The Toyota alliances: BMW (Part 1: The first volley)

Economies of scale. Allocation of finite engineering and research & development resources. Ever-tightening low emissions and high fuel economy regulations by the world’s governments. Figuring out which of the myriad alternatives to the internal combustion engine are more or less worthy of receiving time and attention. The mind-boggling challenges facing carmakers in the second decade of the 21st Century are enough to make even famously independendent companies such as Toyota change their tune in the span of 2½ years, from “Toyota is not the kind of company that is good at alliances” to “In the past…Toyota was one of those companies that liked to ‘go-it-alone’. But that’s changing in a major way.”

Those challenges are even greater for the two German luxury car companies – BMW and Mercedes-Benz – that are not simply the upscale brands of larger carmakers, such as Volkswagen’s Audi, Toyota’s Lexus, Nissan’s Infiniti, General Motors’ Cadillac, and so forth. And meeting those challenges has been a bumpy ride for the two companies. The Daimler-Chrysler alliance (or, more accurately, Mercedes parent Daimler-Benz’s takeover of Chrysler) was an unmitigated disaster, but even that somewhat acrimonious divorce didn’t change the need for Daimler AG to hook up with a larger, broader-reach mass-market manufacturer. The result: a new alliance with Nissan-Renault that will see everything from next-gen Smart cars and Renault Twingos sharing underpinnings to Infiniti’s Lexus CT 200h-rival sharing its underpinnings with Mercedes’ A-Class hatchback to shared Tennessee-built 4-cylinder engines to rumors that the next Infiniti G will use Mercedes-sourced engines and, possibly, platforms.

BMW, too, has seen a bumpy ride of its own in its quest to ally itself with a volume car company. Attempting to cure “the English patient” that remained from the company’s ill-fated takeover of the Rover Group in 1994 proved futile, with only the reborn MINI remaining under BMW stewardship 6 years later.

With BMW at that point exclusively manufacturing rear-wheel-drive vehicles with engines no smaller than 1.6 liters, it was obvious that a reborn MINI would require all-new gasoline engines and front-wheel-drive transaxles. A joint venture with Chrysler Corporation led to the creation of the Tritec (or Pentagon) engine family. This, however, did nothing to satisfy burgeoning demand for diesel engines in Europe. Those, instead, would come from a rather unexpected source.

MINI One D: the original BMW/Toyota connection
By several accounts, it wasn’t any great love or appreciation of Toyota quality or reliability à la Lotus’ Roger Becker that led to initial contacts between BMW and Toyota, but a far more pragmatic need for an especially compact and light, off-the-shelf modern turbodiesel engine that would fit under the MINI’s tight underhood confines, and Toyota’s 1ND-TV 1.4-liter diesel best fit the bill. The 1ND-TV, commonly referred to as the 1.4-liter D4-D (Direct Injection 4 Stroke – Diesel), is built in Toyota’s engine plant in Kamigo, Japan, and debuted in March 2002 as an option on the 1st-generation (XP-10) Toyota Yaris primarily in Europe. It remains available as a Yaris option through the current 3rd-generation (XP-130), and also spread to the Auris (Corolla hatchback), Corolla, iQ, Ractis/Verso-S and Urban Cruiser (Toyota ist/Scion xD) lines there. In India, it is also an increasingly popular option on Toyota’s locally-built Etios and Etios Liva models.

The 1ND-TV’s public debut in a BMW MINI came a year after the original Yaris rollout, on March 2003 at the Geneva Auto Show. The engines were imported from Japan by BMW, which added a number of MINI-specific pieces and components at the latter’s assembly plant in Oxford in the UK, most notably a boost in torque from 170 Nm (125 lb/ft) in the Yaris to 180 Nm (133 lb/ft) in the MINI and the replacement of the Toyota’s 5-speed manual transaxle with a Getrag-sourced 6-speed manual. According to the Motors TV website, though, Toyota nixed BMW’s wish to tweak the engine to boost the engine’s 75 hp to about 90 or so for reasons of reliability.

This eventually became a moot point, however, as revisions required to meet tighter Euro IV emissions standards ironically resulted in a power increase for 2006, anyway. In the words of the UK’s Channel4.com via MotoringFile:

The revised engine management system and new exhaust gas re-circulation with catalytic converter has helped boost power output by 13bhp (from 75 hp to 88 hp) and torque by 10Nm (7 lb/ft, from 133 to 140 lb/ft total), and acceleration 0-60mph has improved by nearly two seconds.

