TOYOTA MOTOR CORPORATION (TM) Q4 2020 Earnings Call Transcript

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TOYOTA MOTOR CORPORATION (TM -0.91%)
Q4 2020 Earnings Call
May 12, 2021, 6:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you very much for taking time out of your occupied schedules to be part of this program. We would like to start the fiscal 2021 financial result press conference by Toyota Motor Corporation. And this press conference consists of two parts. Part one starts from 1:30 until 2:15 and we break for 10 minutes and then the part two will start at 2:25. Let me introduce to you the participants in part one: Chief Communication Officer, Jun Nagata; Chief Financial Officer, Kenta Kon.

Now, ladies and gentlemen, Kon will give you the overview of financial results.

Kenta Kon -- Chief Financial Officer

Hello, everyone. Thank you for joining us today. I am Kenta Kon. We would like to express our heartfelt appreciation to our customers around the world who chose us, as well as our shareholders, dealers and suppliers who support us.

Let me discuss our financial results for the fiscal year, which ended in March 2021. And consolidated vehicle sales was at 7.646 million units, which was 85.4% of such sales of the previous fiscal year. Toyota and Lexus brand vehicle sales was 9.087 million units, which was 96% of such sales of the previous fiscal year. Due to the spread of COVID-19 in each region, sales volume declined significantly in the first half of the fiscal year. But in the second half of the fiscal year, sales volume increased in many regions compared to the previous fiscal year. In particular, sales of electrified vehicles was at 2.155 million units, which was 112.3% of the previous fiscal year.

Consolidated financial results for the fiscal year were: sales revenue of JPY27,214.5 billion; operating income, JPY2,197.7 billion; pre-tax income, JPY2,932.3 billion; and net income, JPY2,245.2 billion. I would like to explain the factors which impacted operating income year-on-year. First, the effects of foreign exchange rates decreased operating income by JPY255 billion. Second, cost reduction efforts increased operating income by JPY150 billion. Third, the effects of marketing activities decreased operating income by JPY210 billion, largely due to the decrease in sales volume. Finally, a reduction in expenses increased operating income by JPY70 billion. As a result, excluding the overall impact of foreign exchange rates, swap valuation gains and losses and other factors, operating income increased by JPY10 billion year-on-year. As shown in the top right of the slide, regarding the changes on a quarterly basis, although operating income significantly decreased in the first half of the fiscal year, it increased in the second half.

Next, I will explain operating income for each region. In Japan, Europe and other regions, operating income decreased year-on-year, mainly due to the decrease in sales volume. On the other hand, in North America and Asia, operating income increased year-on-year, thanks mainly to marketing efforts and cost reduction efforts.

Next, let me explain our consolidated subsidiaries and equity method associates and joint ventures in China, as well as our Financial Services business. As for our China business, both operating income of consolidated subsidiaries and our share of profit of investments accounted for by equity method of affiliates and joint ventures increased year-on-year, thanks largely to marketing efforts. Regarding Financial Services, operating income excluding swap valuation gains and losses increased, thanks to the decrease in costs related to residual value loss and credit loss.

Next, I would like to explain our return to shareholders. We plan to pay a year-end dividend of JPY135 per common share. Together with the interim dividend of JPY105 per common share, which included a special dividend of JPY5, the annual dividend for the fiscal year will be JPY240 per common share, an increase of JPY20 per common share compared to the previous fiscal year. And the dividend pay-out ratio for the fiscal year will be 29.8 %. We will continue to aim to pay stable and sustainable dividends, while maintaining and improving upon our consolidated dividend payout ratio benchmark of 30%.

As for share repurchases, we postponed them for the interim period of the fiscal year ended March 2021 due to the spread of COVID-19. With regard to the year-end shareholder return, we plan to buy back up to JPY250 billion. We will continue to implement share repurchases in a flexible manner, taking into account various factors, including investment in growth, dividend levels, liquidity, share price levels and other factors. We will split our common shares at the ratio of five shares for each share with the record date of September 30, 2021. The purpose of the stock split is to reduce the minimum investment price, thereby creating an environment where it is easier to invest in our shares.

Now, let us move on to discuss the forecasts for the fiscal year ending March 2022. Consolidated vehicle sales for the fiscal year ending March 2022 are expected to be 8.7 million units, which is 113.8% of such sales of the previous fiscal year. Vehicle sales are expected to increase in each region. Toyota and Lexus brand vehicle sales are expected to be 9.6 million units, which is 105.6% of such sales of the previous fiscal year. As for electrified vehicles, we will continue to further enhance our product lineup to meet customer needs in each region and expect to sell 2.8 million units, which is 129.9% compared to the previous fiscal year. We anticipate that the ratio of electrified vehicles will increase up to 29.2%.

Toward carbon-neutrality, we are working to develop a full line of products that meet the needs of each region and that can be chosen by customers in those regions.

Next, let me explain the full-year consolidated financial performance. We have assumed the foreign exchange rates to be JPY105 per US dollar and JPY125 per euro. Based on this, our forecasts of consolidated financial performance are net revenue of JPY30 trillion, operating income of JPY2,500 billion, pre-tax income of JPY3,110 billion, and net income of JPY2,300 billion.

I would like to explain the factors which will impact operating income year-on-year. Firstly, we anticipate that cost reduction efforts will decrease operating income by JPY135 billion, largely due to the significant negative impact of increased prices of materials, despite the planned improvement of around JPY300 billion on a gross basis. Secondly, we anticipate that marketing efforts will increase operating income by JPY850 billion, mainly due to an increase in sales volume. Thirdly, we anticipate that an increase in expenses will decrease operating income by JPY350 billion. This is because we are investing more resources than ever in carbon-neutrality and digitalization.

As a result, excluding the overall impact of foreign exchange rates, swap valuation gains, and losses and other factors, operating income is expected to increase by JPY365 billion. We will further improve our earnings structure, which we have been strengthening through the transformation of the way we work and actively invest in the future to accelerate our efforts to transform into a mobility company.

This concludes my presentation. Thank you for your attention.

Questions and Answers:

Operator

[Operator Instructions] Now, ladies and gentlemen, Mr. Ove [Phonetic] of NHK. I will switch the screen. So if you see yourself on the screen, please start your question. Now, Mr. Ove, please -- could you please start your question?

Ove -- NHK -- Reporter

Ove of NHK. Thank you for this opportunity. My question relates to the actual performance of the financial results. First of all, for the period ending in March 2021, in the early part of spring, you adjusted production but increased the sales, and actually the profit and income is higher than the previous fiscal year. How do you assess and evaluate this? And what was the important factors that supported this? Also, the outlook for the period ending in March 2022, there are various factors, but you are going to expect a rather high level. And could you explain to us the background of such positive or high figures?

Jun Nagata -- Chief Communication Officer

Thank you very much. The CFO, Kon, will respond to that question.

Kenta Kon -- Chief Financial Officer

Thank you, Ms. Ove, for your question. My name is Kon, and I'd like to respond to your question. Last year, in the same forum where we announced the financial results, our President, Toyoda, talked about the sales units for the fiscal year ending -- that ended in March, talked about 8 million of sales units and also the operating income of JPY500 billion. At that time, the situation was quite uncertain and we were not able to come up with a clear outlook, but we wanted to present some concrete standards to stakeholders because we do have the large supporting industries for automotive industry. And therefore, considering the importance of giving some figure, we started those figures and announced those figures, and that initiated our various efforts internally. And there are many factors behind those numbers we have announced.

