By Brian Boyle

In the race to electrify the automobile industry, Toyota won by not winning. The Japanese automaker announced record profits Tuesday, thanks to incredibly strong sales of gas-electric hybrid vehicles. Now, Toyota is hoping the timing is finally right to drive full steam into an all-EV future.

Rules of the Hybrid Road

Unlike rivals General Motors, Ford, and Volkswagen, Toyota has been relatively hesitant to jumpstart the transition to EVs. Instead, the company has leaned into what most of its rivals are just now realizing: many consumers aren’t ready to make the full EV transition yet, but they’re willing — and excited — to embrace a hybrid car.

In October, for instance, Ford said that it expects its hybrid sales to quadruple over the next half-decade, after its third quarter saw a nearly 42% year-over-year increase in hybrid sales, far surpassing the growth of its EVs. In the US overall last year, hybrid sales eclipsed EVs, 1.4 million to 1.1 million, according to data from car-shopping website Edmunds, with hybrids seeing sales growth of about 64% compared to EVs’ 51% bump.

But Toyota was already in on the pivot to hybrids, which US dealers tend to say they can’t keep on their lots. It’s led to one of the best quarters in company history — with executives saying they’re likely to maintain their position as leaders of the hybrid pack:

• Hybrid sales increased 46% in Toyota’s year-end quarter, fueling 11% growth in overall vehicle sales. Hybrids also accounted for over one-third of the 11.2 million cars Toyota sold in 2023, the company said.
• That led the company to forecast an overall record $30.3 billion profit for the fiscal year ending in March. Investors responded by sparking a nearly 5% boost to its shares on the Tokyo Stock Exchange, nearing a record high for the company.

Toyota executive Yoichi Miyazaki says he expects hybrid sales to reach around 8 million vehicles by 2025. And Toyota has been able to achieve profit-margin parity with combustion engine vehicles, something competitors have struggled with.

Need a Jolt: While Toyota Chairman Akio Toyoda predicted last year that EVs could soon attain a 30% market share, electric cars made up just 1% of the company’s total sales last year. This may explain why the company also announced it is boosting its investment in a Kentucky EV plant by $1.3 billion — bringing its total investment to about $10 billion — as it prepares to start production on a new three-row all-electric SUV in 2025. Better late than never.