Toyota takes on Tesla and China in humanoid robot race

Toyota is setting its sights on becoming a global robotics powerhouse, as the world’s largest car manufacturer modernises production lines to compete with China and diversify beyond the auto industry.

Its top executives have been drumming up global investor interest for its robotics strategy, including plans to deploy 400,000 robots as part of a $6.4bn annual investment plan to automate factories and establish a dedicated robotics team under the leadership of its chief production officer.

Inside the Toyota Arena Tokyo in April, the automaker gave a glimpse of its robotics prowess. Its AI-powered black and red Cue7 humanoid robot bounced a basketball around the court and shot the ball in the hoop, eliciting cheers from the crowd.

A further sign of its seriousness came in July when Toyota AI robotics spinout Walden Robotics came out of stealth mode, raising $300mn at a valuation of $1.1bn. The start-up has been dubbed the “crown jewel” of its robotics ecosystem by Bernstein analysts and has already deployed its general-purpose robots at Toyota factories in North America.

Investor buzz is growing at the mounting evidence that Toyota is using two decades of robotics research and development to commercialise intelligent robots and compete with Tesla, Xpeng and Hyundai.

“I think that Toyota could be the biggest humanoid robot company on the planet — they just need to get after it,” said Carl Vine at M&G, a Toyota investor.

“Whoever controls the software layer will control global manufacturing. Toyota is developing its own large behavioural models . . . and they have massive amounts of data internally because of the sheer size of the business. Those are critical ingredients.”

Goldman Sachs analysts agree, estimating that Toyota’s technological and mass production expertise means it could capture 3 to 8 per cent of the humanoid market by 2035 — equivalent to between 190,000 and 540,000 units.

Despite recent optimism, other shareholders caution that Toyota has a litany of other innovations, ranging from hydrogen cars and its in-house software platform to solid-state batteries, that have fallen short or are yet to live up to the hype.

Japan was virtually synonymous with robots in the 2000s and 2010s from Honda’s Asimo to SoftBank’s Pepper. However, the rise of AI and viral videos of Chinese dancing and kung-fu fighting humanoids have reinforced the idea that Japan has fallen behind the US and China.

Toyota is a latecomer in outlining a robot vision as rival carmakers have also pivoted to robotics to cut the cost of vehicle manufacturing and find new sources of revenue.

Late last year Hyundai announced plans to invest $86bn in South Korea by the end of the decade, with big commitments towards AI and robotics. The Korean group, which bought Boston Dynamics in late 2020, intends to produce the US company’s Atlas humanoid robot in 2028 at its Georgia plant, with annual capacity of 30,000 units.

Elon Musk has also made bold claims that its Optimus robot would “be the biggest product ever” for Tesla with a long-term target of producing 1mn units a year. However, manufacturing is yet to begin.

People close to Toyota say the sudden push to promote its robotics ambitions under new chief executive Kenta Kon has been prompted by the realisation that it needs to step up efforts to compete with China on factory floors as well as with technology.

Toyota will have a chance to introduce robotics when it starts operating a new vehicle assembly plant — its first since 2012 in Japan — near Nagoya in the early 2030s.

“The people in charge almost stopped thinking about new technology to build vehicles,” said a former Toyota executive. “The production system is one of the keys now to compete with China. Robots are one of the pieces of how to compete with Chinese manufacturing.”

Toyota had been cautious about publicly airing robot ambitions over concerns that employees would fear job losses, but with labour shortages in Japan and other major economies such constraints are now loosening.

The plan is not simply to develop robots to enhance its own manufacturing capabilities. Toyota has touted becoming a “mobility” company that generates revenues from more than just traditional car production.

About 250,000 of the 400,000 robots that Toyota wants to deploy have been earmarked for group companies and their suppliers.

“They say they are going to start by building robots for factory automation [and] labour shortages,” said another Toyota investor. “But they are showcasing their skills and this could be the model, the test case, to go further.”

Investor hype over humanoid robots has been swelling as the auto market offers less room for growth and the price tag for a humanoid robot is likely to be significantly higher than the cost of a new car.

Masahiro Akita, analyst at Bernstein, said Toyota’s calling card might be “integrating robots, AI and production processes into a superior operating system” rather than developing sophisticated robots.

Its California-based subsidiary Toyota Research Institute has developed a foundational model that translates high-level decisions into precise, real-time physical actions and motor control, which is being used in Boston Dynamics’ Atlas humanoid.

The internally developed 50-kilo humanoid Eley will also use the in-house foundational model to learn new tasks by observing factory workers, especially those involving fine motor skills such as moving parts between boxes.

But others pour cold water on the notion that robotics will be a standalone large-scale business for Toyota and insist that the main purpose of the robot push is to improve manufacturing of the 10mn cars it produces annually.

Tomohiro Nomi, Toyota’s head of humanoid robotics research, said in a presentation earlier this year: “We’re giving the highest priority to deploying robots in our own factories, where there is real demand and where the environment can be controlled.”

The former Toyota executive said that powerful chair Akio Toyoda is “a car guy - but he’s not a robot guy” and the primary focus is strengthening the still world-leading auto business. “They don’t need to get away from the auto business now.”

An Asia-based Toyota investor said that selling 200,000 humanoid robots would be “irrelevant to their 10mn base production of cars” assuming similar economics. “It’s the kind of thing that’s rewarded if Toyota’s core car business is doing well and dismissed as a distraction if the car business is suffering.”

Additional reporting by Kana Inagaki