By that point, though, engineering was well along on the 2nd-generation BMW MINI, and dissatisfaction with the Chrysler co-developed Tritec gasoline engines (not to mention that Chrysler was now owned by BMW’s archrival Mercedes-Benz) led to a reevaluation of MINI engine sourcing, and, ultimately, a Peugeot gasoline engine and a diesel co-developed by Peugeot and Ford. Thus ended any sort of official BMW/Toyota interaction until…

December 2011: the first volley
On Thanksgiving weekend (late November) 2011, reports from Nikkei, The Japan Times and Sueddeutsche Zeitung suggested a curious and quite unexpected bit of news: a brewing alliance between BMW and Toyota where BMW, in a stunning turnaround from the MINI diesel supply deal discussed above, would supply Toyota with diesel engines in return for Toyota giving BMW access to its hybrid technology. After initial “We don’t comment on media speculation” denials from both BMW and Toyota, a joint press conference between the two automakers was scheduled in Japan on Thursday 1 December 2012, the second press day for the 2011 Tokyo Motor Show. The initial agreement can be summarized as

…a memorandum of understanding (MOU) concerning a mid-to-long-term collaboration on next-generation environment-friendly technologies.

Under the MOU, the two companies agreed on a collaborative research in the field of next-generation lithium-ion battery technologies.

In addition, Toyota Motor Europe (TME), TMC’s European subsidiary, and BMW have entered into a contract under which BMW is to supply 1.6 liter and 2.0 liter diesel engines to TME starting in 2014. The engines will be installed in certain Toyota-produced vehicles planned for sale in the European market.

To clarify some of the legalese, Wikipedia defines a Memorandum of Understanding as something more formal than a gentlemen’s agreement but not quite as firm or binding as a contract. Thus, at that point, the only firm agreement involving the exchange of money between the two carmakers was Toyota’s commitment to buy diesel engines from BMW.

Also released in early December were videos of the press conference and statements by Takeshi Uchiyamada (shown in the photo above right) and Didier Leroy (shown in the photo above left). Uchiyamada is the “father of the Prius” and then one of Toyota’s 5 executive vice presidents (he has since been promoted to vice chairman of the board, making him Toyota’s #2 behind chairman Fujio Cho and above Akio Toyoda, the president and third-ranked officer), while Didier Leroy is president and CEO of Toyota Motor Europe.

The diesel agreement
When word came that BMW would be supplying diesel engines to Toyota, this author’s first reaction was a rekindling of long-held dreams of a 6-cylinder Lexus IS diesel. Alas, as noted earlier, the agreement clearly involves 1.6 liter and 2.0 liter diesel engines, implicitly with less than 6 cylinders, and Lexus Europe’s public relations manager Etienne Plas denied, first to Lexus Enthusiast and, later, to Automotive News Europe that Lexus would offer any BMW diesels. The latter publication cites Professor Ferdinand Dudenhöffer from the Center for Automotive Research at the University of Duisburg-Essen, Germany suggesting that

Lexus sales are so small in Europe that it makes more sense to position Lexus as an innovation leader and to go in the direction of plug-in hybrids and full hybrids. Given Lexus’ small presence in the premium car market in Europe, it was more likely that Toyota would continue to view Lexus as a niche brand in the region and focus its attention on building sales in Europe with diesel versions of its core Toyota brand models.

As Paul McVeigh of Automotive News Europe rightly observed

The diesel tie-up with BMW represents a reversal in Toyota’s strategy after it scrapped plans two years ago to develop 1.6-liter diesel engines with Japanese truck maker Isuzu Motors Ltd, in which it owns a 5.9 percent stake.

In 2009, when outlining Toyota’s medium-term strategy, President Akio Toyoda said the company would shift its focus in Europe to hybrids and away from diesel so as not to get “lost in the crowd.”

But Toyota has lost market share in Europe, partly due to a dearth of diesel cars, which make up more than half of new vehicle sales in the region.

Hybrid technology has struggled to gain traction in Europe and has never accounted for more than 2 percent of global sales.

There are further dimensions and issues to consider, though. The Toyota/Isuzu alliance always struck this author as an unnecessary, “barely there” one, with much potential overlap with majority-owned truckmaker Hino, and recent reports of a rekindling of old General Motors/Isuzu ties suggest that Toyota may be set to dump its meager share of Isuzu (less than half of Toyota’s stake in Subaru). Far more relevant to Toyota’s decision to purchase diesel engines from BMW are looming Euro VI emissions standards that go into effect in October 2014 and, per Wikipedia, call for a reduction in NOx emissions from the currently allowable 0.180 g/km to 0.080 g/km. Toyota likely figured it made far more sense to purchase its diesels from BMW than to waste its finite resources on reengineering its own aging diesels to meet the new standards. Plus, BMW has long sought to sell its engines to other carmakers, but two recent concrete deals were for ultimately stillborn projects – a Saab B-segment model inspired by its original 92 and Carbon Motors‘ new-age police car.