For one thing, since the global financial results, we made continuous efforts to produce better cars and also the overall cost reduction efforts, especially including reduction of fixed expenses. And through those, we were able to reduce the breakeven units significantly. And also, we worked on the supply chain as well. 10 years ago, when we had the Great East West [Phonetic] Japan Earthquake, together with the suppliers, we made efforts for mitigating disaster efforts and also we adjusted inventory levels. And also, we enhanced the efficiency of evaluating alternative products among others. And as the efforts continued since the great financial crisis, those produced results.

And in addition to that, for the current fiscal year, as Ms. Ove mentioned, in the early spring time, we were not able to sell and produce large number. And at that time, we realized and knew the importance of having a single car to be purchased by customers. The fact that customers do choose our vehicle represents a great importance to us, and including suppliers, having suppliers supply our parts and to simply continue to do that required very demanding efforts, and we really had the first-hand feel of that that altogether. And as we did that, altogether, we have 5.5 million partners in the supply chain as well. And everybody was focused on customers in making their efforts, and that resulted in the financial results I have announced today.

When we announced the third quarter results three months ago, I just mentioned that we continued to do what we should be doing as a natural course of action without having to think twice. I think I mentioned that. And after that, we had earthquake in northeastern Japan, and suppliers did have the fire incident among others, and those were the events and difficulties we were faced. And each one of those events could have developed into very serious disasters. I wouldn't say those are trivial matters, but they could have produced a substantial impact on the financial results. But we tied over that and was able to create the financial results I have just mentioned. And that reflects the efforts made by all those people during the past year, and those crystalized in the results that I have just mentioned. In terms of the actual performance, that is what I can say.

In terms of the outlook, JPY2.5 trillion in terms of operating income is the number that I announced earlier, made public. And as shown on the slide, for the most part, the sales unit is expected to recover significantly for the fiscal year, and that is indeed a very major factor supporting this projection for the full year basis and next year. And for the current running period, what we did in terms of continuous improvement, the change of way we work and also the change of performance that we have been working on during the past year, how can we sustain that and how can we maintain that would be very crucial in the current year. So our determination and natural action will be tested. And we would like to add to what is mentioned here. And in the future, we would like to reduce the breakeven unit even further to create additional resources that we can make for investment. So to make sure that what we have been doing over the years really gets established and continued is very important. That briefly is my response to the question. Thank you.

Operator

Thank you very much. Thank you very much, Ms. Ove. Now, let us take the next question from Nikkan Kogyo Shimbun, Mr. Masatoshi [Phonetic]. We will switch the screen. So when you see yourself on the screen, please ask your question. We will be switching the screen. So please wait a while. Masatoshi-san, please.

Masatoshi -- Nikkan Kogyo Shimbun -- Reporter

My name is Masatoshi from Nikkan Kogyo Shimbun. It was referred to in the previous question, but last year, at the beginning, the breakeven unit was set to be reduced by 2 million units compared to the Lehman shock time. But from now on, you will see more next-generation related investment. So the question is about the breakeven point or breakeven units forecast. And second, for the next-generation investment, I think the major topic will be carbon-neutral. Globally, at each region, the regulations or the energy source mix may differ. So in that environment, what will the actions be that Toyota will take?

Jun Nagata -- Chief Communication Officer

Thank you very much to Ms. Masatoshi. So let us answer the carbon-neutral question first and then move on to the investment question. The first question will be -- the first part will be answered by myself, Nagata. Toyota's carbon-neutral thinking was the first part of your question. Our President, Mr. Toyoda, has mentioned at a JAMA statement -- he has made a statement, it's still really [Phonetic] the same as that of Toyota. Electrification rate is not our target there. By 2050, we are to realize carbon-neutral. That is our target. The new vehicle CO2 is not the point. Transport use -- this overall cycle of CO2 use will have to be made neutral. That will be the point. So at this point, rather than restricting or limiting the types of technologies to be used, in order to realize carbon neutrality, various options or various technologies will have to be addressed. We think that will be the most important point and that is where Toyota is putting its entire efforts in. More specifically, we at Toyota has HEV, PHEV, battery EVs or BEVs or FCEVs. So we have a full electrified vehicle lineup. And with Mr. Sato -- GRs [Phonetic] and Mr. Sato and Mr. President -- our President, we announced the hydrogen engine. So including that, we have a variety of options. And we shouldn't just be working on new vehicles.

Carbon-neutral will have to be realized by addressing existing vehicles as well, including in fuels. Carbon-neutral fuel is what we have to take up as a challenge. Comprehensively, we would like to take up the challenge of carbon-neutral. But what is important here is not just the technology. For the customers of each region in the world, sustainability and practicability will have to be realized. Practicability or affordability, in addition to sustainability, would be necessary. So technology in vehicles that achieve these will have to be provided by us, and that is our responsibility. In 1997, we launched Prius, and it's already more than 20 years since then. Since the launch of Prius, the CO2 reduction or energy saving is what we have been working hard on, and we take pride in that we are a top runner in that area. Over the past 20 years, we have contributed to a reduction of CO2 by 20%. So toward 2030, carbon-neutral. Toyota intends to continue to be a top runner. It may be an aggressive goal, but we will continue to work toward that goal. So I hope you will understand.

Now, today, toward 2030, what is our target for electrified vehicles is what we would like to explain. Each region has its own regulations and renewable energy situation, and the ultimate choice is up to the customer. So, just to understand that this is our target. So can I have the slides? So at the top, you see major regions in the world and the ratio of electrified vehicles and out of which percent is BEV plus the FCEVs. As you see, Japan, North America, Europe -- you see the regions. For Japan, 95% electrified vehicles; North America, 70%; Europe, close to 100%. China, in 2035, they are aiming at 100% NEV plus energy saving vehicles. And as you see on the right-hand side, the battery EVs and FCEVs, in Japan, North America, Europe and China are the following numbers: 10%, 15%, 40% and 50%, respectively. And globally, this will add up to 8 million electrified vehicles, including hybrids, out of which battery EVs and FCEVs in total would account for about 2 million units. That is our plan. Of course, ultimately, the choice is up to the customer. But at this moment, this is what we are forecasting.

If we do what we have to do, batteries supply would be a major issue. In terms of production, or in terms of gigawatt hour, at the moment, Toyota's supplied power is 6 gigawatts hours. And in order to realize these numbers, 180 gigawatt hours is necessary; in other words, 30 times the current number. So if you translate that into EV production lines, currently, we have two lines, but that will have to be more than 60 lines, that is more than 30 times. So we will make aggressive investments so that we can realize that. And in addition to that, for battery development or basic units will be reduced, and we will work with alliance partners for procurement so that we can procure the necessary goods. And in addition to that, for battery EV development, compared to the current situation, 15% to 30% reduction in development lead time is to be aimed at. And this is currently under discussion, but PHEV and hybrid EVs and battery EVs sharing the same platform is what we are aiming at so that we can make improvements in supply. So, as you see, we aim to have a full lineup of products, as was mentioned at the outset.

We would like to add some comments from Mr. Kon about the investment.

Kenta Kon -- Chief Financial Officer

So, breakeven units being reduced by 2 million. And the forecast, this year, the year that has just ended, on a year-on-year basis, so a reduction of breakeven units by hundreds of thousands of units. So depending on the environment or the market, in the short term, it may go up or down, but we will continue to work on the cost improvement and we will continue to work on sales and marketing efforts. And after the consumer purchases the vehicles, the supply parts, accessories, second-hand car business and software updates, these are sources through which we intend to get more profit. So the value chain profit will be improved. So for the investments, electrification case, digitalization, roughly speaking, on an annual basis, we are currently making an investment of JPY1 trillion. This year, compared to the past levels, we intend to increase investment by 20%. So we will continue to secure the money necessary for investment and we'll continue to work on reducing the breakeven unit numbers.

Masatoshi -- Nikkan Kogyo Shimbun -- Reporter

That is all. Thank you very much.

