Toyota Thrives with Hybrids as EV Demand Wavers

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Toyota Thrives with Hybrids as EV Demand Wavers

When Tony Le decided to buy a new car with his wife, he considered Tesla and other fully electric models. Ultimately, the 37-year-old chose a Toyota RAV4 Hybrid due to concerns about limited access to charging stations, potential breakdowns, and the overall practicality of an electric vehicle for his frequent work trips from California to Washington state.

Le's decision reflects the growing consumer interest in hybrid vehicles, which has helped Toyota maintain its leadership position as numerous competitors prioritize the transition to full electrification. Amidst rising interest rates and economic uncertainty, many EV manufacturers have reduced production targets and acknowledged slower sales growth.

Meanwhile, Toyota's reliance on hybrids has positioned it well for success. In 2022, hybrids accounted for about a third of its total vehicle sales, and the company is aiming to increase their proportion further. Toyota's dealer network is actively promoting hybrids, aiming to increase their share of total sales to 40-50%.

Additionally, Toyota plans to make its popular Camry sedan available exclusively as a hybrid, showcasing its commitment to the technology. However, analysts warn that Toyota's focus on hybrids may be a risk, considering the long-term dominance anticipated for battery electric vehicles (BEVs) in the automotive industry.

While Toyota sold a modest number of BEVs in 2022, it aims to increase shipments to 1.5 million by 2026. Despite this target, Toyota's BEV sales are still significantly behind those of competitors like Tesla. The company's Chairman, Akio Toyoda, believes that BEVs will only capture a 30% market share, with hybrids, hydrogen fuel-cell cars, and traditional fuel-powered vehicles accounting for the rest.

In the United States, consumer demand for hybrids is rising due to concerns about the high cost and limited range of BEVs, particularly in rural areas. Hybrids accounted for 9.3% of new vehicle registrations in the U.S. during the first eleven months of 2023, surpassing BEVs by 1.8 percentage points. Toyota dominates this market, with over a third of new hybrid registrations, followed by Honda, Hyundai-Kia, and Ford. General Motors recently announced plans to introduce plug-in hybrid vehicles in North America, signaling a shift in strategy.