The current Toyota diesels
Leaving aside the truck-centric KD engine family (available as a 2.5-liter 2KD-FTV and as a 3-liter 1KD-FTV), Toyota currently makes two distinct families of 4-cylinder diesels for automotive applications. The first of these is the ND engine, available solely as the 1.4-liter 1ND-TV that was amply discussed above in the second section of this article.

Larger, more powerful applications are served by a trio of AD diesel engines. The smallest and most frugal of these is the 1AD-FTV 2-liter mill, whose 86mm bore x 86mm stroke coincidentally matches that of the Subaru-engineered FA20 2-liter flat 4 that powers the Toyota GT86, Scion FR-S, Subaru BRZ and Japan’s Subaru Legacy 2.0GT DIT. The 126 hp and 229 lb/ft of torque 1AD-FTV 2-liter is currently offered in Toyota’s Corolla, Auris (Corolla hatchback), Verso (a 7-seat mini-minivan that sits on the Prius v/+/Alpha platform) and Avensis (sedan and sportwagon on Scion tC/Lexus HS platform) lines.

For those preferring more power, a larger alternative increases stroke to 96mm for an overall 2.2-liter capacity. This 2AD diesel is offered in both lower-output (150 hp / 251 lb/ft of torque) 2AD-FTV and high-output (177 hp / 295 lb/ft of torque) 2AD-FHV variants. Currently, the Avensis offers only the lower-output FTV; the Auris only offers the high-output FHV as the line’s most powerful variant; and Verso, RAV4 and Lexus IS offer both low and high output versions.

Although it appears that the AD diesels will be replaced by 2-liter BMW engines and that the BMW 1.6-liter diesel will supplant the smaller 1.4-liter 1ND-TV in Europe, expect the latter to soldier on and possibly be built in India where, frankly, we don’t expect to see BMW-sourced diesels in the Etios and Etios Liva lines, the cheapest cars in Toyota’s global lineup.

The incoming BMW 2-liter diesel
The BMW 2-liter, 4-cylinder diesel engine is part of the N47 engine family, bears the N47D20 engine code, and is available in a mind-boggling array of power options that make the current Toyota 2.2-liter diesel’s lower-output 2AD-FTV and high-output 2AD-FHV choice seem downright simple. Rather than varying engine codes, the assorted versions of the BMW N47D20 diesel are best identified by the last two digits of the model numbers in which they appear. The base version of the 2-liter diesels is rated at 116 hp and 192 lb/ft of torque and is used on 116d, 316d and X1 sDrive16d models (sDrive denoting rear-wheel-drive). The next step up is good for 143 hp and 236 lb/ft of torque and appears on 118d, 318d, X1 sDrive18d (RWD) and X1 xDrive18d (xDrive denoting all-wheel-drive) models. Mid-pack in power ratings, but producing the best fuel economy and lowest CO2 emissions numbers (the basis for a number of European vehicle taxation schemes) is the 163 hp and 280 lb/ft of torque claimed by the EfficientDynamics Editions of the 120d, 320d and X1 sDrive20d. A widely available 177 hp version is on its way out, replaced by a 184 hp and 280 lb/ft of torque iteration used in the “regular” 120d, 320d, X1 sDrive20d and X1 xDrive20d, as well as in the 520d (both regular and EfficientDynamics Edition) and in the X3 xDrive20d. Finally, for the power-hungry among us, BMW adds a second turbocharger to come up with 218 hp and 332 lb/ft of torque in the 125d, 525d and X1 xDrive25d, and we suspect it’s just a matter of time before we see a 325d and an X3 xDrive25d as well. The biturbo holds the distinction of being the first production diesel engine to achieve more than 100 hp per liter. European parts catalogs tend to use the N47 D20 C denomination for the four single-turbo versions and N47 D20 D for the biturbo “25d” variant. The N47 D20 A is an older, outgoing version of BMW’s 2-liter diesel.

Most crucial to Toyota’s aspirations to use the BMW N47D20 in its front-wheel-drive-centric European model range, however, are a couple of applications in the MINI range, in the Cooper D Automatic and Cooper SD models, as shown above left. These front-wheel-drive/transaxle versions of the N47 produce 111 hp / 199 lb/ft of torque and 143 hp / 225 lb/ft of torque, respectively. Thus, they roughly correspond to the two lowest-powered BMW-branded versions of the N47D20. Some European parts catalogs refer to the MINI version as the N47 C20 A.