Operator

Thank you very much, Ms. Masatoshi. So let's move on to the next question from Chunichi Newspaper, Shiraishi-san [Phonetic], please. We are going to switch the screen, and if you see yourself on the screen, please start your question. We are now switching the screen. So please allow us a little more time, please. Now, Shiraishi-san, please start your question. Mr. Shiraishi, you are still on mute. Could you de-mute the microphone? Could you de-mute the microphone? Mr. Shiraishi, your voice is not being transmitted. Could you please turn on the microphone? Could you please de-mute the microphone?

Shiraishi -- Chunichi Shimbun -- Reporter

Can you hear me?

Operator

Yes, we can. We can hear you now.

Shiraishi -- Chunichi Shimbun -- Reporter

Shiraishi of Chunichi Newspaper. Thank you for the opportunity. I have two questions. First question relates to the following. For the press conference of full year results, the absence of a President, I think, is quite unprecedented. For this financial result press conference, Mr. Toyoda, President, is absent. And could you explain the reason behind that?

Secondly, this relates to the Tokyo Olympic Games, and it's going to be opened -- the scheduled opening is within two months or so. And the COVID-19 is quite rampant, and the cases of serious symptoms are increasing. Even these conditions, I think the government is assuming the opening and holding of the Olympic Games. But given the medical and healthcare situation, people are concerned that whether the games can be conducted safely. You are the top sponsor of the Olympic Games and you have been supporting athletes and you are deeply involved and engaged with the Olympic Games. And despite COVID-19 being under control, the Olympic Games are going to be, well, scheduled to be open. And what is your view on that?

Jun Nagata -- Chief Communication Officer

Thank you, Mr. Shiraishi, for your questions. We received two questions. And with respect to the first question, that is to say the absence of President Toyoda for full year financial result press conference, and also as the top sponsor of the Olympic Games, what is your assessment and position on the current situation? Nagata, I would like to respond to that.

With respect to the absence of President Toyoda in this press conference, as you already know, Toyoda, our President, has been serving as the chairperson of Japan Automobile Manufacturers Association. And as a separate face, he is a master driver as Morizo. He is engaged in various activities. So he is engaged in many different activities with different faces, including those press conferences, and especially more recently as Chairman of JAMA, he's been holding a press conference on a monthly basis, and his statement has been inviting various interests and concerns. And in terms of communicating, presenting at TMC, sometimes they are taken as the JAMA situation. So for this year's press conference, we have decided to take face press with the CFO to convey what Toyota is engaged in at this moment and also Toyota's value overall with the President being absent in this press conference. That's my response to the first question.

And secondly, let me just explain to you our position as a top sponsor for Olympic Games. As you already know, Toyota decided to sponsor the Olympic and Paralympic Games because we share the spit of creating through sports a peaceful and inclusive society without discrimination in which anyone can participate. And so, echoing those values, we have decided to participate as the top sponsor. And the spirit of Olympic Games and Paralympic Games -- for the Olympic and Paralympic Games, for the spirit to be fully realized, we must first ensure the safety and peace of mind of athletes who are the core of event and of everyone in the country where the games will take place. I may be digressing a little bit here, but back in 2009, that is the year in which, at Toyota, I had to conduct a major recall and we caused serious convenience to customers worldwide and we also caused concerns in the minds of those customers. And the important learning we made on that occasion was, even if the product itself is very safe in terms of technological aspect, but it is also important to ensure the peace of mind. Customers told us that the feeling of piece of mind when using our product was more important than the specific technical details in that, what we learned.

We love sports and we have been supporting athletes who devote their lives to them. We have been deeply concerned by reports that athletes have become the target of some people's frustrations about the current medical situation. And we have been working to identify what we can do as a sponsor to help that situation because we are really concerned about the situation as a top sponsor. We sincerely hope and wish peace of mind for all the athletes and people of this country that can be ensured. And that's the frank and honest feeling that we have at this moment. That's all. Thank you.

Operator

Thank you for your response. Thank you, Mr. Shiraishi. Now let us take the next question from Yomiuri, Katori-san, please. We will switch the screen. So, please start asking the question when you see yourself on the screen. Katori-san, please.

Naotake Katori -- Yomiuri Shimbun -- Reporter

This is Katori from Yomiuri. About the financial results, first, about the impact of semiconductors. In your case, it seems like you don't have any major problems at the moment, but 9.3 billion [Phonetic] is the production plan, but does that include any impact of semiconductor supply? And how do you see the supply demand forecast for semiconductors?

And my next question is about capital investment. We see the question on capital investment, but R&D investment, JPY1.6 trillion you have, I think this is the highest ever number. Can you give us details of this JPY1.6 trillion? Carbon-neutral case, I think there are other projects as well. So what will be the focal project accounting for the JPY1.6 trillion? Those are the two questions. Thank you very much.

Jun Nagata -- Chief Communication Officer

Mr. Kon, the CFO, will answer your questions.

Kenta Kon -- Chief Financial Officer

Thank you very much, Mr. Katori, for your question. Your first question was about the impact of semiconductors. In our forecast, the current demand -- the tight demand-supply situation is incorporated or discounted for as a risk. Rather than a reduction in production actually from the plan at the beginning of the year, the plan is to -- was to increase production, but the numbers were -- are conservative. We are cautious. In the short term, do we foresee any major impact? No, but as a risk -- in the second half of the year, we don't think we should -- we can rest and be relaxed. So the risks are incorporated in the numbers. The supply demand situation still can fluctuate and we cannot sit back and relax yet, but we are not forecasting a major impact by semiconductors.

One of our suppliers experienced a fire, and Mr. Toyoda, our President, visited them and saw how steadily they are making efforts to recover. Mr. Toyoda went there and supported them. They're trying to reduce man hours and people are working long hours, and that has contributed to us enjoying the situation where there is no impact of semiconductor supplies. I hope you understand the efforts made by those people. Even after the Lehman shock, efforts to reduce the impact of disasters have been taken, and semiconductor inventory has been reviewed, and the assessment of alternative products being done. That is when you switch to an alternative product when supply goes down, it's made more efficient. In the past, the number of processes was very large, but after the Great East Japan Earthquake and after efforts to mitigate the impact of disasters, we are now able to assess -- make assessments of alternative products in a speedy manner. And that was one of the factors behind us being able to mitigate the impact of semiconductor supply. This is not something where we can see results immediately, but our steady efforts being taken are now producing results.

Now, to your R&D investment question, as you mentioned, JPY1.6 trillion is the forecast number that we have announced. To look at the breakdown, in addition to vehicle development, as Nagata-san mentioned, initiatives for carbon neutral, in particular, electrified vehicles or reducing CO2 from factories and also software development for Software First and connected initiatives. So these are the areas in which we make investments. We're not just blindly adding investment projects. Minor changes and other changes, we look cautiously at whether they are really necessary. If they are not necessary, we eliminate them and use those funds for other investments. So we just don't add new projects. We review our existing projects for efficiency improvement, and that lets us have resources for investments in other areas and that allows us to make improvements. That is all from my side. Thank you very much.

Operator

Thank you, Mr. Katori, for your question. There seems to be other questions, but since the scheduled ending time is approaching, so the next person will be the final person from whom we will receive questions. Asahi Newspaper, Mr. Kamisawa-san, please. We will switch the screen. So if you see yourself on the screen, please start your question. So Kamisawa -san, please start your question.

Hiroyuki Kamisawa -- Asahi Shimbun -- Reporter

Kamisawa of Asahi Newspaper. I have two questions. As was shown on page seven of the materials, with respect to the performance for the current year, could you talk about each region? The situation seems to be varied from region to region, America, Japan, Asia, among others. So could you share with us the current situation and outlook for the different regions? And you also showed the outlook for carbon neutral for 2030, and you talked about 6 million, and your plan was to increase carbon-neutral vehicles and PHEV. And could you share with us the reason why you believe customers will be choosing those vehicles?

