By Norihiko Shirouzu
AUSTIN, Texas (Reuters) – Toyota may be one of the slowest automakers to develop electric vehicles, but it could be the first to move away from gasoline-only vehicles.
Nearly three decades after launching the Prius, its groundbreaking gasoline-electric hybrid, Toyota is in the process of converting most – and perhaps eventually all – of its Toyota and Lexus brand lineups to pure hybrid models, two Toyota executives told Reuters.
Toyota’s stubborn focus on hybrid rather than electric cars is part of a larger challenge by the world’s largest automaker to prevailing industry and regulatory wisdom that all cars will be electric in the near future.
Toyota CEO Akio Toyoda said in January that he believes the global share of electric vehicles will be only 30 percent. The Japanese automaker is instead promoting a “multi-path strategy” that includes not only electric vehicles but also hybrids, hydrogen fuel cell vehicles, green fuels and possibly other technologies that have not yet been developed.
“In the future, we plan to examine each vehicle series individually to see whether switching to pure hybrid vehicles makes sense,” David Christ, Toyota’s sales and marketing director in North America, told Reuters.
These evaluations will occur with each model redesign, if not sooner.
This includes the upcoming revision of the RAV4 for the 2026 model year. The RAV4, America’s best-selling SUV, already has hybrid variants that account for about half of sales.
Two people familiar with Toyota’s product planning discussions said the automaker would most likely abandon the gasoline-only version for the North American market but had not made a final decision.
The automaker has already stopped offering a pure gasoline version of its Camry, America’s best-selling sedan, for the 2025 model year, and its robust Land Cruiser and Sienna minivan, for example, are now only available as hybrids.
Many of the pure hybrid models will likely also be available as plug-in hybrids with larger batteries, said the two people, who asked not to be identified.
Toyota’s efforts to convert all or nearly all of its North American product line to pure hybrid vehicles have not been reported so far.
NEW EMISSIONS REGULATIONS
With its hybrid strategy, the car manufacturer wants to consolidate its already dominant position in a part of the market that is experiencing a new upswing as demand for electric vehicles declines – partly due to high prices and inconvenient charging options.
Toyota’s hybrids do not need to be charged and switch seamlessly between gasoline and electric power, or use both simultaneously, depending on driving conditions. The plug-in hybrids can be charged and, like an electric vehicle, typically run about 40 miles on battery power before their gasoline engines are used.
If you exclude the two electric cars and one fuel cell car sold in North America, there are currently 31 other Toyota and Lexus models on offer. Eight of these are already pure hybrid models and eight are only available as gasoline models.
The hybrid strategy will also give Toyota unique advantages in complying with increasingly stringent U.S. restrictions on carbon emissions, Toyota executives and industry experts said.
As the U.S. lowers emissions limits under new legislation announced in March, Toyota’s booming hybrid sales could save the automaker billions of dollars in fines and costs while giving Toyota more time to develop electric vehicles and other zero-emission vehicles.
The new emissions standards will come into force from the 2027 model year and will apply until 2032.
Christ said Toyota has not yet set a date for production of a pure hybrid line, and certain models such as pickups and small cars may take longer due to consumer price sensitivity at entry-level versions.
In addition to hybrid vehicles, Toyota plans to convert about 30 percent of its global fleet to electric vehicles by 2030. The focus will be on a small number of fully electric versions of existing best-selling models, say two sources familiar with Toyota’s product planning.
Toyota had previously announced that it would invest $35 billion in new batteries and EV platforms by then.
In May, the automaker unveiled a small prototype of an internal combustion engine that it said could one day run on biofuels or low-carbon synthetic gasoline and could be combined with hybrid powertrains.
But the main reason for downsizing the engine, according to one of two sources familiar with Toyota’s product planning, was that the company wanted to develop hybrids in a different way. Instead of starting with a gasoline car and adding a battery, Toyota plans to start with its new EV platform and add the tiny motors to create a more efficient hybrid option.
According to one of the two sources, the first hybrid based on the new platform and engine is likely to be a Corolla plug-in hybrid, which is expected to be launched in China in 2026 and in the US in 2027.
Turning point
Toyota’s hybrid boom is the result of decades of investment in reducing costs and increasing the efficiency and performance of its gasoline-electric powertrains.
For most Toyota models, the decision to go all-hybrid has increasingly become a no-brainer for the automaker and its customers, as the technology for a conventional hybrid drive typically adds less than $2,000 to a car’s selling price today.
In addition, although early hybrid vehicles were slow, today’s models often offer more power than pure gasoline variants.
These advances address the two biggest consumer concerns that have kept hybrid vehicles largely a niche in the automotive space for years, accounting for less than three percent of all U.S. sales as recently as 2019. Their share is now 11.3 percent and rising rapidly, according to auto service specialist Cox Automotive.
Toyota has experienced far more dramatic growth due to its dominance in the hybrid sector, putting the automaker at an inflection point that has prompted executives to now consider a pure hybrid lineup. Hybrids accounted for just 9% of Toyota’s sales in 2018, but in June they were 37%.
The increase in hybrid sales was a key factor in driving the company’s profit and stock price to all-time highs this year.
Christ said Toyota expects hybrid sales to continue to rise. “Next year,” he said, “we will definitely be well over 50 percent of our total volume.”
In the US, Toyota’s hybrid sales rose by 66 percent year-on-year to 438,845 vehicles through June 30, the company said. By comparison, electric vehicles were only sold 15,107 times at that time.
Atlanta-based Cox Automotive expects demand growth for electric vehicles to remain moderate over the next few years.
“Electric vehicle growth will continue, but will not reach the pace we have seen in recent years,” said Stephanie Valdez Streaty, senior analyst at Cox.
“In the meantime, traditional gasoline-electric hybrids and plug-ins will continue to eat into electric vehicle sales because they are simpler and more familiar alternatives and there is no range anxiety.”
HYBRIDS CREATE TIME
Toyota’s plan to offer more plug-in hybrids is aimed at taking advantage of U.S. emissions rules that give the company disproportionate rewards for reducing pollution. That’s now possible because Toyota is opening a battery plant in North Carolina that will have 14 production lines capable of producing 30 gigawatt hours (GWh) of batteries annually by 2030.
Plug-ins have so far sold in far fewer numbers than conventional hybrids because they incur significant additional costs. Toyota’s current plug-in hybrid models typically cost $5,000 to $6,000 more than comparable gasoline models.
Mass sales of hybrid vehicles will buy Toyota valuable time to develop electric vehicles and other next-generation technologies, says Katsuhiko Hirose, a Toyota executive who headed the company’s global powertrain planning from 2001 until his retirement in 2019.
Hirose, now a visiting professor at Japan’s Kyushu University and an energy consultant, estimates that under U.S. regulations, Toyota would have to switch almost entirely to hybrid vehicles – with an increasing proportion of plug-in hybrids – by about 2030 to avoid fines or other costs.
“(Hybrids) buy them more time and give Toyota flexibility in terms of the speed and number of EVs they need to bring to market,” Hirose said. “They wouldn’t feel cornered when it came to producing EVs.”
(Reporting by Norihiko Shirouzu; Editing by Brian Thevenot and David Clarke)