Might upcoming stricter Euro VI (or EU6) emissions standards compel BMW to ditch the N47D20 and start from scratch with an all-new diesel? The answer to that, we’d say, is a resounding “no”, since a BMW Group PressClub Global Press Release proudly proclaims that, as of July 2012, the BMW X3 xDrive 20d with optional BluePerformance technology meets the EU6 emission standard. And, speaking of strict emissions standards, even EU6 standards pale in some regards when compared to current U.S. EPA Bin 2 Tier 5 and California CARB regulations. Yet, MotorAuthority reports that BMW plans to bring the N47D20 to the United States, in its highest single-turbo state of tune, in the 3-Series or, possibly, in the X1. Although highly unlikely to happen, it certainly makes one dream of the possibility of a Toyota or Scion diesel in North America. After all, we’re already set to receive a French-built Yaris, albeit gasoline-powered.

Determining which power outputs Toyota will choose to purchase from BMW is anybody’s guess, but we will point out that the so-called “16d” version of the N47D20 is weaker than Toyota’s 2-liter 1AD-FTV. If Toyota wanted to replicate something akin to its current three AD diesel strategy, then purchasing the “18d”, “20d EfficientDynamics” and “regular 20d” variants would be the way to go. Awesome as a Toyota powered by the twin turbo “25d” would be, we don’t expect to see one, mostly because we wonder what front-drive transaxle can handle its 332 lb/ft of torque and if the engine itself is too costly for a Toyota-badged vehicle. Also, BMW might want to keep this beast to itself much as Toyota kept the GR-FSE V6s from Lotus.

Speaking of transaxles, initial information remains silent on whether Toyota will also be purchasing these as a unit with the N47 diesels from BMW, or if the deal strictly involves engines. As we mentioned earlier, when BMW purchased Toyota’s 1ND-TV 1.4-liter diesel for the first Mini One Ds, it declined to use Toyota’s C53 5-speed manual transaxle as on the Yaris diesel, opting instead for a Getrag-sourced 6-speed manual. Will Toyota, then, stick with the Aisin-sourced EA60 six-speed manual transaxle currently used in conjunction with the AD diesels, or will it go with the MINI’s Getrag unit? As to the automatic transaxle option, things may be a bit more straightforward, as both BMW’s MINI and Toyota use Aisin AW-sourced units. The Aisin/Toyota U660E 6-speed automatic transaxle, ubiquitous in front-wheel-drive V6 versions of Toyota Avalon, Camry (including the Australian-built Aurion), Sienna and Venza, as well as Lexus’ ES 350 and RX 350, is also used in automatic D-CAT versions of the 2AD-FTV diesel-powered Avensis and RAV4.

Finally, engine-code geeks like yours truly will be intrigued to see whether Toyota maintains the BMW N47D20 engine code or changes it to something more Toyota-centric. The previous example of Toyota purchasing an engine from another manufacturer is the Toyota GT86/Scion FR-S. After initially giving its Subaru-engineered flat-four engine a Toyota 4U-GSE engine code (in homage to Toyota’s earlier U, 2U, 2U-B and 2U-C flat-twin engines used in Publica, MiniAce and Sports 800 models), the GT86/FR-S ultimately wound up adopting Subaru’s FA20 denomination.

The incoming 1.6-liter BMW diesel
After BMW stopped using Toyota’s 1ND-TV 1.4-liter, 4-cylinder diesel in the MINI One D, it turned to the 1.6-liter DLD-416 (or DV6) 4-cylinder diesel. Jointly developed by PSA (Peugeot S.A., Peugeot/Citroën’s parent company) and Ford, this 1560cc mill is used by a mind-boggling array of marques. Besides the aforementioned Peugeot, Citroën, Ford and, of course, BMW’s MINI, Mazda, Suzuki and Volvo also use this oil burner in a multitude of models. Even Toyota got in on the list, offering the DLD-416/DV6’s smaller variant, the 1.4-liter DLD-414 (or DV4) diesel on the Czech-built Aygo A-segment hatchback from January 2006 to May 2007.

In August 2010, for the 2011 model year, however, BMW changed MINI diesel sources yet again. This time, it turned inward and took its own N47D20 4-cylinder 2-liter diesel, reduced the bore and stroke from 84mm x 90mm to 78mm x 83.6mm to create the 1598cc N47D16. As with the N47D20, its smaller D16 sibling is offered in several states of tune, although in a more manageable number of choices. In MINI One D models, the D16 produces 90 hp and 159 lb/ft of torque, while MINI Cooper D manual transmission models 112 hp and 199 lb/ft of torque. The 16d’s first rear-wheel-drive application is in the BMW 116d EfficientDynamics Edition, where it produces 116 hp and 192 lb/ft of torque.

