Toyota Announces its Electric Car Manufacturing Plan

Toyota Announces its Electric Car Manufacturing Plan

The Japanese automaker Toyota Motor Corporation (NYSE: TM) is well known for their hybrid vehicles. They are known to be investing heavily in hydrogen fuel cell technology to achieve zero-emission. However, compared to batteries, fuel cells have proven to be ineffective for passenger vehicles. Toyota lags behind its rivals in the development of electric vehicles, as it has focussed on fuel cell technology. As electric vehicles are gaining more attention from consumers and mainstream media, Toyota has made a strategic shift by announcing its intention to launch 10 pure electric vehicles by the early 2020s.

Announcing the company’s decision, Executive Vice President Shigeki Terashi said yesterday that electric vehicles will be first offered in China, which subsidises the manufacture of electric vehicles. It will be later offered in Japan, India, the US and Europe. Terashi further told the media that by 2025, all its lineup of cars will have electric options. The company also has plans to manufacture electric passenger and commercial vehicles in the 2020s.

By 2030, Toyota aims to sell more than 5.5 million vehicles, which have some form of electric (gas plus electric, fuel cell plus electric etc.,) option in it. The target also includes more than 1 million zero-emission vehicles.

In order to achieve the ambitious targets, Toyota is entering into a partnership with Panasonic Corp to design and manufacture batteries for electric vehicles. By doing so, Toyota hopes that green cars will account for half of its global sales by 2030. Under the existing agreement, Panasonic, a market leader in lithium-ion batteries, manufactures batteries for Toyota’s plug-in and petrol-electric hybrid vehicles. Toyota is planning to invest ¥1.50 trillion ($13 billion) to realize its objective.

More than half of the planned investment will be spent on creating facilities for manufacturing batteries. Toyota is usually known for developing crucial technologies in-house, rather than purchasing them from other companies. Even the robotics technology used by the company is developed by its own R&D center.

Notably, other manufacturers such as Nissan Motor Co., Honda Motor Co., and Volkswagen AG are also working to introduce a range of electric vehicles in the market. Thus, the competition among battery manufacturers is heating up. The announcement is expected to keep the stock bullish in the short-term.

The stock of Toyota, which is trading above its 50-day moving average, is also rising along the ascending trend line, as shown in the image below. Further, the stochastic oscillator is near the oversold region. Thus, we expect the stock to remain bullish in the short-term.

Toyota - Technical Analysis - 19th December 2017

Trading a call option may prove beneficial under the current scenario. We wish to use our surplus funds to invest in a call option contract, which remains valid until Dec 27. Additionally, the option will be bought only when the stock of Toyota is trading near $124 in the NYSE.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

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