-term R&D.

Toyota has held the mantle of the world’s largest carmaker for three successive years. At first glance the Japanese auto manufacturer had a disappointing year: global sales fell by more than 10 percent. Even still, the company managed to boost operating income by almost 20 percent.

According to Toyota’s President Akio Toyoda, “[o]perating income improved by $3.83 billion to $23 billion due to positive factors such as favorable foreign exchange rates and cost reduction efforts that more than offset negative factors such as decreased vehicle sales and increased expenses including the investments to enhance our future competitiveness.”

Creating a strong and ‘safe’ investor base

Apart from North America and Europe, Toyota’s car sales decreased in all its other markets, particularly its home market in Japan.

But Toyota has come up with a new plan to enhance its competitiveness. It plans on investing in future car technology, funded by a new financial instrument: the Model AA class shares.

Named after its first passenger car, the Model AA class shares would be issued with voting rights and transfer restrictions. With these shares, Toyota is aiming to target medium and long term investors who are willing to lock up their investments for at least 5 years. Related: Is This The Top For Oil Prices For Now?

Toyota says it needs to raise capital in order to invest in R&D that will support the auto industry’s future. The move is targeted towards those individual Japanese investors who are looking for low risk stocks. Almost 40 percent of Japan’s population is 55 years of age or older, a demographic that tends to look for stocks with low risk and stable returns. With interest payments as high as 2.5 percent after the fifth year, Model AA shares would be ideal for those who want to invest long-term in Toyota.

Investing in innovation and green technology

Relatedly, Toyota and Mazda have decided to collaborate in the near future by setting up a joint committee for combating rising greenhouse gases, strict global environmental norms, escalating R&D costs and safety requirements.

The two car manufacturers are reportedly in talks to expand their already existing technology partnership in Fuel Cell Vehicles (FCVs). Toyota would provide the fuel cell and plug in hybrid technology to Mazda while Mazda would reciprocate with its fuel efficient diesel and gasoline engine technology through its Skyactiv series. Related: India Could Be The Next Solar Investment Hotspot

What do these moves mean for Toyota?

With a possible new collaboration with Mazda, it is clear that Toyota is hoping to further boost its sales in Japan, North America and Europe, the company’s biggest markets. Those markets – Japan and the US in particular – are also the fastest growing market for electric vehicles. Currently, Toyota’s Mirai is the world’s only mass produced hydrogen fuel cell vehicle. If Toyota succeeds in developing a better alternative to its own Mirai by collaborating with Mazda, we can expect a lot of changes in already flourishing green car market.

2014SalesChart

2014 Sales Chart for EVs Source: Insideevs.com Related: A Spanner In The Works Of The Solar Revolution

On the other hand, Toyota’s rolling out of Model AA shares signifies it’s well laid out strategy of creating a solid and safe domestic investor base. As Takashi Hiroki of Monex Securities in Tokyo noted, “[a]s long as you're a listed company, you can't select your shareholders. But Toyota's new class of shares is a new approach to choose their investors. Toyota is expressing who they want to be purchased by.”

Toyota hopes to secure stable financing and use the proceeds to invest in its green car future, two moves the company thinks will allow it to retain its supremacy over the global automobile industry.

By Gaurav Agnihotri of Oilprice.com

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  • decent on May 15 2015 said:
    Just made a calculation.

    if hydrogen is made of water using electrolysis, then conversion efficiency water to hydrogen is about 60% (very good efficiency actually) also PEM efficiency is around 60%. there is another loss of energy when filling tanks. From zero to full 700bar, energy used is substantial 22kwh.
    So, for hydrogen range of 620km you need total energy input of 376kWh.
    it would be similar if Tesla had 125kw/h battery. with charging efficiency of 85% input energy needed is 147kwh.

    It makes hydrogen cars uneficcient. About the same as ordinary gasoline cars. Unless there will be better and cheaper sources of hydrogen. Like high temperature water breaking at nuclear power plants, which is efficient and cheap. But then again, hydrogen storage and transport still remains very problematic and costly.
    I do not understand Toyota commercial plans.
  • harleydavid on May 15 2015 said:
    Just as major advancements are being made in solar energy, the same is happening to hydrogen fuel. One breakthrough that was announced recently concerned producing hydrogen with much less energy than was possible before. What this means is that hydrogen can be produced by solar energy with just a small amount of electricity to complete the process. This could mean that every home could have its own independent source of hydrogen production that could not only produce the fuel to run their vehicle, but supply the power to run their homes energy needs. This can be done 24/7, even when the sun is not shining. The implications of this technological breakthrough would be enormous.
  • David Hrivnak on May 15 2015 said:
    The number 1 buyers of the Plug-in Volt were former Prius owners like ourselves. Toyota has missed an opportunity as an electric vehicle is MUCH easier and cheaper to refill and much easier to maintain.

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