Toyota's Scoop and the Coming Oil Shortage
Lord William Rees-Mogg

We can only hope that "What is good for Toyota is good for the world economy." The Times of London has had a major scoop, little noticed by the other leading newspapers of the world. It comes with a Tokyo by-line, giving joint credit to Leo Lewis, the Tokyo Correspondent of the newspapers, and Robert Thomson.

Who is Robert Thomson? He is the Editor of The Times. He used to work in the Far East as a correspondent for the Financial Times. The story is an example of the access which can be gained when the Editor of a major newspaper visits distant countries.

The scoop was an interview with Fujio Cho. Who is he? He is the President of Toyota, and the interview gives Toyota's current thinking about the prospect for the world's automobile industry. This may not have seemed a big scoop in some political circles, but it will have been passed around in the Board papers of every major automobile company in the world. Toyota is not in the habit of revealing its private forecasts to visiting journalists.

The story is packed with interest. Mr. Cho changed Toyota's policy on the euro. As recently as May of 2003, Shukei Toyoda, the President of Toyota Europe, had said "expansion [in the United Kingdom] is ruled out due to the euro problem." The "euro problem" is that Britain has not joined, and is not going to join in the next few years.

Mr. Cho brushed this aside. "I am not concerned by Britain's not being in the euro; whether or not the U.K. joins Euroland is up to the British people." He went on to forecast that Toyota would be expanding sales to Russia. "Eventually we believe we may have to construct a plant in Russia. On a ten-year horizon, it could become a reality within that time."

Toyota's expansion plans in the United States, in Euroland, in the United Kingdom, in Russia, are important to everyone, to Governments as well as investors, because Toyota is the world's leading automobile manufacturer, almost the Microsoft of the automobile industry. Toyota is now the second-largest producer in the United States, with a global target of four million vehicles next year, and a market capitalization equal to the Detroit "big three" put together.

For European central banks, the important news in this interview may have been the shift of policy on the euro. But Toyota's eyes are on China and on new technology. Toyota has signed a series of major partnership deals with Chinese companies, including an engine plant with Guangzhou Auto in the South of China.

For us, it is the logic of Toyota's position which is most revealing. Toyota sees China as a rapidly expanding economy, which will continue to expand. That will produce a huge increase in demand for automobiles. The motorization of China is already pushing up the price of oil, now at $37.50 a barrel. It is likely to go further and create a world oil shortage. In turn that will create a demand for "green" cars. Here Toyota is already in the lead of world development, so much so that Ford has recently agreed to buy hybrid technology direct from Toyota. The Toyota technology is said to be about three years ahead of Detroit.

China changes everything. It changes the outlook for the world oil price, and therefore the forecasts for inflation. It changes the future of technology; it could eventually mean the end of the hundred-year reign of the internal combustion engine, and its replacement by fuel-cell technology. Mr. Cho told Robert Thomson that this was not just a matter of image, but of corporate survival. Toyota will be producing 130,000 Prius automobiles next year. The Prius is a hybrid using both petrol and electric motors. The preparations for launching the Prius in China are already going ahead.

Everything happens faster than one expects. The motorization of China is following the pattern of automobile sales in Europe or the United States. That is already creating a shortage of oil, let alone atmospheric pollution. Green cars will be needed and Toyota will make them. The world is being changed before our eyes.