The journey of Tesla in 2024 has been tumultuous so far, and this would hardly be a surprise to Akio Toyoda, the chairman of Toyota. Toyoda has been notably skeptical of the hype surrounding electric vehicles (EVs), directing his company’s energies towards the development of hybrids. This strategy, it seems, is paying dividends.
Tesla’s shares have dipped by about 24% since the start of the year, causing Elon Musk to lose his position as the world’s wealthiest individual to Bernard Arnault, a French luxury magnate. The disappointing fourth-quarter earnings of Tesla, which hinted at a potentially lower sales growth this year compared to last year’s, did not sit well with investors. This grim forecast came despite Tesla’s move to slash prices in 2023 to stimulate demand.
In a stark contrast, Toyota is struggling to ramp up production of its hybrid vehicles to meet the soaring demand. In 2023, Toyota was the world’s top-selling automaker for the fourth consecutive year, selling 11.2 million vehicles globally, reflecting a commendable 7.2% rise from the previous year. Although Tesla’s annual sales of 1.8 million vehicles marked a remarkable 38% year-over-year increase, it still pales in comparison to Toyota’s numbers.
Hybrids over EVs
Toyoda remains unconvinced that EVs will dominate the auto industry. He anticipates that the proliferation of EVs will plateau at around 30%, predicting a future where the roads will be shared by hybrid, gas-guzzling, and hydrogen-powered cars.
Hybrids have witnessed a surge in popularity, not just within Toyota, but also among other automakers, including Ford and Honda. According to S&P Global Mobility data, hybrids accounted for 9.3% of all new light vehicle registrations from January to November 2023, outpacing EVs by 1.8 percentage points. Toyota led the hybrid market in the U.S., contributing to more than a third of all registrations.
Consumer Preference for Hybrids
For many consumers, the appeal of hybrids lies in their ability to consume less fuel than conventional cars, making them more environmentally friendly and economical. The fear of running out of charge mid-journey, a common concern with EVs, is also absent in hybrids, which can switch between gas and battery power to optimize efficiency. The pricing of hybrids, which is closer to that of traditional cars, adds to their allure.
While Toyota does offer EVs, they constitute only a minor portion of its sales. The automaker has made it clear that it is not against EVs, but believes in giving consumers the freedom to choose their preferred vehicle type. Toyoda once likened Toyota to a department store of powertrains, emphasizing that it was not for the company to dictate what customers should buy.
Why Toyota’s Strategy Works
Despite facing issues like recent recalls and suspended shipments due to engine certification discrepancies, Toyota’s emphasis on hybrids seems to be a winning strategy at least for now.
Elon Musk’s dismissal of hybrids as a “phase” in 2022 and his ridicule of Chinese rival BYD’s EVs in 2011, which have now surpassed Tesla in global sales, are stark reminders that consumer preferences can differ from industry predictions.
In conclusion, the current auto market dynamics show that many car buyers are not ready to move on from hybrids, contrary to Musk’s predictions.
