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Updated February 5th, 2024 at 14:22 IST

EV slowdown signs: Toyota may outpace rivals as hybrids see more demand in US

Sales of hybrid vehicles in US have been rising as EVs continue taking a price hit.

Business Desk
Toyota certification issues
Toyota certification issues | Image:Toyota Fortuner
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Best of both worlds: The considerably high interest rates and an economic outlook, led by industry concerns, have prompted several Electric Vehicle ( EV) makers to cut their production targets. The projections of slowing sales growth in recent weeks notwithstanding, Toyota is expected to offer a more upbeat outlook when it reports its earnings on Tuesday, helped by its heavy reliance on hybrids, which accounted for around one-third of its total sales of more than 10 million vehicles last year.

"More or less every model that is rolled out now is either exclusively hybrid or has a hybrid variant," Greg Davis, General Manager of a Minnesota-based dealership said.

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Davis said his outlet is aiming to get its hybrid vehicle sales up to 40 per cent to 50 per cent of total sales. The robust sales are on the back of Toyota's soon-to-launched best-selling sedan in the US market, Camry, which is available only in a hybrid version.

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

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Even as Toyota has expressed hope over healthy sales, analysts warn a major risk facing the world's top-selling carmaker is that it remains a laggard in pure battery EVs, which are widely viewed as making up the long-term future of the auto industry. "Toyota's biggest risk is about consumer adoption of BEVs (battery EVs)," said Stephanie Brinley, an associate director at S&P Global Mobility.

"If consumer adoption of BEVs shifts again and speeds up, Toyota may not be fully ready with competitive BEV solutions."

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

Toyota takes a "multi-pathway" approach to satisfying customer needs in every market, and Chairman Akio Toyoda said last month that battery EVs would reach a market share of 30% at most, with hybrids, hydrogen fuel-cell cars and fuel-burning vehicles making up the rest.

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LONG WAITS FOR DELIVERIES

The sales of hybrid vehicles in US, have been rising as higher EV prices are negatively affecting buyer decisions, at high EV prices and are anxious about the range of electric cars, especially in more rural areas, where there could be long distances between charging stations.

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Battery EVs are not as widely 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 for about a year to get deliveries of some models such as the Toyota Sienna multi-purpose vehicle, and pay full manufacturer-suggested retail prices, he said.

In stark contrast, Tesla, which has been offering sharp price cuts since last year in major markets including the US and China, suffered a vehicle margin reduction last quarter and warned of slowing EV demand this year.

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Hybrids accounted for 9.3 per cent of new light vehicle registrations in the United States from January to November in 2023, outstripping those of EVs by 1.8 percentage points, according to S&P Global Mobility data.

That is benefiting Toyota, which was the biggest hybrid seller in the US with more than one third of the new registrations, followed by Honda Motor (7267.T), opens new tab with 20 per cent, South Korea's Hyundai Motor (005380.KS), opens new tab and its affiliate Kia (000270.KS), opens new tab, and Ford Motor (F.N), opens new tab.

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General Motors (GM.N), opens new tab CEO Mary Barra said this week her company will roll out plug-in hybrid vehicles in North America, pivoting away from a strategy of bypassing hybrid powertrains on that continent. Analysts expect Toyota to post a 40 per cent rise in October-December operating profit, according to LSEG data.


 

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Published February 5th, 2024 at 14:22 IST

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