Toyota Unplugs Electric Car Hype

Phil LeBeau | @Lebeaucarnews

Published 12:41 PM ET Mon, 24 Sept 2012 CNBC.com

Yoshikazu Tsuno | AFP | Getty Images

Vice chairman of Toyota Motor, Takeshi Uchiyamada (R), introduces the company's new compact electric vehicle called the 'eQ', at the company's showroom in Tokyo on September 24, 2012.

What does Toyota know that GM and Nissan don’t?

Or is this a case of Toyota learning from the struggles their competitors have gone through in ramping up production of electric vehicles.

Whatever the reason, Toyota has decided to cool off its once ambitious plans for developing electric cars. In fact, the company announced in Tokyo that it is scaling back plans for selling its all-electric minicar, the eQ. Even more telling is Toyota also saying that it no longer plans to develop a second electric vehicle.

Why?

Toyota’s Vice Chairman told reporters the company sees many difficulties developing electric vehicles, especially given the limited market for electric cars. “The current capabilities of electric vehicles do not meet society needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” Toyota’s Vice Chairman Takeshis Uchiyamada told Reuters in Japan.

Uchiyamada’s comments will fuel critics of the Chevy Volt, Nissan LEAF and other pure or extended-range electric vehicles. This is not someone standing in an oil patch who wants to protect the century long relationship between oil and cars. No, Uchiyamada is the man who helped lead development of the Prius hybrid in ‘90’s. So when he says the world is not quite ready to embrace electric cars it carries some weight. (Read More: GM's Volt: The Ugly Math of Low Sales, High Costs)

Let’s be clear, Toyota’s decision is also about the company playing to its strength in gas-electric hybrid cars. The Prius dominates hybrid sales and using that as a base Toyota says it expects to have 21 hybrid models by 2015, with 2/3 of them being all-new models.

But even in the hybrid market, Toyota is scaling-back plans. Look at plug-in hybrid sales in Japan. Toyota originally targeted sales of 35,000 plug-in hybrids in Japan this year. Eight months into this year it has sold fewer than 9,000. (Read More:Best Cars for Commuting)

Will Toyota’s decision about EVs change things with GM and Nissan? No. Both companies have already invested heavily developing their electric cars ($1.2 Billion at GM) and they believe the Volt and LEAF will eventually pay off. So far, the sales have been underwhelming.