Jun Nagata -- Chief Communication Officer

Now, with respect to the first question, the regional breakdown, the recovery for fiscal 2021, Kon, CFO, will respond to your question.

Kenta Kon -- Chief Financial Officer

Thank you for your questions. And about Page 7, which shows the operating income by region and also the sales units, and for the fiscal 2021, the period ending in March 2022, what would be the likely outlook. In terms of the automotive market, Japan, North America, and also Europe and Asia, and Asia includes China as well, and about those regions, the recovery is going on more quickly than we had anticipated. That's our current awareness, generally speaking. And in that general context, we are facing customers and focusing customers' need, and we are trying to launch the vehicles that can meet customers' demand and also that can enhance the convenience for customers, and we are planning for that.

With respect to ASEAN within Asia, in the overall picture on relative terms, the market recovery seems to be somewhat slower than other regions, we believe. And about those areas relating to the current infection situation, and especially in a country like India, a lockdown is still going on that caused the stoppage of the economic activities among others. So compared with other regions, the impact of COVID seems to be more serious and bigger. Although at a slower pace, but recovery is taking place. That's how we are assessing at the moment. In terms of the sales unit, for the current fiscal year, for each region, compared with the previous fiscal year, we are planning to increase the sales volume. So that's my response to your first question.

Jun Nagata -- Chief Communication Officer

With respect to the second question, and the majority of the plan consists of HEV and PHEV. And I'd like to respond to that question. My name is Nagata. And for 2030, for one thing, as Mr. Kamisawa mentioned in his own question, the battery EV, its prices and availability of infrastructure on the global situation is not likely to progress significantly. That's one assessment. And with respect to hybrid EV and plug-in hybrid EV, those are easier for customers to choose and use.

But I would like to add further to that question about the Japanese data. We are focused on connectivity or connected. And through connected network, we obtain information and data on vehicles. And even in the case of hybrid EVs or plug-in hybrid EVs, especially in urban areas, the distance traveled by electric mode is quite long. And probably, we can share with you later on, but in the urban areas, generally speaking, there is some difference between urban area and suburban areas, but in urban areas, even in the case of hybrid electric vehicles, about 50% of the times, it is running on the electric mode.

And in the case of PHEV, of course, there are differences in conditions, but 70% or 80% of the times, it is driven on pure electric mode. So hybrid EVs or plug in hybrid EVs, not just their performance and also the data that we can obtain through connectivity, and also, we use information we obtain from navigations. And using that, depending upon where the vehicle is located, the EV mode ratio can be increased or decreased, so adjusted. And those can be doable in the future through hybrid vehicles as well as plug-in EVs. So we would like to make contribution to the environment in a sustainable manner as well as practical manner. And when we aim at that, I think hybrid EVs and plug-in hybrid EVs can continue to be a very important weapon for us to achieve that. And those will be explained details in the second part of this press conference. So please confirm that in the second half. That's all from me. Thank you very much.

Operator

Thank you very much, Mr. Kamisawa. With this, we conclude part one of the financial results meeting. After a 10-minute break, from 2:25, we will start part two of the meeting. Thank you very much for listening.

Now, ladies and gentlemen, I would like to start Part 2 of Fiscal 2021 Financial Performance Press Conference by Toyota Motor Corporation. First of all, let me introduce to you the participants for this part. Member of the Board/Chief Digital Officer, James Kuffner; Chief Production Officer, Masamichi Okada; Chief Communication Officer, Jun Nagata; Chief Financial Officer, Kenta Kon; Chief Technology Officer, Masahiko Maeda.

Now, the Member of the Board, James Kuffner is going to make a presentation.

James Kuffner -- Chief Digital Officer

Today, I'm excited to share with you a glimpse of Toyota's technology and strategy with regards to carbon neutrality. Before I begin, I would like to express deep gratitude to the millions of Toyota customers who continue to choose our products and services and place their trust in us. The COVID-19 global pandemic has been difficult for everyone. These strong financial results that we have shared today were only possible due to the hard work and dedication of Toyota group employees, suppliers, dealers, shareholders and partners worldwide. Thanks to these amazing people, Toyota can continue to create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers all over the world.

The Toyota Philosophy was developed to guide our company. At its foundation is mobility and happiness for all. For over 80 years, Toyota has been executing on its vision and mission to produce happiness and deliver safe, sustainable, mobility technology to customers globally. As part of that mission, Toyota has been working hard to help all countries and regions around the world achieve carbon neutrality through its products. In addition, Toyota is 100% committed as a company to achieving carbon neutrality by 2050 or earlier.

What does carbon neutrality actually mean for the automotive industry? Carbon neutrality for the automotive industry means achieving zero CO2 emissions in all processes throughout the lifecycle of manufacturing, transporting, operating, fueling and/or charging, and recycling and disposing of vehicles.

Toyota has been innovating and investing in technology to reduce emissions and achieve carbon neutrality for over 30 years. In the early 1990s, Toyota committed to achieving the ambitious goal of building a practical mass-market vehicle that would have twice the fuel efficiency of a Corolla class vehicle with the same high reliability and low cost that Toyota customers expect. There were many skeptics at the time.

In 1996, Toyota developed and launched its first battery electric vehicle, the RAV4 EV. The RAV4 EV faced significant challenges related to limited range, long charging times, and lack of available charging infrastructure. But Toyota engineers used customer feedback and valuable knowledge from the RAV4 EV development to improve both battery technology and power electronics. In 1997, Toyota launched the best-selling Prius, the world's first mass-produced hybrid electric vehicle.

Bringing practical HEVs to market was not easy. It involved many innovations in motors, inverters, engines, batteries, and electronics. Some of Toyota's innovations in battery technology included materials, manufacturing processes, improved safety and crash-worthiness, high-power output performance, and better recyclability for sustainable manufacturing. Building upon that experience, over the past 25 years, Toyota has remained committed to developing an array of new technologies and products to help reduce carbon emissions. We have successfully developed and launched a wide variety of innovative products, including hybrid electric vehicles, battery electric vehicles, plug-in hybrid electric vehicles, and hydrogen fuel cell electric vehicles.

The success of the Prius demonstrated that our commitment to carbon neutrality had also created a once-in-a-generation opportunity for innovation and market leadership. And today, Toyota offers the world's largest lineup of 55 practical, reliable, and affordable electrified vehicles all over the world, with many more to come. Our combined sales volume of electrified vehicles, including HEVs, BEVs, PHEVs, and FCEVs is now more than 2 million vehicles per year.

The Atkinson cycle engines in our HEVs and PHEVs are extraordinarily efficient, up to around 40%. These efficiency improvements have helped reduce emissions in many parts of the world, particularly those with less green power infrastructure. The net positive impact of Toyota's innovations enabled an estimated reduction in total cumulative carbon emissions of approximately 140 million tons in over 20 years. This is equivalent to removing 1.5 million typical passenger vehicles from our world's roads every year over that time period. We are proud of these achievements, but we know we can and we must do better. That is why we are rapidly introducing 15 battery electric vehicle models globally by 2025, including seven recently announced TOYOTA bZ models.

We are also expanding and improving our product lineup of HEVs, PHEVs, and FCEVs. To support all of these new products, Toyota will continue to make global investments in exciting new battery technology, such as solid-state batteries. Along with more efficient electric motors, these new batteries will help make EVs more practical, safer, and more sustainable.

