Toyota bets big on hybrid-only models as EV demand slows

Toyota may be one of the slowest legacy automakers to develop electric vehicles but it could be the first to jettison cars powered only by gasoline.

Almost three decades after launching the Prius, its pioneering gasoline-electric hybrid, Toyota is moving to convert most, and eventually maybe all, of its Toyota and Lexus line-up to hybrid-only models, two Toyota executives said.

Toyota's stubborn focus on hybrids over EVs is part of a broader challenge by the world's biggest automaker to the prevailing industry and regulatory orthodoxy that all cars will be electric in the near future.

Toyota Chairman Akio Toyoda said in January that he believed the global share of EVs would top out at just 30%. The Japanese automaker instead touts a "multi-pathway" strategy that includes EVs along with hybrids, hydrogen fuel-cell vehicles, green fuels and, potentially, other technologies yet to emerge.

"Going forward, we plan to evaluate, carline by carline, whether going all-hybrid makes sense," David Christ, head of sales and marketing for Toyota in North America, said.

Those evaluations will come with every model redesign, if not sooner.

That includes the pending overhaul 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 is highly likely to ditch the gasoline-only version for the North American market, but hasn't made a final call.

The automaker has already stopped offering a gasoline-only version of its Camry, America's best-selling sedan, for the 2025 model year while its rugged Land Cruiser and Sienna minivan, for example, also now come only as hybrids.

Many of the hybrid-only models will also likely come as a plug-in hybrid with a bigger battery, according to the two people, who declined to be named.

Toyota's effort to convert all or almost all of its North American line-up to hybrid-only vehicles has not previously been reported.

New emission rules

The automaker's hybrid strategy aims to solidify its already dominant position in a part of the market that has found a new lease on life as demand for EVs slows, partly due to their high prices and charging hassles.

Toyota's hybrids don't need charging and switch seamlessly between gasoline and electric power, or use both at once, depending on driving conditions. Its plug-in hybrids can be charged and typically travel about 64 km (40 miles) on battery power, like an EV, before their gasoline engines are required.

Stripping out two EVs and a fuel-cell car on sale in North America, there are currently 31 other Toyota and Lexus models. Eight are already hybrid-only and eight are available in gasoline versions only.

The hybrid strategy will also give Toyota unique advantages in complying with increasingly tough US carbon-emissions restrictions, Toyota executives and industry experts said.

As the US lowers pollution limits under regulations announced in March, Toyota's booming hybrid sales could help the automaker save billions of dollars in regulatory fines and costs while buying Toyota more time to develop EVs or other zero-emission vehicles.

The new emissions standards take effect from the 2027 model year and run through 2032.

Christ said Toyota hasn't set a deadline for producing an all-hybrid lineup, and that certain models, such as pickups and economy cars, may take longer because of consumer price sensitivity on entry-level versions.

In addition to hybrids, Toyota aims to convert about 30% of its global fleet to EVs by 2030 by focusing on a small number of fully electric versions of existing top-selling models, according to two sources familiar with Toyota's product planning.

Toyota has previously announced plans to invest $35 billion in new batteries and EV platforms by then.

In May, the automaker showcased a small prototype combustion engines it said could one day run on biofuels or low-carbon synthetic gasoline and could be paired with hybrid drivetrains.

But the main point of scaling down the engine size, according to one of the two sources familiar with Toyota's product planning, was to allow it to develop hybrids in a different way. Instead of starting with a gasoline car and adding a battery, it plans to start with its new EV platform and add the tiny engines to create a more efficient hybrid option.

According to one of the two sources, the first hybrid based on the new platform and engine will likely be a Corolla plug-in hybrid, which will likely hit the market in China in 2026 and the United States in 2027.

Tipping point

Toyota's hybrid boom owes to decades of investments in bringing down the cost and boosting the efficiency and performance of its gasoline-electric powertrains.

For most Toyota models, the decision to go hybrid-only is becoming a no-brainer for the automaker and its customers because the technology for a traditional hybrid now typically adds less than $2,000 to a car's retail price.

In addition, while early hybrids were slow, today's models often offer more power than their gasoline-only variants.

Those advances eliminate the two biggest consumer concerns that for years made hybrids largely an automotive niche, accounting for less than 3% of all US sales as recently as 2019. Now they're at 11.3% and rising fast, according to auto services specialist Cox Automotive.

Toyota has seen far more dramatic growth because of its dominance of the hybrid sector, bringing the automaker to the tipping point that has pushed executives to now consider an all-hybrid lineup. Hybrids accounted for just 9% of Toyota sales in 2018 but 37% as of June.

The hybrid sales surge has been a key factor driving its profit and stock price to all-time highs this year.

Christ said Toyota expects hybrid sales to keep accelerating. "Next year," he said, "we definitely will be well over 50% of our total volume."

Toyota's US hybrid sales through June 30 shot up 66% from last year to 438,845 vehicles, the company said, compared with EV sales of just 15,107.

Atlanta-based Cox Automotive estimates demand growth for EVs will likely remain modest for the next few years.

"EV growth is going to continue, but it's not going to hit the big pace we saw in the last few years," Cox senior analyst Stephanie Valdez Streaty said.

"Regular gas-electric hybrids and plug-ins will continue to eat into EV sales in the meantime because they are easier and more familiar alternatives and there's no range anxiety."

Hybrids buy time

Toyota's plan to offer more plug-in hybrids aims to take advantage of US emissions rules that give them outsized credit for reducing pollution. That's now possible because Toyota is opening a North Carolina battery plant that, by 2030, will have 14 production lines capable of producing 30 gigawatt-hours (GWh) of batteries annually.

Plug-ins have so far sold in far lower volumes than traditional hybrids because of their substantial extra cost. Toyota's current plug-in hybrid models tend to cost $5,000 or $6,000 more than comparable gasoline models.

Mass-market hybrid sales will give Toyota invaluable time to develop EVs and other next-generation technologies, said Katsuhiko Hirose, one of Toyota's managers who led its global powertrain planning from 2001 through his retirement in 2019.

Hirose, now a visiting professor at Japan's Kyushu University and an energy consultant, estimated US regulations would essentially require Toyota to go nearly all-hybrid by around 2030 — with an increasing share of plug-in hybrids — to avoid regulatory fines or other costs.

"(Hybrids) will buy them more time and give Toyota flexibility over how fast and how many EVs they'd have to roll out," Hirose said. "They wouldn't feel pinned against the wall to produce EVs."