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Timing matters. When it comes to timing the transition to electric vehicles, several Japanese automakers may be getting it just about right\u2014despite appearing to be late to the game at first.<\/p>\n
Rather than rush headlong into EVs, Toyota<\/a>, Honda<\/a>, and Mazda have focused on hybrid vehicles as a more practical transition\u2014to great success. They\u2019ve each enjoyed surging sales of hybrids, which has helped them achieve record or near-record profits. That\u2019s positioned them well financially to invest in EVs today, with an eye toward entering the fray in earnest in the second half of this decade.<\/p>\n Meanwhile, the sales growth of electric vehicles, while still strong, has recently slowed, prompting Ford and GM to pare back<\/a> their production plans. This is partly because an initial wave of EV enthusiasts have already bought their vehicles, and everyday car shoppers are more likely to be turned off by higher prices, range anxiety, and poor resale value<\/a>, among other concerns.<\/p>\n Tesla<\/a>, in a call with investors last month, warned of<\/a> \u201cnotably lower\u201d sales growth this year after a disappointing fourth quarter. CEO Elon Musk said his EV maker is \u201cbetween two major growth waves\u201d as it aims to start production of a more affordable new model late next year.\u00a0One difference with that second growth wave for Tesla is that, unlike in the first, it will face intense competition from Japanese carmakers, whose EV pushes have been helped by surging hybrid profits, putting them on a stronger financial footing.<\/p>\n In 2022, Musk dismissed hybrids as a phase, saying that it\u2019s \u201ctime to move on\u201d from them. He might be right in the long run, especially as regulators around the world push harder for EV adoption to meet climate goals. In California and New York, zero-emission mandates loom over<\/a> the automotive landscape. Both states will require that all new passenger vehicles sold be zero-emission by 2035.<\/p>\n But for now, many consumers are opting for hybrids, which use less fuel than traditional vehicles\u2014easier on the environment and the wallet\u2014even while still requiring occasional trips to the gas station.<\/p>\n Currently, car shoppers are worried about the downsides of EVs, said Mazda CFO Jeffrey Guyton, as reported<\/a> by Automotive News. \u201cOur strategy is to follow regulation, yes, but also to pay close attention to what actual customers want,\u201d he said. <\/p>\n Mazda, thanks in large part to strong hybrid sales, reported record profits in its fiscal third quarter ending Dec. 31, 2023\u2014and is closing in on the same for the full year ending March 31.<\/p>\n Guyton said hybrids are getting extra attention among U.S. consumers thanks in part to growing interest in electric vehicles.\u00a0\u00a0<\/p>\n \u201cI think hybrid is benefiting a little bit from the hype around EV,\u201d Guyton said. \u201cNow there is a flattening of the EV market. And I think the people who used to be shouting EV and promoting EV have decided, well, if we cannot get people to take pure electric, hybrid is a good alternative.\u201d<\/p>\n While EVs accounted for less than 1% of Mazda\u2019s global sales through last September, the carmaker expects that to reach up to 40% by 2030. By that time, it hopes to be selling seven or eight EV models. It recently set up a standalone division to build EVs on a new scalable platform, with the first models from that expected to launch in the 2025-2027 timeframe.<\/p>\n Honda has similarly enjoyed surging sales and profits thanks in no small part to hybrids. Two hybrid models accounted for<\/a> a quarter of Honda\u2019s total U.S. sales in 2023. But it also aims to introduce 30 new EV models globally by 2030, by which time it plans on EVs making up<\/a> 40% of its sales in North America.\u00a0<\/p>\n Toyota, the world\u2019s top carmaker for four years running, feels vindicated<\/a> after being widely criticized for not jumping on the EV bandwagon early enough. It didn\u2019t launch its first EV, the bZ4X, until 2022. (Ford by contrast launched its first EV, the Ford Focus Electric, in 2011.) But this month, Toyota said it expects to notch record operating profit for the fiscal year ending March 31, crediting higher sales of hybrid vehicles across all its major markets.\u00a0<\/p>\n \u201cWe think the market is now rethinking the potential of hybrid products, which are a strength of Toyota,\u201d Goldman Sachs<\/a> analysts wrote<\/a> in a recent research note.<\/p>\n But as Toyota rakes in the hybrid profits, it also has big plans for EVs. In November 2023, it vowed to make<\/a> 3.5 million EVs annually by 2030, with dozens of different models across its Toyota and Lexus<\/a> brands. To put that in perspective, Tesla sold 1.8 million EVs last year. And as soon as 2027, Toyota plans to introduce new solid-state batteries that allow for longer ranges and faster charge times than today\u2019s lithium-ion batteries.<\/p>\n In October 2022, Akio Toyoda, then CEO of Toyota, said that<\/a> EVs \u201care just going to take longer than the media would like us to believe,\u201d thanks in part to insufficient charging infrastructure. He emphasized the importance of hybrids in the meantime, insisting that Toyota would keep offering a wide variety of powertrains and let consumers decide for themselves.<\/p>\n Last month, he predicted<\/a> that EVs would capture just 30% of the market and would share the road with hybrid, traditional, and hydrogen-powered vehicles.\u00a0<\/p>\n But that doesn\u2019t mean Toyota won\u2019t push hard into the EV space. Last year, Toyoda\u2014whose grandfather founded the Japanese auto giant\u2014resigned as CEO and became chairman, making way for a new leadership team that\u2019s better able to transition to EVs.<\/p>\n \u201cI am an old-fashioned person in regards to digitalization, electric vehicles, and connected cars,\u201d Toyoda said. \u201cI cannot go beyond being a car guy, and that is my limitation. The new team can do what I can\u2019t do.\u201d<\/p>\n<\/div>\nHybrids more than \u2018a phase\u2019\u00a0<\/h2>\n
Gearing up for EVs\u2014for real<\/h2>\n
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