As Q3 closed, there was buzz aplenty about Washington’s plan to pour $600 million into shoring up coal-fired electricity – less than thrilling news for the innovation crowd. Such announcements tend to provoke more than illuminate.
Perspective requires looking past the noise to find trends that matter.
Hours after the coal announcement, the company unveiled an $800 million fund for mobility technologies. One firm on its own investing more in the future than the U.S. government was spending to preserve the past.
Perspective restored.
This juxtaposition captures an important facet of the energy transition: progress is unstoppable, but far messier than the climate PowerPoints ever promised.
Pragmatism Trumps Rhetoric
(Forgive me, for I have punned.)
Why dwell on Toyota?
- First, the timing was poetic—a fun little poison-antidote pairing.
- Second, their announcement underscores a key theme of ours: pragmatism often creates more durable change than idealism.
Toyota’s (current) status as climate villain makes them especially interesting as a study in the unstoppable investment in energy transitions. Toyota’s name provokes reactions for its refusal to join the all-electric bandwagon a few years back. Some saw in that choice an obstinate corporation putting profit ahead of decarbonization.
Understandable – but hardly the only available interpretation of Toyota’s actions.
Toyota could also be seen as more aggressive, honest, and consistent about its transition strategy than competitors who made splashy EV commitments during the Biden Administration—only to reverse them in recent months as political winds have changed.
Toyota has made steady work of developing low and zero emission vehicles that customers will buy.
- 1997 – Hybrid vehicle introduced. Regenerative braking and other hybrid tech become the foundation for battery electric vehicles
- 2014 – Hydrogen-powered vehicle introduced
- 2017 – An innovation fund for climate friendly technologies launches
- 2018 – Toyota Research Institute founded at Stanford and MIT
- 2021 – Woven Capital – a growth-stage fund – launches
- 2022 – Controversy erupts over Toyota’s opposition to 100% EV pledges
- 2025 – Strategic investment fund launched.
What’s most interesting here?
- Disciplined, patient capital building through the venture, growth, and strategic investment cycles necessary to nurture technologies from the lab bench to commercial viability
- Insistent commitment to climate technology development that is: a) focused on developing consumer-friendly options and b) indifferent to the ebb and flow of climate politics.
Limits of Government
At best, government programs play a limited role in shaping markets.
- 2024 total US federal revenue ~$4.9 trillion
- 2024 U.S. vehicle sales revenue ~ $2.2 trillion
Governments must spread their budgets across every demand voters throw at them—which means private-sector resources dwarf government resources to address any specific problem.
Policy can nudge markets, but commercial success is essential to sustain them.
Federal tax incentives boosted electric vehicle demand, but consumer enthusiasm was oversold (or misunderstood) by policy champions. Let’s look at the numbers from last year:
- Americans bought 1.6 million EVs – or 10% of sales
- EVs comprised 1/3 of the luxury market
- YoY sales growth rates slowed to 10% (compared w/ 40% in 2023)
- Hybrids, YoY sales surged to 30%
Sales performance in 2024 is instructive as it reflects peak EV incentives and mandates. Even before November’s election, manufacturers were scrambling to revise EV targets downward and answer shareholder questions about overcommitment.
Consumer appetite doesn’t obey government timelines.
Had policymakers listened to Toyota’s perspective and added flexibility to vehicle policies, the EV regulations and incentives may have proved less controversial and more durable. Flexibility for manufacturers and consumers can cover many sins of faulty projection.
Who will remember this lesson when (if?) the political pendulum swings the other way?
Automakers Adapt
Toyota is not alone in providing evidence that the transition continues apace in the vehicle sector. Revised plans have become increasingly visible during Q3 for many manufacturers.
General Motors CEO Mary Barra is redirecting capital from battery production to V8 engines, while still insisting EVs will win in the end because they’re better machines.
Ford Motor Company scrapped a luxury electric SUV project to focus on a low-cost EV, invoking the Model T strategy: mass adoption through affordability.
The Market (Always) Decides
Meanwhile, Chinese automakers are flooding Europe with low-cost EVs that undercut combustion car prices. Tariffs largely keep them out of the U.S., but that’s a temporary shield at best and does little (nothing) to make U.S. exports more competitive. American markets remain hampered by policy whiplash, while Europeans scramble to out-compete government-subsidized Chinese product.
The EV race continues along its unpredictable, messy, inexorable way.
None of the major players are backing away from innovation. What automakers do to meet evolving consumer demand will matter far more than any government’s policy.
Analyzing (with envy) the sector-defining Model T success a century ago:
- GM’s Alfred Sloan said it was rooted in the car being “reliable, durable, and easy to repair.”
- Walter Chrysler said it gave ordinary people “mobility and a sense of freedom.”
For EVs to truly displace combustion engines, they likely must deliver both superior product value and inspiration. That’s why Barra’s confidence feels warranted: inevitability lies in the product – and manufacturers are investing heavily in that.
In Q4: We Look to the Seas
October brings the next meeting of the International Maritime Organization (IMO):
- Member nations will vote on net-zero targets for global shipping
- The U.S. Administration is opposed and rumored to be lobbying heavily
- At the September 2025 London International Shipping Week 2027, optimism ran high that the IMO will adopt a decarbonization strategy
- Real investments in port electrification and fuel infrastructure give many in the shipping sector reason to believe IMO momentum is irreversible.
- However, Shell’s pricey Rotterdam cancellation is a concerning signal
November brings COP30 Brazil:
- Biofuels are on the agenda to complement electrification strategies in industry and transportation
- The International Energy Agency (IEA) projects that sustainable biofuel production could quadruple in the coming years
- Biofuels could be essential for meeting 2050 goals in maritime and aviation.
It has been a decade and a half since the first hybrid-electric tugboat launched, introduced by AJW-client Foss Maritime Company in Long Beach. Maritime’s turn in the energy transition spotlight may be near.
AJW Quarterly Series: Finding Calm in the Chaos
A quarterly review of global forces across the energy transition, seeking the signal amidst the noise.
AJW is wading into the conversation because we see the upside in discerning the difference between caution and fear. We make no claim to clairvoyance – merely some hard-won insights, drawn from setbacks as well as successes during decades of working with dedicated and resilient energy leaders. We aim to help those seeking resilience, not retreat.
To learn more about our work – and to gain an experienced partner tested in the crucible of energy transition turbulence – visit https://ajw-inc.com/.