Hybrids Boost Toyota's Profit, Fuel Honda EV Shift

Toyota and Honda leverage hybrid sales boom, with Toyota's hybrids contributing to a record ¥5 trillion profit, fueling EV ambitions.

By Bill Bullington

5/15, 17:53 EDT
Ford Motor Company
Honda Motor Company, Ltd.
Toyota Motor Corporation

Key Takeaway

  • Toyota's hybrid vehicle sales soared 32% to 3.59 million units, contributing to a record ¥5 trillion operating profit.
  • Global EV market grew 18% in Q1 2024, with hybrids outpacing BEVs due to lower costs and no range anxiety.
  • Major automakers globally are shifting focus towards hybrids, including Ford's F-150 production increase and Hyundai's hybrid-capable Georgia plant.

Hybrid Vehicles Gain Momentum

Toyota Motor Corp., the world's largest auto manufacturer, has reported a significant increase in hybrid vehicle sales, which jumped 32% to 3.59 million units. This surge in sales has contributed to Toyota achieving an annual operating profit of ¥5 trillion ($32 billion), marking the first time any Japanese company has reached this threshold. The industry-topping margin of 11.9% underscores the profitability of hybrid vehicles, which now matches or even exceeds that of gasoline-engine cars for some models, according to Masahiro Yamamoto, an operating officer in Toyota's accounting group. The cost to manufacture hybrid vehicles has decreased to a sixth of what it was when the Prius debuted, signaling improved efficiency and profitability in hybrid technology.

Global EV Market Dynamics

The global electric vehicle (EV) market, including both battery-electric vehicles (BEVs) and hybrids, has seen an 18% increase in sales in the first quarter of 2024 compared to the same period last year. This growth is led by a strong demand for hybrid vehicles, which saw a 46% year-over-year increase, significantly outpacing the 7% rise in BEV sales. Counterpoint Research attributes the higher demand for hybrids to their lower upfront costs and the elimination of range anxiety, a common concern with fully electric vehicles. China has emerged as a leading market for EVs, with sales jumping 28% in the first quarter of 2023, benefiting companies like BYD, which saw a 7% increase in hybrid vehicle sales.

Industry-Wide Shift Towards Hybrids

Not only Japanese automakers like Toyota, Honda, and Nissan are focusing on hybrids, but global players such as Ford Motor Co. and Hyundai Motor Co. are also adapting their strategies to include hybrids. Ford plans to double the production of hybrid versions of its F-150 pickup, while Hyundai is reportedly making its EV plant in Georgia capable of manufacturing hybrids. Mazda Motor Corp. is developing hybrids using its SkyActive engines for improved performance in models like the CX-5. This industry-wide shift is a response to changing consumer perceptions and demands, as noted by Mazda Motor Corp. President Masahiro Moro, who highlighted the dramatic change in perception towards hybrids.

Management Quotes

  • Masahiro Yamamoto, Operating Officer in the Accounting Group at Toyota:

    "The profitability of Toyota’s hybrids versus gasoline-engine cars are now the same, and in some cases more for some models, which means that the more we sell, the more they will contribute to profitability."

  • Toshihiro Mibe, CEO of Honda:

    "Hybrids are very competitive, including on the cost front."

  • Masahiro Moro, President of Mazda Motor Corp.:

    "The media, investors and dealers are all talking about ‘hybrids, hybrids, hybrids.’ The perception has changed dramatically."