The Electric: Is Toyota Right to Be Skeptical About EVs?
n Aug. 2 in Tokyo, Toyota unveiled the first hybrid electric Land Cruiser, a refreshed version of a large SUV previously known for its off-road muscle-bound chops, now containing both a gasoline engine and a small electric motor. Toyota, which had pulled the Land Cruiser from its U.S. lineup in 2021 after Americans began to balk at its $85,000 base price, said the hybrid would cost around $55,000, and that it would deliver the first vehicles in North America next spring.
Perhaps the loudest point in the event, however, was what Toyota did not say: The company would make neither fully combustion nor fully electric versions of the Land Cruiser, at least not yet. That is, while much of the auto industry has rushed to go fully electric as fast as it can, the Japanese giant would maintain its longtime strategy straddling combustion and electric propulsion.
For more than two years, Toyota—the world’s largest automaker by production—has been criticized for its skepticism toward electric vehicles: Environmentalists, policymakers and other automakers have accused the company of falling behind rivals and moving too slowly to reduce carbon emissions by eliminating combustion engines.
That may be changing. Last month, Ford CEO Jim Farley abandoned plans to make 2 million EVs annually by 2026. EV sales, he said, were growing more slowly than he expected, as many customers were put off by the relatively high price tag for the company’s electric Mustang Mach-E and Ford-150 Lightning models. So Farley said Ford would slow the transition to EVs and instead quadruple its production of hybrids by 2028, including introducing hybrid versions of its best-selling F-150 pickups at the Detroit Auto Show in September. Already, he said, well over half the customers of its $22,000 Maverick compact pickups were choosing the hybrid version. “We never thought we would be at 60% hybrid mix for Maverick,” Farley told analysts. “It was far beyond our expectation.”
Others, too, have embraced hybrids, including China’s Li Auto, which only makes hybrids, and South Korea’s Hyundai Motor. China’s Byd is the world’s largest seller of electrified vehicles, counting both pure EVs and hybrids. Roughly half its sales are hybrids—900,000 last year, mostly in China, and about 600,000 in the first half of this year.
The big selling point for hybrids: price. In the U.S., the average price for a hybrid is $39,000, according to Kelley Blue Book, compared with $53,000 for a fully electric vehicle. In China, Byd’s Qin Plus plug-in hybrid, equipped with an 18 kilowatt-hour battery, sells for about $17,400, compared with $24,400 for the Qin Plus EV.
U.S. sales of pure EVs are growing strongly, up 62% last year from 2021 and 61% in the first half of this year, according to data compiled by Argonne National Laboratory. Less noticed, however, has been a recent sales surge of hybrids and plug-in hybrids: From 2021 to 2022, sales of plug-in hybrids rose just 3%, while those of hybrids fell 4%. But in the first half of this year, hybrid sales are up about 32% and plug-in hybrids by 39%, though some of this surge may reflect the slower growth last year. In June alone, the last month for which Argonne has data, plug-in sales rose 52% compared with the same month in 2022, and pure hybrids by 66%; sales of pure EVs, meanwhile, rose just 35%.
Jack Hollis, executive vice president of Toyota Motor North America, told me that U.S. consumer demand for hybrids and plug-in hybrids was surprising even Toyota. He said the company underestimated the scale and timing of demand for hybrids. “Right now we cannot make enough hybrid vehicles to meet the demand,” he said. “Demand for hybrids has outpaced our expectations, greater than the forecast for EVs.”
Regulators could gum up Toyota’s calculus: In California, they want to ban combustion and hybrid cars as of 2035, though they would allow plug-ins; European regulators want to ban both hybrids and plug-in hybrids that year. But as we have written, there is no way to know if those deadlines will be met—future policymakers could delay the transition to EVs, consumers could reject the timing, or both.
Most automakers, including Tesla, Volkswagen and General Motors, have embraced the fast timetable to EVs and either abandoned hybrids or, in the case of Tesla, never made them. Toyota argues that, given typical driving habits, hybrids can save as much gasoline as pure EVs. Americans on average drive about 37 miles per day. Toyota’s newest plug-in Prius can go 44 miles on a charge before switching over to the gasoline engine. The company also argues that its batteries, since they are much smaller than those in EVs, require much less lithium, nickel, graphite and other metals and minerals, and so cause less environmental disruption.
The contrarian, pro-hybrid group is betting that hybrids will maintain their price advantage as lithium and nickel remain in short supply, squeezing the availability of EVs and pushing up their price.
A 122-Year-Old Idea
In 1901, Ferdinand Porsche, founder of the luxury carmaker today owned by VW, commercialized the first hybrid electric car—the Mixte. It failed—largely because the drive train could barely propel the heavy vehicle, which weighed almost two tons, according to the official Porsche history.
In 1993, Toyota picked up the idea. The company assigned a team to begin designing a car “for the 21st century.” Most of the industry was experimenting with EVs—GM was working on what would become the electric EV1, and Ford was developing an electric Ranger pickup. Both models were commercialized and for different reasons quickly abandoned. Toyota researchers, meanwhile, rejected a pure EV, deciding that the batteries were not ready, and settled on a hybrid system containing a gasoline engine and two electric motors, one of which would act as a generator to recharge the battery when a motorist applied the brakes. In 1997, Toyota introduced the Prius in Japan. It was impractical as an electric car, since it could go just a half mile on its battery power alone. But by 2008, Americans were snapping them up, seeing them as an environmental statement. Toyota’s new Prius is an attempt to gussy up the car, sales of which have declined in recent years, and attract new buyers.
But tastes have changed in the last 26 years. Today, Americans favor pickups and SUVs, which is why automakers are turning out hybrid and EV versions of those vehicles. Hyundai will release hybrid and plug-in versions of its Santa Fe SUV next year, and Toyota has launched a hybrid version of the $23,000 midsize Tacoma pickup.
Toyota’s Land Cruiser is an attempt by the company to bring back some of the glory of the early Prius days. Toyota introduced the Land Cruiser in 1951 as a military vehicle for the U.S. Army, then fighting in Korea. In 1958, the company started to sell cars in the U.S. and imported civilian versions of Land Cruisers into the country, along with Crown sedans. It sold only one Land Cruiser that first year. But in subsequent decades, Toyota made the car heftier, with features designed for rough, off-road conditions, making it a symbol of machismo and toughness. When I was based in Afghanistan in the 1990s, white Land Cruisers were the go-to status vehicle for Western diplomats, spies and the Afghan commanders they bankrolled (the troops drove around in Toyota Hilux mini-pickups).
Now, Toyota says it hopes to recapture that spirit for the Land Cruiser while using propulsion more suited for today. Toyota’s Hollis argues that hybrids are a better choice than EVs because they are more affordable, and, unlike an EV, they don’t burden a motorist with the worry of finding a charger or budgeting lots of time to charge up. Until the price of EVs comes down and charging infrastructure is built up everywhere, hybrids will remain the best choice, he said, and that could take much longer than rival companies and policymakers expect: “I think hybrids will be the No. 1 choice of customers in the 2030s.”
It’s a compelling argument—everything including advances in batteries, deployment of charging infrastructure and opening new lithium and nickel mines will have to go right for EVs to take off the way their champions predict. So far, success has favored the bold—mainly China and Tesla, both of which bet early on that EVs would prevail. That doesn’t mean the pro-hybrid hands now playing it safe will be wrong about the next stage of the transition.