Toyota's sales reached a record 11.2 million units in 2023, making it the world's best-selling automaker for the fourth consecutive year. One of the main reasons why Toyota has been able to achieve such impressive results is that consumers prefer hybrid vehicles over electric vehicles.
Last year, when Tony Le and his wife were looking to buy a new car, he researched Tesla and other all-electric models, according to the report. Eventually, the 37-year-old Californian technician opted for a Toyota R**4 hybrid because he was worried he would be stuck with a battery electric vehicle, with a dead battery and unable to find a charging station.
Sometimes I want to just play around with electric cars based on speed and torque. But for practical use, ......It doesn't make sense at all. Le, who often drives from California to Washington State for work, said.
EV market is weak Toyota is bullish on the hybrid vehicle market
Le is one of the growing number of consumers driving sales of hybrid vehicles, putting Toyota Motor Corp., a long-time commitment to hybrid fleets, ahead of its competitors who have been rapidly transitioning to full electrification and are currently dealing with weak demand for electric vehicles.
High interest rates and an uncertain economic outlook have also prompted many EV makers to cut production targets and warn of slowing sales growth in recent weeks.
Toyota, however, is expected to offer a more optimistic outlook when it reports on Tuesday, helped by its heavy reliance on hybrids, which accounted for about a third of the company's total sales of more than 10 million vehicles last year.
Greg D**is, general manager of Walser Toyota, a Minnesota dealership, told Reuters that his store is working to boost sales of hybrid vehicles to 40 to 50 percent of total sales as Toyota begins to turn all of its best-selling Camry, into a hybrid version in the U.S. market.
Toyota has said that the next-generation Camry will be launched as a hybrid only, the company's boldest move to date, aiming to push the technology pioneered when the Prius was introduced more than 20 years ago.
Are battery-only electric vehicles a risk for Toyota?
Although Toyota's sales are expected to increase in the near term, analysts warn that the main risk for Toyota is that it still lags behind in the field of pure battery electric vehicles.
Stephanie Brinley, associate director at S&P Global Mobility, said the biggest risk for Toyota is the potential for consumers to favor BEVs (battery electric vehicles).
If consumers shift to BEVs, Toyota may not be fully ready for a competitive BEV solution. ”
However, Toyota has taken a "multi-path" approach to meet customer needs in each market, with chairman and former CEO Akio Toyoda saying at a business event in January that electric vehicles will never capture 30% of the global market share.
He explained that gasoline and hybrid vehicles, as well as hydrogen fuel cell vehicles, will dominate.
He mentioned that the appeal of electric vehicles is limited because there are still 1 billion people in the world who do not have electricity, and electric vehicles** are expensive and require charging infrastructure to operate.
According to the global statistical database Statista, nearly 1 billion people in the world live without electricity.
"The decision (purchase decision) should be made by the customer – not by regulation or politics," Akio Toyoda said. ”
Toyota** sold 104,000 EVs last year, less than 1% of total sales, including those of the Lexus brand. The company plans to increase EV shipments to 1.5 million units by 2026, down from Tesla's 2023 shipments of 1.8 million units.
Long waiting times for delivery
With consumers hesitant about the EV profile and concerns about the range of the EV, U.S. hybrid sales have been growing, especially in more rural areas, where charging stations can be far apart.
Davis said battery electric vehicles are not as widely accepted in the Midwest as they are on the West Coast and elsewhere in the United States.
But he said demand for hybrids is so strong that buyers have to wait about a year to receive certain models, such as the Toyota Sienna utility vehicle, and pay the manufacturer's suggested retail price in full.
In stark contrast, Tesla has been slashing prices in key markets such as the U.S. and China since last year, with declining auto margins last quarter and warning of a slowdown in EV demand this year.
S&P Global Mobile data shows that hybrid vehicles accounted for 9 new light vehicle registrations in the U.S. from January to November 20233%, which is 18 percentage points.
The figures benefit Toyota, the largest seller of hybrid vehicles in the U.S., accounting for more than one-third of new registrations, followed by Honda (20 percent), South Korea's Hyundai Motor and its subsidiary Kia, and Ford Motor.
General Motors CEO Mary Barra said this week that the company will introduce plug-in hybrids in North America, changing its strategy to bypass hybrid powertrains.
According to the London Exchange Group (LSEG), analysts expect Toyota's operating profit to rise by 40% in October-December last year.