An automaker is only as good as its supplier base allows it to be. Sure, companies can set targets and try to steer the ship, but everything from quality and innovation to cost margins and speed-to-market depends on the parts suppliers. A single issue can derail production (think the Takata airbags recall or the Bosch diesel software scandal), but supplier innovation can also fuel growth (EV batteries, Lidar, etc.).
Now amid the tariff chaos, some of Japan’s largest suppliers are doubling down on EVs and self-driving investments, something that could enable automakers like Toyota to take these emerging technologies more seriously.
Welcome to the Friday edition of Critical Materials, your daily round-up of news and events shaping up the world of electric cars and technology. Also on the radar today: Chinese EV makers are helping many countries decarbonize road transport and pushing local players to be more competitive. Plus, sales of hybrids surged in April whereas EV sales declined for most automakers.
30%: Toyota’s Largest Suppliers Speed Up EV Investments
Toyota is slowly shredding its reputation as the laggard in the global EV race. It plans to launch as many as 15 EVs by 2027 across the world and some of them—likely the crossovers, SUVs and trucks—will also end up on U.S. shores.
But this big shift isn’t happening in a vacuum. Behind the scenes, Toyota’s sprawling supplier ecosystem is going all in. The combined research and development spending from its closest affiliates—Denso, Aisin, Toyota Industries, Aichi Steel, Toyota Gosei, Toyota Boshoku and Jtekt—is on track to increase more than 7% to over $7 billion this year.
Crucially, that cash is being funneled into EVs, hybrids, and self-driving tech—exactly where Toyota needs help most.
Denso provides critical systems to Toyota including hybrid units, power control systems, motor stators and dozens of components for its gas cars such as spark plugs and fuel pumps. The list of what Aisin supplies to Toyota is also extensive, including everything from transmissions, drivetrain parts, brakes, suspension and more.
Here’s more from Nikkei this morning:
"It's because this is a period of change that we want to increase investment in improving future added value," Denso CEO Shinnosuke Hayashi said in an earnings briefing, referring to the tariffs.
Hayashi cited electrification and advanced driver assistance systems as growth areas, along with semiconductors and software to strengthen underlying technology.
"We will stop investment related to internal combustion engines," Executive Vice President Yasushi Matsui said.
That last bit could mark a turning point for Toyota. Denso has long been a stalwart of Toyota’s gas-powered empire. If it’s truly shifting to electrification, it signals not just a technological pivot, but a broader cultural one within Japan’s auto suppliers.
And Toyota needs it. The company has been sleepwalking through the EV era, with half-hearted efforts like the bZ4X. Full disclosure, I do have a soft spot for the bZ4x despite its shortcomings because it really suits specific use cases in cities like New York. But that’s beside the point. Chinese EV makers have raced ahead and threatened Toyota’s dominance, especially in China.
But now, with its supplier base leaning in, Toyota finally has a chance to not just survive in the EV race, but also to thrive in it.
60%: Why Openness To Chinese EVs May Be Important
There’s a clear difference between countries where EV adoption is high and regions where it’s low. Countries that have allowed Chinese EVs have far higher EV adoption rates. Those with protectionist policies such as the U.S. are only growing modestly.
There’s broad scientific evidence that EVs, if done correctly, can be a smarter choice in terms of economics and ownership experience. Some nations are already benefiting from that. Australia’s EV sales were up 145% from 2022 to 2024. Thailand’s EV sales grew 279% in the same period and Mexico saw similar growth. In Brazil, EV sales soared by 500% in that same period—the common link is that they allowed Chinese EVs in.
Research firm BloombergNEF makes a solid case for this “openness”:
Even in markets where Chinese automakers make up a relatively small share of total EV sales, their presence forces competition and pushes incumbent automakers to put real effort into their EV launches. Companies typically don’t self-disrupt a profitable market—a challenger often is needed to force the issue. Tesla played that role for many years, but the Chinese are now coming on fast.
Tesla indeed was the disrupter. Not just in the U.S., but also globally. But it has lost that status as CEO Elon Musk isn’t interested in cars or climate anymore. Artificial intelligence and robotics excite him more these days. The disrupters now are Chinese automakers who have learned from the Tesla playbook and are now moving at warp speed.
Their presence in the U.S., even if in an extremely limited capacity, could help Americans realize how far the technology has come and why it’s so much better than fossil fuels and internal combustion.
90%: U.S. EV Sales Plunge In April
American car buyers rushed to their local dealerships in April to grab the pre-tariff inventories of gas-powered and hybrid vehicles. But EV sales dropped sharply.
Hyundai’s hybrid sales grew 46% in April, but sales of the Ioniq 5—which has generally been a strong seller—dropped 8% from 3,702 units to 3,411 units. Sales of the Kia EV6 fell 68% from 2,051 units to just 646 units last month. EV9 sales dropped 85% from 1,572 units to 232 units.
Ford’s EV sales also decreased by 40% across the Mustang Mach-E, F-150 Lightning and E-Transit range. Although it said that was in part due to model year changes—and its hybrid vehicle sales soared nearly 30%. The same could be true for Kia, as buyers await the updated EV6 and EV9 which come natively equipped with the Tesla-developed NACS charging port.
The U.S. has imposed 25% tariffs on imported cars. Imports from China have been tariffed at a whopping 145%. Trump did announce some tariff relief this week—like reimbursements on foreign parts of vehicles assembled in the U.S., but that wasn’t enough for General Motors to project a whopping impact of up to $5 billion from this policy.
It’s worth noting that the Toyota bZ4x was the bright spot among this lot—posting a solid 111% growth from 827 units sold last April to 1,678 units last month.
Only time will tell if these are early signs of tariffs taking a toll on EV sales as automakers focus on their high-profit-margin gas-powered vehicles.
100%: What’s More Important, Tariffs Or Affordable EVs?
Automakers face their toughest test in years as their capital-intensive quest to build more EVs now locks horns with tariffs that are set to cost them billions of dollars and squeeze their profits. The grim EV sales performance in April could be a sign that carmakers may refocus on their gas-powered models to better absorb the impact of tariffs. That could also mean affordability may remain elusive to the EV market.
So as China races away with its EV lead, what’s more important for the U.S.? Protectionist policies such as tariffs or the urgency of making more affordable EVs?
Have a tip? Contact the author: suvrat.kothari@insideevs.com
