Toyota Motor's logo. Picture: REUTERS
Toyota Motor's logo. Picture: REUTERS

The world’s largest carmaker is flinging big bets around in the hope that something sticks. It might be better off doing what it knows best.

Toyota said on Tuesday that it is deepening ties with Uber, investing $500m and making Sienna minivans equipped with the tech company’s self-driving software. A yet-to-be determined third party will operate that fleet. One day earlier, four Toyota-affiliated parts companies announced a joint venture to develop software that manages components for automated driving. A few months before that, Toyota put $1bn into Southeast Asia’s largest ride-hailing provider, Grab, the largest such investment by a carmaker.

From chunky stakes in mobility and autonomy to financing partnerships and doubling down in China, the Japanese leader is splashing out on the future of the car. Increasingly, though, it looks like two Toyotas: One that remains squarely focused on cost-cutting and operating within the confines of a struggling world market, the other trying to spend its way out of the gloom.

The latest splurges might give the impression Toyota is shedding its conservatism towards advanced technologies. Unlike the commitments to autonomy and self-driving made by its peers, however, the company has not put a date on when it expects to see major changes of direction. The Toyota Research Institute and its Advanced Development offshoot have poured billions of dollars into fields like artificial intelligence (AI), but even there, advisers have expressed scepticism.

The hard reality is Toyota’s cost challenge, exacerbated by the slowing US market and the rising price of materials from American tariffs. So as adjusted earnings before interest, tax, depreciation and amortisation (ebitda) margins shrink every year and the cost of sales seems harder to control, Toyota has struggled to boost research and development spending as a proportion of revenue. Meanwhile, its late arrival in the Chinese market — now the world’s largest — means the carmaker also must spend aggressively there to catch up, while keeping operations lean.

At some point, though, the two Toyotas must meet. Everything the carmaker is doing comes from the same pocket. While rivals have bought smaller stakes in technology companies, few had the wherewithal to invest on Toyota’s scale.

For a window into how expensive these prospects can be, look at the $2.25bn investment by SoftBank Group’s Vision Fund in General Motors’ autonomous driving unit, GM Cruise. That division posted a $154m loss in the quarter to end-June and its costs were $200m. GM expects to spend $1bn on Cruise in 2018, and another $1.3bn in 2019. Even the Vision Fund’s investment came with a rider — it is split in two, with an initial $900m, and the other $1.35bn to follow when Cruise vehicles are "ready for commercial deployment".

So while Toyota tries to get ahead, investors should be asking about costs and returns. Uber is still haunted by questions of viability, as my colleague Shira Ovide noted. It is no expert in self-driving technologies and remains miles away from full autonomy. The latest investment is on top of stakes in Grab, JapanTaxi and Getaround. Is the carmaker motivated mainly by fear of missing out?

Toyota got to be the world leader by doing what it does best. On its own initiative, the company has accumulated the greatest number of patents in autonomous driving of any carmaker. There is an argument that it should target every penny towards its own research and stop trying to be a venture capitalist. That way, something is sure to stick.

Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. This column does not necessarily reflect the opinion of the editorial board or Bloomberg and its owners.