The more frugal, lower-powered version of the BMW-sourced N47D16, we’d say, is a shoo-in for, at least, the Yaris if Toyota, as we suspect, opts not to revise its own 1.4-liter 1ND-TV diesel for tougher EU6 emission standards. As to the high-output version of the D16, eagle-eyed number crunchers might have noticed that its output numbers match those of the least powerful iteration of its larger D20 sibling. It’ll be very interesting to see how BMW manages this situation going forward. On the surface, one would think that the D16 has lower CO2 emissions and fuel economy numbers in its favor, ultimately eliminating the need for the current lowest-output D20. Yet, BMW’s MINI Cooper D models currently use both sizes, depending on transmission. In other words, manual Cooper Ds use the smaller D16, while automatic Cooper Ds use the larger D20. In fact, BMW does not offer any sort of automatic transmission in conjunction with the N47D16, whereas Toyota offers its clutch pedal-less M/M Multimode Manual Transmission with the 1ND-TV diesel as an alternative to a traditional clutch-pedal manual.

The lithium-ion battery collaboration: from MoU to full-fledged agreement
Although Toyota is the world’s undisputed leader in nickel-metal hydride battery full hybrid automotive technology, its position on more compact lithium-ion battery technology (as used on the just-launched Prius Plug-in and 7-passenger Prius+/Prius Alpha) is less clear-cut, ranging from 2009 reports proudly trumpeting “enormous gains in power storage that could extend the range of an electric vehicle almost tenfold” to the more sobering conclusion drawn by Associated Press business writer Yuri Kageyama last December after the initial BMW/Toyota collaboration announcement:

Toyota has struggled to find a good lithium-ion battery for its green cars and is using technology from Japanese electronics maker Sanyo Electric Co. in its latest plug-in hybrid, for which Toyota has recently started taking orders. Toyota had worked with Panasonic Corp. on a battery before the electronics maker acquired Sanyo, partly to get better lithium-ion technology.

Regardless of conflicting opinions on the state of Toyota’s lithium-ion battery technology, however, BMW certainly must have liked what it saw from the Japanese carmaker, because, on Tuesday 27 March 2012, a Toyota Global newsroom press release proudly announced that the initial December memorandum of understanding for “collaborative research in the field of next-generation lithium-ion battery technologies” had morphed into a full-fledged signed formal agreement “focusing on increasing the performance and capacity of lithium-ion battery cells through the use of new combinations of materials for cathodes, anodes and electrolytes.”

BMW’s path towards an ideal lithium-ion battery has been a bit rocky, with the dissolution of the Global Hybrid Cooperation with General Motors and Mercedes-Benz and, as John Voelcker of Green Car Reports reminds us, BMW’s multipronged sourcing of lithium-ion batteries for its hybrids, with the ActiveHybrid 7 using cells from the French-American partnership JCI-Saft, while the newer ActiveHybrid 5 and upcoming ActiveHybrid 3 use A123 Systems as its source. The latter, you may recall, is also the battery-maker for the Fisker Karma’s recalled and trouble-prone battery packs, even though the Chinese-built BMW A123 battery packs were unaffected.

Still, there remains ultimate optimism over the future potential of lithium-ion batteries, with Automotive News’ Vince Bond, Jr. citing a July 2012 McKinsey study that

the price for a “complete automotive lithium ion battery pack” could drop from $500 to $600 per kilowatt hour today to about $200 by 2020 and $160 by 2025. A kilowatt hour is a measure of energy storage.

How would lower prices affect the price of the Chevrolet Volt’s 16 kilowatt hour battery pack? Assuming a current cost of $500 per kilowatt hour, the Volt battery today costs $8,000.

At $160 per kilowatt hour, the same battery would cost $2,560 in 2025, assuming no inflation.

The report says nearly 30 percent of the cost reductions — much of them achievable by 2015 — will come from manufacturing, with improvements in manufacturing processes, standardizing equipment and spreading fixed costs over higher unit volumes.

In addition, advancing cathode, anode and electrolyte technology could raise battery capacity by 80 to 110 percent by 2020-25 and help cut battery prices by 40 to 45 percent, according to the study.

Will BMW and Toyota be at the vanguard of these lithium-ion battery advances?

Stay tuned for Part 2 of this story, which delves into the expansion of the Toyota/BMW alliance that took place in late June 2012.