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Toyota defies shareholder pressure to embrace EVs

Stakeholders demand halt to 'anti-climate lobbying' at annual general meeting

Shareholders enter the venue of Toyota's annual general meeting in Aichi Prefecture, Japan, on June 15. (Photo by Yuki Nakao)

TOKYO -- Toyota Motor on Wednesday said it will continue to develop hybrid and other low-emission vehicles even as shareholders pile pressure on the company to embrace fully electric models to better address the challenge of climate change.

Shareholders raised the issue at Toyota's annual general meeting, held at its headquarters in Aichi Prefecture, western Japan -- an event that also saw climate protesters calling for more action from the company.

In response to a number of questions on environmental measures, Executive Vice President Masahiko Maeda told the meeting that the goal was "carbon neutrality," and not simply the proliferation of electric vehicles.

"We will not, cannot, limit the choices [of our customers], because Toyota is truly global and serves customers in different regions," Maeda said, and asked for shareholders' understanding.

Toyota reaffirmed its policy developing a wide range of environmentally friendly vehicles, including hybrids and zero-emission cars, and reiterated its belief that different markets will take different paths to decarbonization. The company has long argued that fully electric vehicles, also known as battery EVs, are not appropriate for all markets.

Large European investors, however, are growing increasingly concerned over Toyota's reluctance to embrace battery EVs.

On Monday, AkademikerPension, a Danish fund with over $19 billion of assets under management, revealed it had submitted written questions for the meeting, demanding an explanation for Toyota's "ongoing negative climate lobbying." Maeda acknowledged at the AGM that the company had received a questionnaire from investors abroad. 

The fund accused Toyota of repeatedly seeking to weaken attempts by governments to phase out internal combustion engines and to phase in fuel economy standards and pure electric vehicles.

AkademikerPension said it has been engaging with Toyota on the issue since March 2021, along with AP7, one of Sweden's largest pension funds, the Church of England, and The Storebrand Group, a Norwegian pension fund. The Danish fund said it had tried to file a shareholder resolution for the meeting, but it had been rejected on the grounds that it had missed an undisclosed deadline for submission by one day.

Environmental groups and international organizations are calling for an urgent shift from conventional cars, powered by internal combustion engines, to battery EVs in order to meet climate goals.

Though Toyota has established an image as a pioneer in EVs, launching the hybrid Prius over two decades ago, it now faces criticism that it is moving too slowly in adopting fully electric models.

The company set a goal last year of selling 3.5 million battery EVs per year by 2030. That is about a third of its annual sales in 2021, which came to 9.6 million. Fellow Japanese automaker Honda, meanwhile, announced in 2021 that all of its sales will be of zero-emission cars by 2040.

Toyota maintains that its approach of not focusing exclusively on full EVs allows "more consumers to contribute to carbon reductions sooner compared to relying on a single technology or single approach."

Toyota's president Akio Toyoda has also voiced opposition to government policies aimed at curtailing sales of conventional vehicles.

"Policies that ban gasoline and diesel vehicles from the outset will limit these options and cause Japan to lose its competitive edge," Toyoda warned in 2021.

Overseas investors are critical of such an attitude. "'In our view, the lobbying work undertaken by Toyota Motor has given the company a global laggard status on climate action within the auto sector," said Anders Schelde, chief investment officer of AkademikerPension, in a news release. This jeopardized the company's valuable brand to the detriment of shareholder interests, he added.

Following the Danish fund's announcement, the Office of New York City, which said it held $139 million worth of Toyota shares as of June 10, also voiced concern over the company's lobbying activities.

"Toyota's approach puts it at a competitive disadvantage compared to its peers, which have shown a far greater commitment to transitioning to battery electric vehicles," Comptroller Brad Lander wrote in an email to Nikkei Asia. "Toyota's opposition to strong EV and climate policies creates significant reputational risk, and is at odds with its efforts to appear to be a 'green' automaker."

Climate organizations are adding their voices to those of investors. Last week, nongovernmental organization SumOfUs submitted to Toyota Europe in Brussels a petition signed by 110,000 members demanding the company stop "anti-climate lobbying."

On Wednesday morning, environmental group Greenpeace Japan held a protest at the automaker's headquarters. As attendees of the general meeting entered the building, members of the group held a banner demanding Toyota stop production of fossil fuel cars.

Greenpeace gave Toyota the group's lowest grade in its 2021 annual analysis of global automakers' decarbonization efforts.

"We would like to know in detail how Toyota plans to achieve carbon neutrality by 2050, and be shown a clear road map that aligns with the 2015 Paris Agreement," said Daniel Read, climate and energy campaigner at Greenpeace Japan. "It's disappointing that such a powerful company is being reluctant to change, despite being capable of making innovations happen like the one we saw with Prius."

Additional reporting by Kyohei Suga.

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