Toyota President Calls Tesla A Chef Without Kitchen
Toyota president and grandson of founder Kiichiro Toyoda, Akio Toyoda has compared Tesla to a chef without a kitchen. The comment came in the earnings call following the release of Toyota’s Q3 financial results.
In the call when asked about Tesla’s success in the stock market Toyoda said, Tesla has a higher market valuation than all 7 of Japan's automakers combined. According to Toyoda Japan’s 7 car manufactures together have a value of 33 trillion yen or 330 billion US dollars and Tesla is valued at 40 trillion yen or 400 billion US dollars.
Toyoda believes Tesla is overvalued saying “Tesla’s business if you want to use the analogy, is like that of a kitchen and a chef. They have not created a real business in the real world yet. They are trying to trade recipes. The chef is saying our recipe is going to become the standard of the world in the future!”
Toyoda seems to think Tesla’s valuation is based on future promises rather than achieved capabilities. This statement is true but that is how the entire stock market works. Investors value companies not on past performance but rather on future promise. Though past performance could be a very important indication of what’s to come.
Continuing his analogy Toyoda says “at Toyota, we have a real kitchen and a real chef too and are creating the dishes already. There are customers, who are very picky about what they like to eat, sitting in front of us, and eating our dishes already.”
Furthering his point Toyoda said Toyota currently has over 100 million cars on the road. And the company plans to sell 7.5 million vehicles in the company’s current fiscal year. In comparison, Tesla plans to sell 500 thousand vehicles in 2020.
Looking at just past performance Toyoda makes a good point for why Tesla is overvalued or Toyota is undervalued. However, as we said earlier if we take a look at the future promises the reason for Tesla’s valuation becomes more clear.
Tesla is at the forefront of several changing trends in the automotive industry. Currently, several regions and countries are planning to ban the sale of vehicles with internal combustion engines. For example, China, which is the biggest automotive market in the world with over 25,000 cars sold every year, plans to ban the sale of ICE vehicles by 2030. California plans to do the same by 2035.
In addition to the two above 26 countries overall have said they will completely ban the sale of ICE vehicles or will severely limit their accessibility. Even in the countries that haven’t pledged to stop the sale of gas vehicles, there are several taxes and incentives proposed which will force the move to zero-emission vehicles in the near future.
Toyota even though a great company that has revolutionized automotive manufacturing and has achieved several successes throughout its history, when it comes to electrification the company is nonetheless lagging.
Currently, Toyota even though was a leader in electrification with the Prius hybrid a decade ago still the company hasn’t yet produced an all-electric vehicle. The company had a short stint in the BEV world when it produced the Rav4 EV but Toyota sourced the powertrain from Tesla and the SUV was discontinued after a short while.
Toyota for its zero-emissions strategy seems to be focusing on fuel cell vehicles. The company currently produces the Toyota Mirai hydrogen car. The vehicle has gotten rave reviews from owners but the vehicle fundamentally is flawed.
Hydrogen even though the most abundant element in the universe it is not found in its free form. So unlike other sources of energy which are mined hydrogen has to be produced from electricity. Since the electricity has to be produced using other sources this makes hydrogen a form of energy storage than an energy source. And as energy storage batteries are significantly more efficient than hydrogen.
Tesla on the other hand is simultaneously building 3 Gigafactories on 3 different continents. And according to the company’s Battery Day presentation, Tesla has achieved battery cell manufacturing and chemistry breakthroughs that will increase the energy density by 54 percent and cut costs per KWh by 56%.
According to Elon Musk, this will make BEV powertrains cheaper than their gas equivalent. Tesla’s newest 4680 cells are expected to make their debut in 2021 on the new Model Ys to be produced next year.
In 3 years Tesla also plans to produce a compelling $25,000 vehicle. This will have the capability of being fully autonomous and should be used for Tesla’s fully self-driving network. Tesla is currently rolling out fully self-driving software to the members of its early access beta testers.
This makes Tesla a leader in the future of the auto industry. And Toyota on the other hand is going to have its current capabilities of manufacturing internal combustion vehicles slowly falling out of favor. This in my opinion justifies Tesla’s valuation.
So what do you think? Do you agree with Akio Toyoda that Tesla is overvalued? Also, what do you think about the future of Toyota? Let me know your thoughts down in the comments below.
For more information check out: Elon Musk Says Following The US Tesla Will Roll Out FSD Beta To Canada And Norway. Also, see Elon Musk: Tesla Will Show Off Redesigned Cybertruck In A Month, Here Are All The Changes We Know So Far.
Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at
@TinsaeAregay for daily Tesla news.