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July 13, 2023

A major focus for Toyota is reducing its carbon footprint

By Melissa Lowery

Electrification. Charging stations. Connectivity.

The automobility industry is amid a paradigm shift as the world moves toward clean energy solutions and increased personalization. In this rapidly changing environment, opportunities abound.

Women’s Enterprise Texas recently spoke with Ryan Grimm, vice president of purchasing supplier development at Toyota Motor North America Inc., about how auto giant is shaping the future of mobility and why it is an exciting time for diverse suppliers.

Electrification and localization

A major focus for Toyota is reducing the company’s carbon footprint at every point, from sourcing to manufacturing to consumer usage.

“We’re focused on what we call a portfolio approach, or a holistic approach, to reducing our carbon footprint,” Grimm said. “That includes accelerating the adoption of hybrid electric, plugin hybrid electric, battery electric and fuel cell vehicles.”

Toyota was the first original equipment manufacturer (OEM) to mass produce hybrid electric vehicles, launching the Prius in 1997. The global shift to electric vehicles (EVs) is accelerating rapidly. While the United States lags behind China and Europe, 2023 domestic sales of EVs are on track to exceed 1 million for the first time ever. According to Cox Automotive, in the first quarter of 2023, EV sales increased by 44.9% year over year and reached 258,882 – a record quarter for the U.S. market.

This year, Toyota launches the third-generation Prius Prime, a plug-in hybrid version of its flagship EV. On the BEV front, Toyota has the BZ4X and Lexus RZ built in Japan and recently announced 10 new BEVs from 2025. One will be produced in North America from late 2025.

In another strategic move to reduce its carbon footprint, Toyota is building its first battery manufacturing plant, located near Greensboro, North Carolina. Not only does this bring battery production in-house, but it also localizes the production of batteries for hybrid and battery electric vehicles built in North America.

“We always want to localize what we can both from a risk perspective and a cost perspective,” Grimm said. “We want to build where we sell the vehicles. North Carolina is a great location both from a labor perspective and as an environment for that type of advanced manufacturing.”

Software first approach

Connectivity and personalization are becoming increasingly important as drivers demand vehicles with features that allow them to stay connected to their devices and personalize their driving experience. Toyota is meeting that demand with a software first approach, updating its electrical architecture and developing the contextual solutions needed to provide over-the-air software updates to its vehicles.

“Vehicles are becoming more and more technologically advanced, but there’s a decentralization of the different functions,” Grimm explained. “There’s a call to centralize the electrical architecture and develop solutions to update those technologies through over-the-air updates, which is where the industry is going rather quickly. Our goal is to lead the way in that space as well.”

The company launched Toyota Connected in 2016 in North America. The goals of the new digital division were to leverage opportunities with first-party data to make owners’ lives “better, safer and, surprisingly, more convenient” using tools including machine learning (ML) and artificial intelligence (AI), according to Toyota. Started with an initial investment of $5 million, Toyota Connected is now valued at about $1 billion and has offices in Plano, Texas; London, England; and Chennai, India.

Collaborative solutions

“The semiconductor issues have been a multiyear challenge that really exposed itself during COVID (-19),” he said. “We realized quickly that the auto industry, only being 10 percent of the semiconductor market, was exposed to broader fluctuations in the market.”

Grimm describes this as “an improving situation” thanks to strategic shifts into a more proactive sourcing and planning model.

“We were reactive at first, but we’re working much more collaboratively with our tier one partners now, as well as some of the chip makers, to ensure that we have the necessary capacity to support our production needs,” he said.

This collaborative approach includes giving partners longer production forecasts and enhanced mutual planning for what Toyota is planning to produce and when it will be produced.

“We’re establishing a line of sight so that we have time to countermeasure if there are issues. Historically we haven’t had backup inventory in the pipeline to cover supply fluctuations, so any hiccup, any quality issue, any production issue creates some short-term impacts. That’s what we’re working through right now,” Grimm said. “We’re getting much smarter in terms of how we approach our chip supply chain, both today as well as in the future.”

Genchi Genbutsu

A core best practice at Toyota is Genchi Genbutsu (“Go and See”). This concept is to go and see the location or process where the problem exists to solve that problem quicker and more efficiently. Grimm and his team are harnessing this best practice to help suppliers not only solve current problems but also anticipate and address future challenges.

“Toyota considers our suppliers very strong partners, and we want to support them to be successful,” Grimm said. “We’re dedicating resources to do on-site health checks and help suppliers foresee the next big problem. When those crises happen, you start out very reactive. Now we’re in that phase of creating a more proactive approach to address challenges.”

This strategy applies to both broad challenges like the chip and labor shortages — both of which Grimm says are improving — and to more micro-level issues, such as aging equipment.

“We are working with our suppliers on how they maintain aging equipment and updating as necessary,” he said. “As we move toward electrification, we’re going through some changes in our approach to manufacturing, so suppliers are going to have to start making changes to their technology. I see that as an area where we need to support our suppliers as they transition with us.”

Supplier diversity: a key priority

The new battery plant in North Carolina is a prime example of how Toyota’s commitment to reducing its carbon footprint brings new opportunities to diverse suppliers. Earlier this year, the company partnered with the Carolinas-Virginia Minority Supplier Development Council for an event introducing Toyota to diverse suppliers in the area. More than 400 diverse suppliers learned about the company’s operations, purchasing philosophy and upcoming opportunities.

“The actual battery manufacturing — the cell production — is capital intensive and complex, but there are opportunities around the related parts and the final pack of that battery itself,” Grimm said. “Components like wiring busbars, insulators, trays – those are areas where I think diverse suppliers with that type of capability can be successful as we move into that type of commodity space.”

And opportunities are not limited to North Carolina. Toyota is modifying existing assembly lines and its existing facilities to prepare for electrification, opening doors for capable diverse suppliers to support the OEM with the transition.

“Supplier diversity remains a key priority for Toyota, even as we move into the future of mobility,” Grimm said. “Frankly, the penetration of all these solutions is going to continue to increase into 2030 and beyond, opening a wealth of new opportunities for diverse suppliers. It’s exciting.”