In today's high-tech, high-stakes auto industry, fortunes can change quickly, and there's no better example of this than Toyota right now.
Not too long ago, Toyota seemed dangerously behind the curve in electric vehicles. Tesla, the electric car pioneer, has grown rapidly to become the world's most valuable automaker. Seeing Tesla's success, other companies like General Motors and Ford Motor Co. decided that many consumers were ready to switch to battery-powered cars and trucks, and they are spending tens of billions of dollars to catch up. started investing.
But Toyota was more cautious, or, critics might say, lethargic. The company has only introduced two fully electric models in the U.S. so far, because the gas-electric hybrids and plug-in hybrids that the company has become known for will continue to be popular. Because they are betting that there will be enough to combat climate change.
Even with the electric car craze over the past few years, Toyota didn't seem to get it.
“When I first heard about Toyota's strategy, I was shocked because I could see what Tesla was doing,” said Earl Stewart, a Toyota dealer in Lake Park, Florida. He also enjoys driving a Tesla Model S.
But sales of electric vehicles have slowed in the past six months, with U.S. car buyers looking to cut fuel costs and emissions flocking to hybrids. Currently, Toyota's sales are strong and they are reporting huge profits.
“This isn't the first time Toyota has proven me wrong, and it won't be the last,” Stewart said.
Toyota's sudden strength is a reminder of how much the auto industry is changing. Developments in technologies such as electric vehicles, advanced microchips, and software have turned what was once a stable, slow-moving field into a dynamic one that can throw even fast-moving, stalwart manufacturers off course. The industry is changing.
Toyota, a Japanese company, is the world's largest car manufacturer. In 2023, he sold more than 11 million cars, which is more than six times more than Tesla. The company slowly rose through the ranks over half a century, first exporting small cars to the U.S., then building factories in the South and Midwest, adding luxury brands, and surpassing its Michigan-based competitor. It has expanded into the dominant segment. A full-size pickup truck.
Toyota has overturned industry norms several times along the way. The introduction of the luxury brand Lexus in 1989 seemed like a risky bet until it significantly surpassed BMW and Mercedes-Benz in sales. Twenty-one years ago, Toyota launched the Prius, a small car with a small gasoline engine and a battery-powered electric motor.
This combination allows the Prius to travel more than 50 miles on a gallon of gas, and allows plug-in hybrid models to travel short distances without using any gas. Other automakers ignored the car as a novelty, but the Prius was a hit, and soon GM, Ford, and others developed their own hybrids.
Tesla CEO Elon Musk has disparaged hybrid cars, saying it doesn't make sense to have two propulsion systems under the hood. Consumers don't seem to care. Toyota offers more than 20 hybrid or plug-in hybrid models, and they account for almost 30% of sales, which is much higher than most other automakers. Last year, Toyota sold 2.2 million vehicles in the U.S. market, more than every other automaker except GM.
Toyota's U.S. sales rose 20% in January and February, driven by an 83% increase in sales of hybrid and plug-in models.
“We're not saying EVs aren't a good solution to carbon emissions,” said Jack Hollis, Toyota's executive vice president of North America. “They are. They're not the only solution, and many of our customers have told us they want hybrid, plug-in, and EV options.”
The strategy is working. Toyota made a profit of $27 billion in the nine months starting in April last year, nearly double the profit from the same period last year. By comparison, Tesla's 2023 profit was $15 billion, about 19% higher than its 2022 figure.
Investors are paying attention. The stock market is currently trading at less than half of Tesla's market cap of $1.2 trillion at its peak in November 2021, as sales growth has slowed and it has lost one car. The main reason is that the per-unit profits are decreasing. Over the same period, Toyota's valuation rose by about a third to about $400 billion.
Gartner analyst Mike Ramsey said Toyota's hybrid strategy is based on strong, long-term logic, but changes in technology and markets could undermine the company's future performance and position. Stated.
“Toyota seems to be oscillating between insensitivity and genius depending on the current state of thinking about technology,” he said. “But no matter what, they still seem to sell more cars and trucks than anyone else.”
One of the big markets where Toyota is struggling is China, the world's largest car market. Many Chinese car buyers are opting for electric vehicles, helping domestic automakers such as BYD capture market share from Toyota, Volkswagen and other foreign manufacturers.
Toyota has other problems as well. A subsidiary of Daihatsu Motor Corporation, which manufactures small cars, temporarily suspended all production in Japan in December after it was revealed that there had been irregularities in safety tests.
But for now, Toyota's deliberate pace appears to be working overall, with several other major automakers approaching the company's trajectory.
Mercedes-Benz had aimed to phase out internal combustion engine models by 2030, but last month announced it was pushing back that goal by at least five years. Ford is lowering its electric vehicle production goals and delaying construction of a factory that will produce electric vehicle batteries.
GM has suspended sales of hybrid vehicles in the U.S. to focus on electric vehicles and has postponed the introduction of some battery-powered models. The company also plans to reintroduce hybrid and plug-in hybrid models, which have been requested by dealers.
GM CEO Mary T. Barra said in February that “as the nation continues to build out its charging infrastructure, deploying plug-in technology in strategic segments will unlock some of the environmental benefits of EVs.” will be brought about.”
Electric cars have so far failed to attract many car buyers because they are generally more expensive than internal combustion or hybrid models, even after government incentives. Electric vehicle charging challenges and concerns about range and cold-weather performance are also holding some people back.
Hybrids don't face many of these issues. Some hybrid cars cost only a few hundred dollars more than similar gas-powered cars, and owners can quickly recoup that premium in fuel savings. Plus, regular hybrids don't need to be plugged in.
Plug-in hybrid models can travel more than 40 miles on electricity alone, with some models equipped with a gasoline engine for long-distance travel, and they have a much smaller battery than an electric car and can be recharged relatively quickly. However, these cars, which make up a small portion of the market, may not be as economically or environmentally beneficial when traveling long distances on gasoline alone.
Toyota plans to significantly increase production and sales of hybrids. A hybrid version of the Tacoma pickup is being rolled out. The redesigned Camry sedan, scheduled to go on sale this spring, will be available only as a hybrid.
Hollis, the Toyota executive, said the company also plans to offer a variety of electric vehicles. With about 30 models scheduled to be released by 2026, Toyota expects electric vehicle sales in the U.S. to increase to about 1.5 million units a year. Last year, they sold about 15,000 units.
In Florida, the new Toyotas that arrive at Mr. Stewart's South Florida dealership are rarely shipped before being sold. As of early March, he only had about 150 cars in stock, down from the 500 he had before the pandemic.
That didn't deter customers who were used to waiting months after ordering a vehicle. At one point last year, we had 1,300 vehicles on order, all of which had customers.
“I've been selling Toyota cars since 1975, and business has never been better,” he said. “People are lining up to buy from me.”