Toyota believes the world can achieve carbon neutrality, but there are still many challenges to realizing our dream. Even with perfect battery technology, a BEV will still generate tons of CO2 emissions over its lifetime if it is charged by electricity produced by coal or other non-renewable energy sources.

Another challenge is that not everyone has convenient access to charging infrastructure. I'm one of them. I live in an apartment building in Tokyo and have no ability to plug in a vehicle. Fortunately, Toyota can offer me additional choices. For example, PHEVs offer flexibility and can be built with smaller batteries using fewer materials. PHEVs can be driven in zero-emissions electric mode, optimized for the short trips that make up most of the world's driving, as well as providing a hybrid mode for longer trips.

In addition, Toyota continues to aggressively invest in complementary new green energy technologies aimed at achieving carbon neutrality. Toyota is the world leader in hydrogen fuel cell technology. Hydrogen is the most abundant element in the universe and can be produced locally at the point of use with nothing but renewable energy and water. Hydrogen can also provide long-term storage of renewable energy for use during peak times. After more than 20 years of research and development, in 2014, Toyota launched the Mirai, our first mass-produced hydrogen fuel cell electric vehicle, which won the World Green Car of the Year Award in 2016.

Fuel cell technology is truly magical. As the vehicle moves, air from the outside combines with hydrogen in the fuel cell to produce electricity and water.

A pure and simple zero emissions vehicle that can be refueled in three minutes. Our second generation Mirai was announced last December. We improved performance, comfort, and efficiency, increasing EPA range to 647 kilometers or 402 miles. Despite these improvements, hydrogen energy still faces many challenges related to available infrastructure, overall efficiency and enabling low-cost clean hydrogen production. Toyota will continue to invest in technology to overcome these challenges. Moreover, passenger cars are only a small part of Hydrogen's future potential.

Toyota's hydrogen fuel cell technology could help to clean up a large percentage of the world's entire transportation ecosystem. That means achieving carbon neutrality in trucks and heavy transport, trains, buses, taxis, aviation, shipping, forklifts, and industrial processes, all of whose combined CO2 emissions exceed those of passenger cars. Toyota has also developed modular fuel cells and a stand-alone fuel cell generator that can be repositioned to produce electricity anywhere on demand. For example, you can use Toyota's stand-alone fuel cell generator to quickly deploy a charging station for a BEV or PHEV.

But cleaning up new vehicle sales is just the beginning. There are more than 1.4 billion vehicles in the world today, and most of them have internal combustion engines. Toyota is exploring possible ways to clean up the world's legacy fleet of ICE vehicles that will still be in operation during the next 10 to 15 years. Hydrogen fuel can also be burned as a cleaner fuel. Just last month, Toyota demonstrated a new hydrogen engine prototype that could expand the options for achieving carbon neutrality faster. In the world of motorsports, where the development speed of new technology is rapid, President Toyoda, who is a master driver himself, takes the wheel and repeatedly evaluates these vehicles and technology progress. Toyota's work on making ever better cars now also has the potential to enable more environmentally friendly motorsports.

In everything we do, Toyota is and has always been firmly committed to carbon neutrality. Toyota has the world's largest and rapidly expanding lineup of electrified vehicles, consisting of BEVs, HEVs, PHEVs, and FCEVs. Because of our unique history of working with electrification for nearly 25 years, Toyota's technology is world-class and strongly positioned to help different countries around the world reduce emissions and achieve carbon neutrality faster. This was all done before mandated rules by governments or the recent global movement and growing awareness of the need for carbon neutrality. Giving back to the world and having a clean future is in our Toyota DNA.

We are very excited about the future of electrified mobility and the tremendous new products and business opportunities that the green economy will create as we make progress toward achieving our goal of carbon neutrality. However, no single company, including Toyota, can accomplish this goal alone.

All industries must work together to develop new technology and infrastructure in cooperation with scientists and academia, as well as local and national governments. This is a challenge that we are excited about facing, because it will not only lead to better products, but also help protect our precious planet at the same time.

We would like to be a trusted partner to build the best products suitable for people in every part of the world to achieve carbon neutrality faster, with Toyota's brand representing quality, reliability, low-cost, and long-lasting value. Toyota is 100% committed to the global goal of achieving carbon neutrality by 2050 and as a result, a brighter, happier future for us all. Thank you very much.

Operator

Now, ladies and gentlemen, we would like to start the Q&A session. [Operator Instructions] River Davis of Bloomberg. We will switch the screen. So if you see yourself on the screen, please start your question. So, Ms. River, please.

River Davis -- Bloomberg -- Analyst

Hello, can you hear me, OK?

Operator

Yes, we can.

River Davis -- Bloomberg -- Analyst

Thank you so much for the opportunity today. I have one question for Mr. James Kuffner about electrification of vehicles. It seems that there is kind of two camps when evaluating Toyota's pursuit of electric vehicles, one that looks at Toyota's kind of behind the pack in developing battery electric vehicles and another that looked at the recent announcement of the bZ electric vehicle plan as Toyota finally announcing the plans that it had been building for quite a long time, so not necessarily behind the pack. I wanted to ask, James, where do you see Toyota standing compared to rivals in regard to the development of specifically battery electric vehicles? I know Toyota has quite a strength in hybrid vehicles.

James Kuffner -- Chief Digital Officer

Thank you very much for your question. I'll make a brief comment and then, I'd like to invite our CTO, Mr. Maeda to follow up. One of the reasons that I spent some time to explain the history of electrification is that a lot of people don't actually realize that Toyota developed electric vehicles over 20 years ago, and we've learned a lot. it requires a lot of innovation and development in engines and motors and power electronics. All of these things that are needed in order to build a practical electric vehicle and electrify transportation and mobility. And Toyota is always listening to customers, always trying to develop products that are suitable for every part of the world. And we have to remember that the goal is not electric vehicles. The goal is carbon neutrality. And even if we have the best technology, if it's not chosen by customers, it will not have the impact of reducing emissions and that's the reason why we've chosen to have a full lineup, and we've invested in all of these technologies.

But make no mistake, Toyota is really excited and I believe we are strongly positioned to lead the world in the best reliable low-cost battery electric vehicles. As you know, producing batteries has a lot of challenges, and we are trying to overcome them as well as the rest of the industry related to infrastructure, but we should also not forget that mining some of the rare elements that are needed to produce today's batteries, whether it's lithium or cobalt or nickel, these things are also producing emissions. So we have to find a good balance and that's what Toyota is committed to. We've reduced the size. We've increased power output, and we've made incredible innovations in performance and safety of battery technology. And we're doing that with 25 years of experience of building cars that are electrified. And like I said, we're now selling over 2 million of electrified vehicles per year. So I feel very confident that we can continue to lead the industry in changing and producing products that are chosen by customers all over the world that will deliver clean energy and clean transportation.

I'd like to ask maybe CTO Maeda-san to follow up.

Masahiko Maeda -- Chief Technology Officer

Now, from my side, let me add some comments. As Dr. Kuffner mentioned, batteries is one way to realize carbon neutral. In fact, battery vehicles are one way. Realizing carbon neutral is one purpose of electrification. Then, how can we achieve carbon neutral? At Toyota, we think environmental technology itself is not worth it, if it isn't used widely. Carbon neutral by 2050 or in China by 2060 are the numbers that we are hearing. But way before that, we were developing the first Prius, and even at that time, we think that the technology is only good when it is widely spread.

Then the question is how can we make technology widespread?

Operator

You don't have to soft there because your trans being translated simultaneously.

