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Automotive

The auto industry and its future: An interview with Toyota’s Jim Lentz

Carol Fox  Global Head of Automotive Practice Group

Carol Fox  Global Head of Automotive Practice Group

The CEO of Toyota North America sees many changes ahead for automakers. Here's how he anticipates those challenges will be met.

At a recent Reuters Newsmaker event, Jim Lentz, CEO of Toyota Motor North America, provided a rare glimpse into the current state of the automotive industry and Toyota’s future plans in an interview with Reuters Corporate Regulation Reporter David Shepardson.

Self-driving vehicles

Toyota is an active innovator in the area of autonomous vehicles. In fact, it just recently launched a US$2.8 billion organization, Futurism, to advance its efforts in this area.

Lentz explained the company already has autonomous functionality in its newer cars, like lane-safety detectors, and is expanding its capabilities to “guardian mode” autonomy and then, eventually, full “chauffeur mode.” He emphasized the plan is to have guardian mode available “for the Olympics.”

The biggest challenge he sees with overall autonomous acceptance is convincing people that having a computer drive your car is a good thing.

“I think it will be 2025 before you see these systems really come into play and will be 2040 or 2050 before you see the majority of cars with this functionality,” Lentz said. “But, everyone is so secretive it is difficult to see the true science versus the carnival makers.”

As part of the evolution in autonomous driving, Toyota is taking an overly cautious approach to its testing. This is in contrast to other companies in the space, like Uber (in which Toyota is an investor). Toyota tests with two drivers and two steering wheels in each vehicle, and it’s done away from the general public.

Lentz confirmed the company has paused its autonomous vehicle testing following the recent Uber crash  in which a pedestrian was killed. This is mostly “because of the impact on our drivers, not because of our technology.”

Regulations

The auto industry is no stranger to regulation, but that doesn’t make managing it any easier. With regard to autonomous vehicles, Lentz sees a need for United States federal regulation, versus a patchwork of different rules across state borders. His view is that this is a new technology; first and foremost, the most important thing is safety.

With nearly 40,000 lives taken annually in car accidents, the majority of which are the result of driver error, Lentz sees autonomous vehicles as a solution to reversing this trend. However, Lentz questioned the government’s and public’s tolerance with regards to testing fatalities, asking:  “How much risk are they [the government] willing to take? If you can save net 34,000 lives, are you willing to potentially have 10 or 100 or 500 or 1,000 people die? I think the answer to that today is: They’re not willing to take that risk and that’s going to really slow down the adoption of autonomous driving.”

New Concept – the Rolling Palette

Toyota recently showed an autonomous concept vehicle at the Consumer Electronics Show (CES) called the e-Palette. It is a large van without a steering wheel that can move in multiple directions and “represents the intersection of the digital and brick-and-mortar worlds.”

One application for the e-Palette is driving stores. For instance, if a consumer orders a pair of shoes online, the e-Palette could show up at the person’s location with various shoe styles and sizes. The buyer would go into the van or e-Palette, try on the shoes, make a selection and purchase them. Then, the e-Palette would roll away. This concept is aligned with autonomous technology and is a newer area of innovation for Toyota.

And, yes, Lentz confirmed that flying cars are also in its development plan.

Trade and tariffs

Prior to the enactment of the North American Free Trade Agreement (NAFTA), Toyota had just two plants in the U.S. Since NAFTA, it has eight plants in the U.S., as well as 11 in Mexico and one in Canada. He described these latter two countries as being integral to the success of Toyota’s North American hub.

“NAFTA allowed us to grow our manufacturing in the U.S.,” Lentz said.

Last year the company moved its North American manufacturing plant to Plano, Texas, taking nearly 70 percent of its northern-U.S. workforce with it. He explained that this move made the current administration much happier with Toyota and that earlier negativity was based on a lack of understanding of the company and its presence in the country.

Lentz sees a real risk in terms of steel tariffs and trade barriers. NAFTA is an essential component to Toyota competing with the rest of the world. Ninety percent of steel is U.S. steel (5 percent is from Japan and 5 percent from Canada).

“The tariff won’t drive our cost of steel, the marketplace will,”Lentz said. “Ultimately, it is a cost that will be passed on to consumers.”

In addition to NAFTA, he cited the Korean Trade Agreement as being of benefit to the company. The highest selling car in South Korea following its implementation was a Toyota model.

Electrification and environmental conscience

Approximately 9 percent of Toyota sales are from hybrid vehicles today, whereas the industry standard is just 2 percent. By 2025, Lentz believes that every vehicle will have some sort of electrification in it. By 2030, he predicts 5.5 million vehicles will be electrified and a million will be running on pure fuel cells.

As for fuel cells, Toyota already has a Generation 2.0 electric vehicle. The company is building a Class 8 concept truck using its existing fuel cell technology that can drive 65 mph and go 200 miles. The idea is to remove old diesels in densely populated areas and replace them with fuel cell vehicles that emit water vapor. Toyota is using methane to create the hydrogen needed for these zero-emission vehicles.

Lentz believes what is holding people back from more readily adopting the technology is the ability to access supply. They want to refuel within 10 minutes of where they work or live.

CO2 Reduction

Toyota has a goal to reduce carbon emissions by 90 percent by 2050. The company’s Texas campus has the largest solar array and wind power in the entire state, outside of utility companies.

The real effort, however, in reducing emissions, needs to be in getting older cars off the road. If newer, lower-emissions cars are priced too high, it can have the reverse effect and will actually contribute to people delaying the purchase of new or buying used cars, which can increase regional emissions.

According to Lentz, “We want to lead consumers to a greener future, but if we get too far in front of them, they won’t follow.”


Learn more

Lentz shared a number of other views on topics impacting the global automotive industry. Listen to the full interview.

For other insights on the automotive industry, visit the Thomson Reuters Automotive Practice Group.

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