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Toyota Doubled Down on Hybrids. It Might Just Pay Off
Toyota is entitled to an I-told-you-so. The company and its chairman, Akio Toyoda, have for years bucked the auto industry’s herd-like stampede to electric vehicles. Now, with sales of electric vehicles falling short of industry expectations, automakers are hastily revising their product plans—and Toyota is posting
robust profits.
Hindsight has a way of making mistakes obvious—of course the car-buying masses weren’t going to leap at the opportunity to buy more expensive vehicles that are in many ways less practical—but it’s important to understand the forces that pushed others to bet so heavily on EVs. The strongest of those forces is regulation. The federal government has mandated 50 percent of new vehicle sales be EVs by 2030; California has gone even further, banning sales of new gas-engine vehicles by 2035.
Investors also played a role. Tesla became the world’s most valuable automaker thanks to the innovative sheen of EVs. Rivals faced shareholder pressure to pursue a similar strategy.
Then there’s the simple reality of how much it costs and how long it takes to develop new vehicles. Most automakers can’t afford to make the wrong bet, so they’ve made what they see to be the safe one: Go all-in on EVs. General Motors aims to be 100 percent electric by 2035. Volkswagen says it’s developing 70 electric models for 2030. Stellantis, the parent company of Chrysler, is shooting for 75.
How was Toyota able to forge a different path? Much of the answer seems to revolve around its culture. From its earliest days as a maker of knitting looms to its position today as the world’s largest automaker by sales, Toyota has adhered to a distinctive philosophy that emphasizes continuous improvement (kaizen, in Japanese) and what it calls “respect for people.” And it has repeatedly found a way to outmaneuver competitors and astound skeptics. In the late 1980s, for instance, rivals were dumbfounded when Toyota—known for plain Jane, unpretentious cars and trucks—unveiled a plan to sell luxury cars. How could the maker of cheap Corollas hope to attract the affluent and sophisticated? The answer, Lexus, revolutionized the way dealerships treat their customers.
Toyota also swam against the current with hybrids. Alert to tighter fuel-efficiency regulation, especially in California, Toyota introduced the Prius in 1997. Once again, the reigning automotive powers were amused. How on earth could any modern vehicle bear the weight, complexity, and cost of two powertrains? The Prius went on to become one of the most successful Toyotas ever—and chastened competitors developed their own hybrids.
The same culture helps explain its caution with regard to EVs. Rather than leap to a new technology that imposes challenges on customers, including a nascent charging infrastructure and higher prices, Toyota has chosen to take the kaizen approach to hybrids, refining the technology and putting it in ever more offerings, from the Corolla to the Tundra pickup. The company says it can build 90 hybrids with the amount of lithium used in one 75-kWh EV battery and that it can sell these hybrids to a wider set of consumers.
Mind you, Toyota has not entirely ignored EV vehicles. It has committed to introduce 30 of them by 2030. It also maintains a considerable investment in hydrogen fuel.
The breadth of these investments points to another advantage over competitors: money. Three-quarters of the way through 2024, Toyota was sitting on more than $90 billion in cash reserves—more than three times that of GM or Ford. Toyota, unlike its competitors, can afford to hedge its bets.
This story first appeared in the January/February 2025 issue of Hagerty Drivers Club magazine. Join the club to receive our award-winning magazine and enjoy insider access to automotive events, discounts, roadside assistance, and more.
I think people will learn the truth of Hybrids.
They sound great. More MPG etc.
But then the truth hits.
#1 They cost more to buy and prices are too high now,.
#2 they are more expensive to repair. Especially Toyota that can have parts that may be double other brands.
#3 they still need oil changes and ICE maintenance.
#4 the Hybrid batteries can go bad and often at a point the car is worth he same or less than the labor and battery.
#5 Generally they never recover the added cost with fuel savings.
We are seeing these cars that have been out for a while come in and the limited number of shops often force people back to dealers. Most hold larger batteries that can cost thousands. The battery often needs replaced around the time the Timing belts need changed or if it is a wet belt it will need to be changed sooner.
Marketing makes these cars should wonderful but for the average driver they are not what they are made out to be. One of the few that work is the Prius as it has such a small battery and it is easy to change. Or was, I have not done a recent one.
If you want electric go electric, if you want ICE Go Ice but the mix is the best and worse of each and it compounds in price and costs.
There are comments made in here that indicate ‘worse than’, but worse than what? For instance battery costs. Is the battery in a hybrid more expensive than in an EV? I don’t think so.
My issue with EVs is the maximum distance they can achieve, and that’s in rather temperate conditions. In Canada, where temperatures hit -20°C and sometimes lower, the battery capacities are considerably diminished, meaning you may not make a destination to recharge. A good friend of mine has panic attacks driving his EV in the winter. He has to shut off the heater and most everything consuming electricity to hopefully make it to charging station during a 350 km trip.
I personally do not want that kind of anxiety while driving an high priced vehicle.
The reality is we need ICE and EV but not in the same package.
In cold and Canada just keep the Ice as it will be a while till we have a battery package that is logical.