Masahiko Maeda -- Chief Technology Officer

Then how can you make technology used widely? High convenience for the customer is important. As we mentioned in Part 1, the technology of vehicles so that we prepare, we will have to be practical for the customers. Worldwide, there are many types of consumers. Of course, on a day-to-day basis, there are some people who simply use vehicles as passenger cars and it may sound like an excessive case, but for example, in the United States, a 1 pound trailer may be told by their vehicles. And in the southern hemisphere, there are people who go into the mountains and drive on roads where you can't imagine vehicles being driven. Historically, Toyota even before the days of electrification has always focused on the convenience of the customer. So, we have responded to customers' need and as a result, we created the current full lineup of products that we have.

Towards carbon neutral, when we prepare electrified vehicles, it's the same approach. For people who tow heavy trailers, what kind of vehicles would be necessary. Currently, a lot of people think hybrids are the most convenient. And if that is represented in the form of sales and units, in the future, we may have a good charging stations and we have a higher battery performance. Some people may see that as convenient. So not just the technology of batteries, but depending on the region, customers will use their vehicles in their own ways. So convenience and environmental technology has to be provided by Toyota. Both will be provided by Toyota, we think that is important. And for electrified vehicles, as a result, we have a full lineup. HEVs, PHEVs, FCEVs, BEVs, we have this full lineup and that is because the convenience of the customers and environmental technology are both important. And as we consider this very seriously, we have this full lineup. And in the future, we would like to continue to make efforts so that we can realize carbon neutral with electrification. Thank you.

Operator

Thank you Ms. Davis for your question.

River Davis -- Bloomberg -- Analyst

Thank you very much.

Operator

Now, let us move on to the next question. Mr. Naoto Ikeda, please could you start your question? I'm going to switch the screen. So if you see yourself on the screen, please start your question. So, we are now switching the screen. Mr. Ikeda, could you start -- please start the question, please?

Naoto Ikeda -- Freelance Journalist -- Analyst

Naoto Ikeda, Freelance Journalist. Thank you for this opportunity. Earlier, Mr. Nagata talked about electrification and moving toward that, you said we were required 30 times more batteries that you are using currently. If that is the case, procuring that battery, especially the raw materials for the battery production, including lithium, cobalt and nickel included, that was mentioned earlier. Currently, those raw materials are procured for the most part in China and probably would need to start thinking about procuring in Japan or from Japan. Toyota alone wouldn't be able to achieve that. It would require cooperation with government. And what is the current status of the discussion with the government about the procurement of those raw materials for batteries?

One other question, which also relates to batteries. Basically speaking those batteries could combust substantially. And if you leave an address, it could take fire and probably it will become costly if you try to control that characteristics of the batteries are taking to fire. So what is the balance of that? And in terms of cost competition among rivals, how are you going to maintain your cost competitiveness, trying to control the combustiveness of those batteries?

Jun Nagata -- Chief Communication Officer

Thank you Mr. Ikeda for your question. The first question with respect to the production of batteries, so Okada, the CPO, will respond to the first part of the question. And second question relates to the safety of battery and also the balance with the cost and Mr. Maeda, CTO, will respond to that question. So, Mr. Okada, please.

Masamichi Okada -- Chief Production Officer

Thank you for your question Mr. Ikeda and allow me to answer your question. First of all, in terms of the procurement of raw materials for battery production, naturally as you pointed out in your question, we do have those concerns and to address those concerns in relation to batteries, we do have various partners. We do have several partners who worked with us for battery migration and we started making efforts to ensure the procurement of batteries. And as you mentioned, the collaboration and cooperation with the government is required for the procurement of purpose and requirement of batteries and that is a very important aspect. And therefore, working with partner is one thing we are doing and also, we have partner working with us in our subsidiary, the battery manufacturer. So we work with Panasonic to ensure the certainty of procurement of materials for batteries. And once we have assured the procurement of raw materials in terms of procurement as well as Mr. Nagata mentioned, the production volume is expected to increase. I will be repeating currently, annually, we have 6 gigawatt hours and in 2030, we have to produce 180 gigawatt hours and need to establish nearly 60 production lines for those batteries and to ensure that volume for the past 20 years or so, for hybrid EVs, we produced 17 million hybrid vehicles, and the batteries required for a hybrid electric vehicle, the capacity of that, probably 30 times of that will have to be produced in the next 10 years or so.

So as mentioned earlier, in addition to ensuring the procurement of raw materials, we must ensure the appropriate production of batteries as well. We must ensure that supply is stable and safe supply of that for us to secure the volume as well as state of those batteries, we are working closely with multiple number of partners and that is very important. And also, the subsidiaries for producing batteries, we have PPAs and also [Indecipherable], in a sense, the production there is close to in-house production and in the small -- starting with a small capacity and starting with the small basic unit, we are establishing new production lines, preparing that in the shorter lead time and repeating that frequently. That's what we are trying. And if those facilities for manufacturing is necessary, we are going to produce and manufacture those production facilities as well.

And I'd like to share with you some slides. As I mentioned earlier, back in 1997, we entered these hybrid vehicles and since then, since 1997, the production facilities of hybrid motors and also the production lines for batteries and for FCEVs, we are producing hydrogen tank manufacturing equipment for those important production equipment, starting with the small basic units like minimizing the required investment, we have been introducing those production lines to be introduced in the short lead times. So, those are the efforts that we have made over the years.

And this sort of technology and skills that we have accumulated over the years will be applied for the production for the expanded volume of BEVs and electrification overall. So the -- within Group, we have the businesses of producing production equipment and mobilizing the capabilities of equipment manufacturers. We intend to have the solid and robust structure for battery supply and procurement.

Masahiko Maeda -- Chief Technology Officer

Now, this is Maeda speaking. The safety of battery and the cost, the balance between the two. Let me start by speaking from a broader perspective. When you say battery performance, you are probably talking about batteries as seen from customers' point of view, what does battery performance mean to the customer? As you mentioned, cruising range or probably deterioration performance, which you will have an impact on used car prices, those will be major factors. And to balance that, in the process of using the product, how safe can it be? In the worst case, our batteries can burn, but making sure that, that doesn't happen, we have to strike a balance.

Technically speaking, for example, if you want to extend the cruising range for volume, how much power can you accumulate, that is energy density? That performance and the deterioration performance and safety, these may sometimes contradict each other. Safety is always important to Toyota. So energy density is not always the priority for us. That will be our approach. Then, how do we improve the cruising range? For example, by improving power efficiency, the cruising range can be increased. Of course, improving battery performance is one approach, but you can look at the overall vehicle and improve power efficiency like reducing resistance or reduce -- the energy necessary inside the vehicle can be reduced.

As for hybrid vehicle development, we have accumulated that kind of technology over the years. As a result, increasing power efficiency will lead to reduction of the amount of batteries to be used. So improving safety and by improving our power efficiency and reducing batteries can be realized together and that is what Toyota has done over the years. And we will continue to look at things from the perspective of the customer.

Now, let me go into a little bit more of a detail, if I can have Slide 14. Now, deterioration of the batteries. What does that mean? I will be going into detailed technical explanation, allow me to do that. For example, for batteries, if you want to a sporty drive where energy goes in and out frequently as you see on the left-hand side, the electrolyte concentration will vary and that accelerates deterioration of the batteries. Since we were developing the hybrid vehicles, we have been creating models of this. The volume, current, temperature, when these are changed, how do they deteriorate? We did a lot of basic experiments on that. This is what we call model-based development.

So, we created a control system by multiple monitoring of the battery. Since the introduction of hybrids, we are using these models. We introduced the vehicle control technologies to confirm the accuracy and reliability. Currently, 17 hybrid or electrified vehicles are sold by Toyota and these vehicles are being used by our customers. At least to the extent of our knowledge, there were no cases where there were no serious impact on the customers. These are being used safely and reliably by our customers at the moment. So historically, we have accumulated this kind of technology. This is used for hybrid vehicles and this will be used in the future for battery EVs. That is our approach to this technology. I went into a bit of details. Well, that is all from my side. Thank you very much.

