Toyota, one of the slower legacy automakers to adopt electric vehicles (EVs), may be the first to eliminate gasoline-only cars entirely. Toyota executives have revealed that the company plans to convert most, if not all, of its Toyota and Lexus lineup to hybrid-only models. While many automakers are focusing solely on electric vehicles, Toyota is challenging the prevailing industry belief that all cars will be electric in the near future. Instead, Toyota Chairman Akio Toyoda believes that the global share of EVs will top out at just 30%. Toyota’s “multi-pathway” strategy includes hybrids, hydrogen fuel-cell vehicles, green fuels, and the potential for emerging technologies. This approach sets Toyota apart from its competitors and allows the company to explore a range of alternative options for reducing emissions and improving fuel efficiency.
The transition to hybrid-only models will be assessed car by car, with evaluations taking place during each model redesign. The popular RAV4 SUV is already seeing success with its hybrid variants, which account for about half of sales. Toyota is likely to eliminate the gasoline-only version of the RAV4 in the North American market. Additionally, Toyota has already discontinued the gasoline-only version of its Camry sedan for the 2025 model year and now offers hybrid versions of the Land Cruiser and Sienna minivan.
Switching to hybrid-only models offers Toyota several advantages. Firstly, it solidifies the company’s dominant position in the hybrid market. Demand for EVs has been hindered by high prices and charging inconveniences, whereas Toyota’s hybrids do not require charging and seamlessly switch between gasoline and electric power. Toyota’s plug-in hybrids can travel about 40 miles on battery power alone before the gasoline engine is needed. This makes Toyota’s hybrid models more accessible and convenient for consumers.
Moreover, Toyota’s hybrid strategy aligns with the increasingly strict U.S. carbon-emissions regulations. By emphasizing hybrid sales, Toyota can potentially save billions of dollars in regulatory fines and costs. The new emissions standards, effective from the 2027 model year to 2032, will be more easily met by Toyota’s hybrid lineup. The ability to comply with these regulations gives Toyota an advantage over competitors and buys the company more time to develop EVs or other zero-emission vehicles.
Toyota intends to convert approximately 30% of its global fleet to EVs by 2030. The company plans to focus on developing fully electric versions of its existing top-selling models. Toyota has committed to investing $35 billion in new batteries and EV platforms. In May, Toyota showcased a small prototype combustion engine that could potentially run on biofuels or low-carbon synthetic gasoline, paired with hybrid drivetrains. This approach allows Toyota to develop hybrids in a more efficient and innovative way by starting with an EV platform and incorporating small engines. The first hybrid based on this new platform and engine is expected to be a Corolla plug-in hybrid, with a predicted release in China in 2026 and the United States in 2027.
Toyota’s emphasis on hybrids has been driven by decades of investments in improving the efficiency and performance of its gasoline-electric powertrains. The cost of adding hybrid technology to most Toyota models is now under $2,000, making it an attractive and affordable option for consumers. Additionally, today’s hybrid models often offer more power than their gasoline-only counterparts, dispelling any concerns regarding performance. As a result, hybrid sales have surged, accounting for 37% of Toyota’s sales as of June. The growth in hybrid sales has contributed to Toyota’s record-high profits and stock prices.
The popularity of Toyota’s hybrid models is expected to continue growing, with hybrid sales projected to exceed 50% of Toyota’s total volume next year. In comparison, EV sales remain modest, and demand is expected to increase at a slower pace. Hybrids and plug-in hybrids offer a more familiar and convenient alternative to EVs, alleviating concerns about charging infrastructure and range anxiety.
Toyota’s plan to offer more plug-in hybrids aligns with U.S. emissions rules, which provide credits for reducing pollution. The opening of a battery plant in North Carolina will enable Toyota to produce more batteries and reduce the cost of plug-in hybrids. While plug-in hybrids have historically sold in lower volumes due to their higher price, Toyota’s battery production capabilities may change this dynamic.
Overall, Toyota’s decision to shift towards hybrid-only models demonstrates the company’s commitment to exploring multiple pathways to reduce emissions and improve fuel efficiency. While other automakers prioritize EVs, Toyota’s focus on hybrids allows the company to differentiate itself and leverage its dominant position in the hybrid market. With hybrid sales driving profits to new heights, Toyota has the flexibility and time to develop EVs and other next-generation technologies. By embracing this multi-pathway strategy, Toyota remains at the forefront of innovation in the automotive industry, catering to the needs and preferences of a wide range of consumers.