Toyota bets on hybrids as electric vehicle demand hits a speed bump

Toyota, a pioneer in the hybrid vehicle market, is doubling down on its hybrid strategy as demand for electric vehicles (EVs) shows signs of slowing. The automaker is now considering converting most, if not all, of its Toyota and Lexus models to hybrid-only versions, according to company executives.

David Christ, head of sales and marketing for Toyota in North America, revealed the company’s approach. “Going forward, we plan to evaluate, carline by carline, whether going all-hybrid makes sense,” Christ told reporters.

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This shift is significant as Toyota, despite being one of the slower legacy automakers to fully embrace EVs, may become the first major manufacturer to eliminate gasoline-only cars from its lineup. The move underscores Toyota’s commitment to a “multi-pathway” strategy, which includes not just EVs, but also hybrids, hydrogen fuel-cell vehicles, and other emerging technologies.

Toyota Chairman Akio Toyoda has expressed skepticism about the global adoption of EVs, predicting that they will make up only about 30% of the market. “We believe that the future of mobility will not be limited to a single technology,” Toyoda said earlier this year.

The company’s hybrid strategy also aligns with its efforts to meet stringent U.S. emissions regulations. By increasing its hybrid offerings, Toyota aims to maintain its market leadership while mitigating the risk of regulatory penalties. “Hybrids will buy us more time and give us the flexibility to develop other technologies without being rushed,” said Katsuhiko Hirose, a former Toyota executive and current energy consultant.

Toyota has already started phasing out fuel-only models in favour of hybrids. The upcoming overhaul of the RAV4, America’s best-selling SUV, is expected to be hybrid-only by 2026, following a similar move with the Camry sedan and other models. Additionally, Toyota plans to introduce more plug-in hybrid options, which offer the convenience of running on battery power for short distances before switching to gasoline.

While EVs have garnered significant attention, Toyota’s hybrids are proving to be a popular alternative. Unlike EVs, hybrids don’t require charging and can switch seamlessly between gasoline and electric power. This flexibility has made them a practical choice for many consumers, particularly as concerns over EV range and charging infrastructure persist.

“Next year, we expect hybrid sales to exceed 50% of our total volume in the U.S.,” Christ added. Toyota’s hybrid sales have surged, with a 66% increase in the first half of this year alone, far outpacing its EV sales.

Industry experts agree that while EVs will continue to grow, the pace may not be as rapid as once anticipated. “Regular gas-electric hybrids and plug-ins will continue to be an attractive option for consumers,” said Stephanie Valdez Streaty, a senior analyst at Cox Automotive. “They offer a familiar driving experience without the anxiety of limited range.”

Toyota’s focus on hybrids, combined with its significant investments in new battery technology, is expected to keep the company competitive as the automotive industry evolves. The automaker has committed $35 billion to the development of new batteries and EV platforms by 2030, with plans to convert about 30% of its global fleet to EVs by then.

As Toyota navigates the transition to more sustainable vehicles, its hybrid strategy may prove to be a winning formula, allowing the company to adapt at its own pace while continuing to meet consumer demand and regulatory requirements.