Operator

Thank you very much Mr. Ikeda. Now, let's us take the next question. From Automotive News, Mr. Hans please. We will switch the screen, so when you see yourself on the screen, please ask your questions. In the case of an English question, you will hear the Japanese translation after the question. Mr. Hans, please.

Hans Greimel -- Automotive News -- Asia Editor

Thank you for taking my question today. May I speak in English please. My question is a little bit about the battery ramp-up that you have. You have to need this massive ramp-up in terms of battery supply by 2030. Can you tell us a little bit about your plans for building and sourcing electric vehicles and electric vehicle batteries in North America, specifically?

And one other thing about the carbon neutral policy, Toyota has been talking a lot lately about this hydrogen burning engine that you will demonstrate later this month at Fuji Speedway and also about e-fuels, how seriously are you investing in these kinds of technologies right now? Is that a real pathway forward to carbon neutrality or is that just kind of a buzzword or some kind of distraction right now from the main show?

And finally, maybe just if I could ask for an update on the Woven City, when can we expect some new developments on that? When will you announce who is living there, other kinds of updates you might have? Thank you.

Jun Nagata -- Chief Communication Officer

Thank you very much. For the first question, BEV battery sourcing plan will be -- in North America will be answered by Mr. Okada, for e-fuel and H engine, Mr. Maeda and for the Woven City, Dr. Kuffner will be answering the question.

Masamichi Okada -- Chief Production Officer

Thank you very much for your question. So your first question was about battery sourcing in North America. In part one, we briefly touched upon this. But in each region, how many electrified vehicles will be produced, that plan is developed. And of course the batteries will be necessary in each region.

And in each region, which vehicle or which powertrain will be necessary that will have to be identified through dialog with the customers, and battery is necessary for that. It is to be produced within that region. That will be an important point toward the future. So you mentioned North America, and the same approach will be applied to North America. For North America they have vast land and depending on where you are in the United States, the customers' preference will differ between East Coast, West Coast and central part.

So customer preference, infrastructure are different depending on the regions. So taking that into consideration, we will be supplying vehicles. And likewise for batteries, hybrids, EVs for these vehicles, we will be sourcing the appropriate batteries. And in order to do that, we will work through partners and we may produce in house. We haven't determined which approach we'll be taking, but we will consider that, so that we can provide supply in a timely manner.

That is all from my side.

Masahiko Maeda -- Chief Technology Officer

So for the second question let me answer. Towards the carbon neutral, the hydrogen engine, e-fuel, how serious are we in investing in these areas. So starting with the hydrogen engine. As we announced two months ago, the President will drive in May in the endurance race. So of course we are serious. There is no way we are not serious.

As we mentioned before, customer convenience is important and the customers use the vehicle in various ways. So the options for the customers about carbon-neutral shouldn't be limited. That is our thinking, and that is why we are developing those types of cars. Of course the President is participating in a race. The joy of driving should be enjoyed by many customers. And toward carbon-neutral, hydrogen engines maybe once of use. And as we think that way, we are serious about this.

This technology may be applied to a large commercial vehicles. That is something that may be possible. And as Mr. Hans note, in the United States and Brazil, bio-ethanol based carbon-neutral fuel is already commercialized. Now this is based on existing technology. And in the future, if you combine that with hybrids, we will be able to contribute to carbon neutral in saving energy. The technology that we have developed so far and the technology that we are to develop from now on can be combined. So the carbon-neutral does not leave it, the choice is for customers. When we say full lineup, we mean, depending on the preferences there, and the way of using the vehicles in each region. We want to provide a wide array of options for the customers.

So for any technology, we are very serious about it. That is all.

James Kuffner -- Chief Digital Officer

Thank you, Hans for your question. I'll take the question about Woven City. It's been 16 months since present Toyota announced the Woven City project at Computer -- Consumer Electronics Show in Las Vegas. And since then, the team has been really hard at work.

And despite the COVID-19, we were able to complete the Phase 1 designs and start the groundbreaking officially this year, February 23rd and we are making continuous progress and we have launched also our website where we've had several thousand inquiries from companies and partners all over the world.

And we just announced a partnership with ENEOS to develop what we believe will be most advanced city in hydrogen. And we believe that, that is going to accelerate our initiatives in order to understand how hydrogen and renewable energy can play a big part in smart cities of the future. Woven City's goal is to become a living laboratory of mobility for people, goods and information. And we are continually making updates.

At this point, we have planned to start inviting companies to start working with us and we've also launched our website where you can find continuous updates. So please stay tuned.

Woven city is going to be I think a very important part of accelerating our efforts as a Company to become a mobility company powered by software and digitalization and really be a true world leader in this area. There are so many issues where -- around urban development, whether it's traffic or pollution sustainability and all of these efforts are connected, whether its carbon neutrality, safe mobility, we would like to accelerate the development of all of that and transform our Company to a mobility company of the future through the Woven City project.

And this is just part of the larger transformation that we are embarking upon related to software first. I didn't have time to talk about that today, but software first is a dramatic transformation and different way of designing products where we design the software architectures before assembling the product and designing the hardware. And this is going to dramatically improve our reusability of software across many, many different forms of mobility, reduce the development cost and accelerate the features that we can offer to our customers over time. And this is not just for traditional passenger cars, but for all kinds of new connected mobility, personal mobility, flying mobility and that is going to be something that I hope Woven City can be a flagship project and help lead the world in accelerating that development. Thank you.

The digitalization of the software first that's happening in our Company on our traditional engineering is all connected to the advanced digital technologies that we will deploy and develop in Woven City. So I believe that they're all part of the strategy of leveraging advanced digital technology and connecting those to real products and getting real feedback in a real situation like Woven City. And that's always been our philosophy try to test and listen to what customers are experiencing and build products that produce human health and happiness. Thank you.

Operator

Thank you, Hans. There may be further questions, but since the scheduled closing time has approached, so I would like to ask the next person to be the final person asking question. May I invite Chiba-san of Asahi Newspapers. We will switch the screen. So if you see yourself on the screen, please start your question. So Chiba-san please start your question.

Takuro Chiba -- Asahi Newspapers -- Analyst

Can you hear me, Chiba speaking.

Operator

Yes, we can hear you.

Takuro Chiba -- Asahi Newspapers -- Analyst

Thank you for the opportunity. I have two questions with respect to [Technical Issues] de-carbonization. You talked about the next generation battery, and Mr. Nagata in part one talked about the importance of enhancing the pace of battery technology development. Could you elaborate on that in details?

And as of this moment, how are you going to enhance the performance of battery? By when? And how are you going to bring that forward and produce those batteries? Is there any concrete numbers that you can sign? And can you also talk about the all solid state battery as well? Do have any concrete timing or prospect of realizing that?

And the second question relates to the carbon neutrality and [Technical Issues] Mr. Kuffner spoke about the ICE being made cleaner. And you may be using existing engines, but talking about carbon neutrality, we tend to focus more on electrification with respect to the development of engine technology, the gasoline including improvement of gasoline engine.

Operator

Mr. Chiba, it's very difficult for us to hear your question. The sound is not really coming through. So could you repeat your question once again?

Takuro Chiba -- Asahi Newspapers -- Analyst

I'm terribly sorry. Can you hear me, all right? Can you hear me, all right?

Operator

Could you repeat your question once again? We have so much noises, if you could speak louder, probably that will help.

Takuro Chiba -- Asahi Newspapers -- Analyst

Can you hear me?

Operator

Well, we can hear you.