Rare earth mineral shortage and the massive environmental destruction to mine them is why EV’s are not possible for the masses today and Toyota knows it. For the cash strapped value buyer, EV’s cost of ownership is far too high. In the higher price range, they can be competitive, and there are advantages to how they operate. Telsa has this market cornered as they are a far superior product to anything else produces. Perhaps the likes of Mercedes and Volvo are closing that gap. They are far from zero emissions, just zero at the tail pipe and that fantasy is what has driven foolish mandates. For those who would claim China is producing $6,000 EVs, that’s because of a 10-20K govt funding going into each vehicle. Unless an alternate battery chemistry is devised that can deliver dense energy with more common materials, EVs will never be able to be produced in near the number’s cars are today. Toyota listens to the engineers more than their marketing dept unlike US mfg.
I think most cars should employ a hybrid drivetrain. It allows the use of a smaller, less powerful gasoline engine, reduces emissions (no idling, for example), generally provides an enjoyable driving experience with no sacrifice in performance, and uses only a small battery with a capacity that is only about 2% that of a BEV, while offering a significant improvement if overall fuel economy. Electric vehicles, on the other hand, are extremely heavy, have a restrictive driving range, are burdened with very long and inconvenient charging times, and depend on infrastructure that simply doesn’t exist – and won’t exist any time soon. Why this misguided headlong rush into BEV’s I will never understand. Second cars for wealthy people with V8 SUV’s for all their “other” driving.
Toyota is 100% correct in their assessment.
The truth is most cars are very efficient and very clean. No need to add more to a window sticker for a higher cost hybrid system that will just price the cars farther out for many to afford.
Think about this. Keep the prices lower without the Rube Goldberg tricks and more people will buy new cleaner cars vs driving older less clean cars even longer.
We need to keep ice and let the EV evolve and improve.
Hyperv6, for some reason, you seem to think there is a cost/value relationship to full electric or full ICE vehicles over hybrids? Nothing could be further from the truth! Hybrids are the smart or common sense step from the ICE, because there was no appreciable infrastructure investment, less pushback from consumers and easy adoption in the manufacturing plants. What Hagerty failed to point out was that Toyota’s board of directors was not as enlightened as Akio Toyoda, and forced him into early retirement, because he insisted they NOT embrace full electric vehicles. They only brought him back as a visionary when they witnessed the financial debacle at the other automakers, and allowed him to go full hybrid. Toyota still needs some improvement to their “metal can of rocks” hybrid engine sound when under load, but when they find that improvement, they will dominate the automotive world. (Kaizen is great, but takes time… sometimes a LOT of time)!
The fact is most consumers have no idea of all the factors on EV and Hybrid. But most learn as they go and after ownership of many they find it more expensive and nor real savings. If you like hugging trees they are great but most lack the cost savings and only make a ICE more complex and expensive.
People need to be better informed and we need to let the EV market improve and develop as if goes.
I stood by and watch my buddy tell a customer their Hybrid needed a new battery. He gave the price and advised the Dealer will have to change it as he did not have the tech to do it in his well equipped shop. The car looked good with just over 100K miles and 12 years the value is less than the battery. They went and bought new ICE and left the Hybrid behind.
I believe GM is on the right track. They are offering ICE and EV and let the consumer choose. They continue to work on lower prices for the EV.
The market is in such flux that you need a little of everything to be ready.
While you see the Hybrid as a smart move I see it as a limited deal till people learn the truth as the customer in my buddies shop.
The other factor will be resale on EV cars. Will they be like a I phone 9 old used up tech no one wants?
Can you explain how the issues your friend needing a battery differs from someone chooses an EV? If it’s ignorance of the fact that hybrids have the same issues as EV ownership, then I find that to be a hollow argument. Doubtful straight EV owners know that their batteries will go bad eventually…
Truth is, hybrids fit the needs of a wider swath of buyers than EVs. The average buyer is ignorant regardless. People see cars as appliances, not as entertainment like we do.
I would love to have a Iphone 9 as my Iphone 7 is getting a little ragged looking.
On my second hybrid. Had a Prius C for 10 years, no trouble. Have a Corrolla Hybrid for the last year, good cars and gas prices don’t bother me. I live in Northern Ohio so we get cold weather so hybrids are the way to go. I would not buy an EV because of range and cold operation. The hybrids maintenance is probably less than my Silverado. Each has it’s place.
“In the late 1980s, for instance, rivals were dumbfounded when Toyota—known for plain Jane, unpretentious cars and trucks—unveiled a plan to sell luxury cars. How could the maker of cheap Corollas hope to attract the affluent and sophisticated?”
Except rival Honda beat them to the punch, launching Acura in March, 1986.
Personally my concern is the reliability of the newer Toyotas, especially with their engines. I’m seeing too many issues pop up on the new ones, especially with the trucks. I would like a naturally aspirated V6 or V8 myself from Toyots. They have a long history of reliability and power.
Near all MFGs have let engineers go to offset cost of the new programs and quality is the price being paid. Toyota and Ford both are really feeling the trouble and the other are starting to.
If you actually owned a Toyota hybrid long term, your comments would be very different.
I disagree with hyperv6. I am on my 3rd Ford hybrid. My grandson is still driving the 1st hybrid I purchased with over 200,000 miles. Yes, the battery has a reduced capacity and mpg has dropped to the mid 30s. And the value of a 2010 Michigan (rust) car is minimal but its still a functional usable car. On an EV, when the battery fails, it is no longer a functional car. As to maintenance, brakes last much longer, (150,000 miles) and no serpentine belts. Mostly just scheduled maintenance. I don’t know about other brands but there’s little to no difference in purchase price between an ICE and hybrid Ford.