Toyota admits Tesla Model Y is “truly a work of art” as it rethinks EV strategy

A group of Toyota executives has reportedly praised Tesla’s revolutionary design philosophy after they conducted a piece by piece “teardown” of the latest Tesla Model Y, in the latest sign that the world’s biggest car maker is realising it’s being comprehensively outplayed by Musk’s industry upstart.

The Toyota executives, who wished to remain anonymous spoke to Automotive News, about what they had learned as they explored the Model Y and considered how Toyota – having largely eschewed the EV transition to now – could start to play catch up.

“Taking the skin off the Model Y, it was truly a work of art” said one Toyota executive. “It’s unbelievable”.

“We need a new platform designed as a blank sheet” said another. “It’s a whole different manufacturing philosophy”

And Toyota knows a few things about manufacturing philosophies. In the 1970s Toyota revolutionised the world with its lean manufacturing principals including the “Just-in-time” Kanban system, the “Kaizen” continuous improvement and 5S organisational housekeeping.

These concepts enabled Toyota and other Japanese automakers to dramatically reduce costs and dominate the global car market. Many European and and US car makers had to scramble to copy the new manufacturing processes to stay competitive, many narrowly avoided going out of business altogether.

A new way

But that was 50 years ago, and times have changed. Tesla is now carving out an entirely new philosophy. A new way of thinking not only about design and manufacturing but also about the way organisations are structured and their relationship to their customers.

A philosophy that while based on simplicity and minimalism, also fearlessly approaches big ideas.

Big vision and big bold engineering like using cutting edge AI for autonomous driving, gigantic single-body castings replacing hundreds of parts, nation-wide supercharging networks, grid-scale battery systems. Even Tesla’s 5 port cooling system is an engineering marvel.

But there’s also the company structure and product flow. Tesla has completely cut out the dealership model going direct to customers. Free over-the-air software updates mean Tesla’s cars actually get better over time. The philosophy permeates every aspect of the company.

There are some core principals that drive this philosophy. A key one that’s often overlooked is Tesla’s philosophical opposition to marketing and advertising. Advertising enables companies to manipulate people into buying sub-standard products. When companies rely on advertising to sell products the product suffers.

Without advertising, Tesla has to put all its focus onto the product itself and the product has to sell itself through word-of-mouth. While legacy automotive companies spend tens of billions on advertising each year, Tesla doesn’t spend a cent and yet is the fastest growing car company in history.

All of these revolutionary approaches stem from a truly new way of thinking. This new mindset is a culture at Tesla and is embodied in simple principals like “the best part is no part” or “there are the laws of physics, everything else is a recommendation” or “the machine that makes the machine”.

It could be argued that automotive manufacturing is the most complex organisational system on earth. The sheer number of parts and mass of materials that need to be mined, refined, cast, extruded, cut, folded, welded and assembled into the final product is truely remarkable.

The daily mission to strip redundancy and complexity out of this mindbogglingly complex operation reaps enormous rewards and enables Tesla to make over $US9700 gross margin from every vehicle. Almost 8 times more than Toyota who make less than $US1300 per vehicle.

The original Tesla teardown

The “whole different manufacturing philosophy” that Toyota executives are now discovering is old news for many Tesla observers.

The first real indication that something special was happening at Tesla was when Sandy Munro did the original Tesla Model 3 teardown in 2018 before enthusiastically going on Autoline After Hours to talk about what he’d discovered.

Sandy Munro’s company Munro and Associates is an engineering consulting firm that specialises in stripping down new car models from different manufacturers, analysing each component (how its made and what it costs) and then selling that research to other companies.

Munro has worked in automotive manufacturing all his life and his firm is considered one of the best in the world at what it does.

A self-proclaimed petrol head, after deciding to do a full teardown of Tesla’s first mass produced Model 3 in 2018, Munro was so taken by some of the technology in the car, that he became an EV evangelist and an overnight celebrity in the Tesla community.

Munro now has a YouTube channel dedicated to pulling apart and analysing electric vehicles. He has done hundreds of videos looking at everything including Tesla’s new 4680 battery packs, single body castings, computer chip design and electric motors. Munro and Associates have also done a tear down of Tesla’s Model S Plaid which Munro described as “A symphony of engineering”.

If only Toyota’s executives had done a little YouTubing five years ago, they may have learned what Tesla was up to and could have started to respond accordingly.

Instead EVs only make up 0.2% of Toyota’s total production in a world that is rapidly shifting to EVs.

Toyota still doesn’t have a dedicated EV platform with the disastrous half-hearted attempt with the BZ4X which simply retrofitted an internal combustion engine vehicle platform resulting in a plethora of redundant parts.

“To deliver attractive BEVs to more customers, we must streamline the structure of the car, an – with a BEV-first mindset – we must drastically change the way we do business, from manufacturing to sales and service” Toyota’s incoming CEO Koji Sato said.

How the world’s largest car manufacture attempts to complete this manoeuvre will be fascinating to watch. The company currently sells around 10 million petrol and diesel cars per year and says it won’t launch its dedicated EV platformed cars until 2027. Many analysts believe that global EV market share will be well over 50% by then. Some like Ark Invest’s Cathy Wood believe it will be as high as 90% by then.

Maybe Toyota’s new Tesla fan executives will be tuning in to Tesla’s “Investor Day” later today to get some more tips on how it’s done.