Toyota to eclipse rivals as more consumers opt for hybrids amid electric vehicle slowdown By Reuters

By Daniel Leussink and Abhirup Roy

TOKYO/SAN FRANCISCO (Reuters) -When Tony Le went out with his wife to buy a new car last year, he looked at Tesla (NASDAQ and other all-electric models.

In the end, the 37-year-old tech worker from Modesto, California, opted for a toyota RAV4 Hybrid out of concern about being stranded with a purely electric vehicle, a dead battery, and no charging station in sight.

“Sometimes I want to play with electric vehicles based solely on speed and torque. But for practical use… it just didn't make sense,” said Le, who often drives to Washington state from California for work.

Le is among the growing number of consumers accelerating sales of hybrid vehicles, leaving hybrid maker Toyota Motor (NYSE in pole position to overtake rivals that have been rapidly transitioning to full electrification and They are now grappling with weakening demand for electric vehicles.

High interest rates and an uncertain economic outlook have also led many electric vehicle makers to cut their production targets and warn of slowing sales growth in recent weeks.

However, Toyota is expected to offer a more optimistic outlook when it reports earnings on Tuesday, helped by its heavy reliance on hybrids, which accounted for about a third of its total sales of more than 10 million vehicles last year.

“Almost all the models we sell now are either exclusively hybrid or have a hybrid variant,” Greg Davis, CEO of Walser Toyota, a Minnesota dealership, told Reuters.

He said his store is trying to get the number of hybrid vehicles it sells to between 40% and 50% of total sales, as Toyota moves to make its best-selling sedan in the U.S. market, the Camry, available. only in a hybrid version. .

Toyota has already said that the next generation of the Camry will come only as a hybrid, its boldest move yet to push the technology it pioneered with the Prius, introduced more than a quarter-century ago.

Despite the near-term sales increase that Toyota is expected to report, analysts warn that a major risk facing the world's best-selling automaker is that it continues to lag in pure battery electric vehicles, which are widely considered to constitute the long-term future of the Auto industry.

“Toyota's biggest risk is consumer adoption of BEVs,” said Stephanie Brinley, associate director at S&P Global Mobility.

“If consumer adoption of BEVs changes and accelerates again, Toyota may not be fully prepared with competitive BEV solutions.”

Toyota sold just 104,000 battery electric vehicles last year, less than 1% of its total sales, including those of its Lexus luxury brand. It plans to increase shipments to 1.5 million electric vehicles by 2026, below Tesla's 2023 shipments of 1.8 million vehicles.

Toyota takes a “multi-track” approach to meeting customer needs in all markets, and President Akio Toyoda said last month that battery electric vehicles would reach a market share of at most 30%, with hybrids, hydrogen fuel cell cars and fuel burning vehicles. vehicles that make up the rest.

LONG WAITS FOR DELIVERIES

Sales of hybrids in the United States have increased as consumers balk at the high prices of electric vehicles and are eager for the range of electric cars, especially in more rural areas, where there could be long distances between stations. load.

Battery electric vehicles are not as accepted in the Midwest as they are on the West Coast and other parts of the United States, Davis said.

But demand for hybrids is so strong that buyers have to wait about a year for deliveries of some models, such as the Toyota Sienna utility vehicle, and pay full manufacturer-suggested retail prices, he said.

In stark contrast, Tesla, which has been offering steep price cuts since last year in major markets including the United States and China, suffered a reduction in vehicle margin last quarter and warned of a slowdown in demand for electric vehicles this year.

Hybrids accounted for 9.3% of new light vehicle registrations in the United States from January to November 2023, outperforming electric vehicles by 1.8 percentage points, according to data from S&P Global Mobility.

This benefits Toyota, which was the largest seller of hybrids in the US with more than a third of new registrations, followed by sling (NYSE:) Motor with 20%, the South Korean Hyundai Motor (OTC:) and its subsidiary Kia, and Ford Motor (NYSE:).

General Motors (NYSE ) CEO Mary Barra said this week that her company will launch plug-in hybrid vehicles in North America, moving away from a strategy of avoiding hybrid powertrains on that continent.

Analysts expect Toyota to post a 40% increase in operating profit from October to December, according to LSEG data.