Takuro Chiba -- Asahi Newspapers -- Analyst

I'm terribly sorry. With respect to the battery technology, earlier it was mentioned that you're going to increase the pace of development that was mentioned in part one. And I would appreciate your elaborating on that more concretely on that point, how much are you going to bring that forward? The development of battery technology?

Operator

It's been very difficult for us to receive your voice, very difficult to hear, discern your voice. We cannot hear you.

Takuro Chiba -- Asahi Newspapers -- Analyst

Can you hear me?

Operator

Could you say that once again.

Takuro Chiba -- Asahi Newspapers -- Analyst

Can you hear me alright?

Operator

Right now we can hear you. Yes.

Takuro Chiba -- Asahi Newspapers -- Analyst

I am terribly sorry. In part one, Mr. Nagata talked about the development of battery technology and he said Toyota is going to enhance or accelerate the pace of battery technology development. And I would like to hear the details of that to be elaborated. What is the current target or goal you have for battery technology? And how much are you going to bring that forward? And what sort of performance are you aiming at? So, if you could talk about that in a more concrete and specific terms, I would appreciate that very much. So that's question one.

The second question also relates to carbon neutrality. And you talked about making internal combustion engine cleaner. I think Dr. Kuffner talked about that. And talking about decarbonization, we tend to focus more on electrification technology, but with respect to the development of engines, based upon existing gasoline engines, you may be able to enhance the thermal efficiency of that and including that aspect, how much investment cost are you expecting for engine development or investing manpower and resources for engine technology? You're not intending to reduce that. I would like you to talk about your approach and concept of engine development. So these are my two questions.

Jun Nagata -- Chief Communication Officer

Thank you, Mr. Chiba for your questions. So let me talk about the first question that is shortening the development time lead time for battery technology, Mr. Okada will talk about that. And the second question, that is to say, the enhancement of ICE or making it cleaner, Mr. Maeda will talk about that.

Masamichi Okada -- Chief Production Officer

Okada speaking. Mr. Chiba, thank you for your question. Starting with the part one, we have been talking about battery in Part 2 as well and ending at -- moving toward 2030, we are trying to accelerate that pace as quickly as possible and we are going to secure the necessary value. As we do that, both hybrid vehicles and PHEVs, customers do support those two technologies significantly, and therefore in terms of supply, we intend to offer those vehicles. And as we do that, we will continue to do batteries for BEVs and also FCEVs.

So we are working on that and we accelerate that further. So probably in the middle of period between 2020 and 2030, aiming at that time frame, we intend to further enhance our capabilities for batteries, for BEVs, ensuring the supply of that and ensure the supply of those batteries that we develop so that we'll be able to achieve the goal that we set for ourselves for 2030.

So that's what we are working on in earnest at this moment. With respect to our solid state batteries, we are -- it's still in the process of development, and Mr. Maeda will talk about that and supplement that later on. But at this stage, all I can say is, it is still in the process of development. We are trying to accelerate the pace of developing all state of battery as well. And Mr. Maeda will supplement that further.

Masahiko Maeda -- Chief Technology Officer

Maeda speaking. And Including additional remarks with respect to your first question, I would like to say the following. With respect to all state batteries, solid state batteries, we are developing raw materials for that. So technologically speaking, we still have very high hurdles to go over.

I won't be able to go into great details, but in terms of the raw materials that are being developed, the safety and durability are not yet fully satisfied. So at this moment we are specializing on the development efforts, dedicating our efforts for the development of raw materials that can satisfy safety and durability requirement.

As Mr. Nagata mentioned earlier, the pace of the battery development is being accelerated. That leads to the shortening of lead times for battery parts as well. As we move toward achievement of copper neutrality, we talked about the importance of offering greater options of technology. To put it differently, going forward, what would customers would prefer and choose in terms of vehicles offering greater convenience that is not yet clearly defined yet.

So given that uncertainty I mean, customer preference may change in the future, regulation might change in different ways, and that's where we find ourselves and we'll try to capture those changes as accurately as possible. While we work on this development, it's very important to shorten the lead time for development, including the development of battery as well. So considering those factors, as you see on the screen, compared with existing Toyota vehicles, in the case of bZ4X, we have shortened the lead time for development by around 30%, and focusing more on the battery.

Going forward, we are now working hard so that we can shorten lead time for development by another 10%. That means as a result, we will be able to achieve the results that we're aiming at without increasing fixed costs and without increasing manpower to be dedicated for the purpose. And to realize that and this is connected to the ICE as well, I think there are two important factors as Kuffner talked about earlier, the digitalization is very important in this area as well. As I explained battery I went into rather technical details. Basically, we use computers simulations in development.

And as we engage in development using computer simulations, the development environment itself is going to be digitalized, so working with Kuffner's team, we need to have the robust, solid development for digitalization, so that we can accelerate the process of development, and achieve the evaluation daily. And as we do that, the TPOs that Toyota has been accumulating over the years will become very important. In the context of the digital development, digital based development, bringing different engineers will work together in engaged development.

The drawings can be made by a single person, but in the case of digital development, multiple number will be engaged in the development of software. So as we do that, how the information is flowing that need to be streamlined, and that area where TPS concept or philosophy of TPS can be applied, and if that is done, if that is streamlined based upon TPS, we can enhance the efficiency further leveraging our own strength.

And TPS and digitalization that I just talked about relates to the cleaning of ICEs that was mentioned in your second question. It is related to that as well. Further, I talked about the allocation of resources for enhancing efficiency of existing -- thermal efficiency of existing engines. And already we're earnestly working on that. But as Mr. Ichiba is concerned about, we simply cannot allocate large amount of resources on that, since we have to engage in electrification as well, the amount of resources we can dedicate could be limited. And therefore even if in the case of development of engines, the digitalization becomes important as well as using TPS concept. And those two becomes very important.

So when we take both of this into consideration, using digitalization and TPS, we will reduce or minimize the basic unit of development so that overall efficiency can be enhanced. And that be very important. Now why the cleaning of ICE is important, could you show us Slide number 15 for that purpose?

Here, in part one, Mr. Nagata mentioned about this a little bit. In the case of existing HEVs, when customers are using it, to what extent engine is not used, the engine is stopped as shown here starting with RAV4 hybrid version, starting from the left hand and before this slide, you have RAV4 PHEVs. And generally speaking, including the vehicle speed is zero, when the vehicle is stationary, between 60% and 80% the engine is stopped. Engine is not running, which means for the rest of the time, the engine is still used. So the efficiency of engine when it is in operation, need to be enhanced going forward as well. So although a bit and bit, but the percentage of engine being stationary by reducing the battery [Indecipherable] electronic efficiency, and being enhanced, we can enhance the efficiency of engine as well. And by using digitalization and TPS even with the smaller amount of resources, we will try to achieve the similar result of technological development, and taking advantage of that in an uniquely Toyota way of doing that. We would like to use those development to achieve the carbon neutrality going forward.

Operator

[Operator Closing Remarks].

Duration: 126 minutes

Call participants:

Kenta Kon -- Chief Financial Officer

Jun Nagata -- Chief Communication Officer

James Kuffner -- Chief Digital Officer

Masahiko Maeda -- Chief Technology Officer

Masamichi Okada -- Chief Production Officer

Ove -- NHK -- Reporter

Masatoshi -- Nikkan Kogyo Shimbun -- Reporter

Shiraishi -- Chunichi Shimbun -- Reporter

Naotake Katori -- Yomiuri Shimbun -- Reporter

Hiroyuki Kamisawa -- Asahi Shimbun -- Reporter

River Davis -- Bloomberg -- Analyst

Naoto Ikeda -- Freelance Journalist -- Analyst

Hans Greimel -- Automotive News -- Asia Editor

Takuro Chiba -- Asahi Newspapers -- Analyst

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