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Where Does Toyota Stand in Its Electric Vehicle Segment?

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Jun. 3 2016, Updated 10:05 a.m. ET

Electric vehicle segment

With the help of technological innovation, automakers are trying to build vehicles that provide higher fuel efficiency. However, the advent of electric vehicles has given a new dimension to the auto industry.

In such an environment, automakers need to innovate and implement faster than their competitors. Companies such as Tesla (TSLA) and Nissan have already demonstrated the potential of the electric vehicle (or EV) segment. In this article, we’ll talk about Toyota’s (TM) plans to expand its EV portfolio in the coming years.

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History of Toyota’s EV segment

Toyota has been one of the early entrants in the EV segment. The company realized the need to develop environmentally friendly EVs back in the 1990s. This began with the establishment of Toyota’s Electric Vehicle Development division in 1992. This was primarily done to meet the zero emissions regulations passed in 1990 by the state of California. This regulation required vehicles with zero exhaust emissions to make up 2% of an automaker’s total units sold, starting in 1998.

This was followed by the launch of EV version of Toyota’s popular sports utility vehicle RAV4 in Japan and in the US in 1996 and 1997, respectively.

However, the RAV4 EV was sold in very limited numbers in the US. This seemed more like an obligation for the company to meet regulatory requirements.

Can Toyota compete in EV segment?

Currently, Toyota’s portfolio lacks the strength in the mainstream electric vehicle segment. The competition in the EV segment is likely to intensify in years to come. Legacy automakers (XLY) such as General Motors (GM) and Ford (F) have already jumped in the race to compete with Tesla’s upcoming first mass-targeted EV Model 3.

Notably, GM plans to launch its all-electric model, the Chevrolet Bolt, in 2017. The car, which may be priced around $30,000 after federal incentives, is estimated to have a 200-mile range. The Chevrolet Bolt will be a mass-targeted EV. The production of this vehicle is expected to begin in late 2016 at the company’s Orion assembly plant. In our view, it’s high time for Toyota to gear up and showcase its strength in the mainstream electric vehicle segment.

Continue to the next article to find out how investors can value Toyota Motor Corporation.

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