Toyota was right all along: Hybrids

Painless efficiency for every nameplate

Once the Tesla Model S became available in 2012, it became fashionable to call hybrids relics.  General Motors made a major shift around 2019-2020 in which it proclaimed hybrids a lost cause, and would go “all in” with battery-electric vehicles (BEVs).  

A long list of other automakers followed with “all-BEV” statements: Volkswagen, Volvo, Jaguar and others.  They made statements about going “all-electric” by a certain date -- 2030, 2035, whatever.  Now that these plans have gone sour, many automakers are pointing to escape clauses in those “100% BEV” plans, but just go back to 2020-2022 and listen/read what was said and written at the time.  You will find precious little emphasis on any escape clauses.

It was only around the second quarter of 2023 that major cracks started to appear.  Tesla started a ferocious set of almost weekly price cuts in January 2023, and the other automakers naturally were forced to follow.  Tesla was able to continue to grow year-over-year sales at a decent -- but moderating -- clip through the end of 2023, but in the first quarter of 2024 the bottom fell out and Tesla’s numbers collapsed, despite even more price cuts.  The Tesla ship is now taking in water from all sides at an alarming pace, and I suspect Q2 results are not going to be meaningfully better than the catastrophic Q1, if at all.  Tesla is now a shrinking company, even by the most generous top-line metric: Units sold.  And it gets worse from there for each step you look down the spreadsheet: Revenue, margins… 

The artificial market: Subsidies, mandates and incentives

Discussing the BEV market is an exercise in arbitrary absurdity.  In an undisturbed free market, in which there were no EV subsidies, no extra taxes on non-EVs, and no BEV mandates, I continue to believe what I said already over a decade ago: The natural market for BEV is closer to 0.1% than 1.0%.  

There is no question that BEVs have a few advantages over gasoline cars, and that they fit certain needs very well.  After all, people were already using golf carts, and many cars are driven mostly locally.  So the BEV market isn’t zero.  

It is also true that the natural “undisturbed” free market demand for BEVs could grow beyond that sub-1.0% level that I think would have existed over the last decade, in the absence of government incentives and mandates.  Batteries and charging are becoming better, and perhaps are improving faster than gasoline powertrains do.  

Yet, the disadvantages of BEVs are monumental.  Let’s start with the fact that there is no problem with gasoline cars that is necessary to solve.  Gasoline cars are increasingly reliable, smooth and efficient.  What’s the problem they are trying to solve, really?

Battery-electric vehicles continue to suffer from expensive batteries, issues about recycling those batteries, weight, tire wear, and of course the inconvenience of a slower fueling time.  On top of the engineering problems, BEVs are now suffering from catastrophic depreciation and skyrocketing insurance costs as well.  Things are getting better on the engineering front, but the total picture is still no match for good old fashioned gasoline. 

Hybrids are a no-brainer choice for many consumers

The first couple of hybrids from Toyota and Honda that came out at the end of the 1990s were underwhelming.  It was the second Prius generation that came out around 2004 that broke the ice.  It was smooth and practical.  Yes, it was ugly and did not give the car buyer the “right image” so to speak -- unless you wanted to tell the world “I’m a California commie.”  But the technology was nearly flawless, as evidenced by taxi drivers who drove that ugly duckling up to nearly one million miles. 

Hybrids simply make the car more efficient, in exchange for a relatively modest up-front extra cost, especially compared with the unsubsidized cost of a BEV.  Instead of 30 MPG, your car now gets nearly 50 MPG.  No effort required, no wasting time, no change of lifestyle. 

Toyota leads the way: Hybrids in (almost) everything

We have come a long way from the second-generation breakthrough Prius in 2004.  Toyota now offers almost every nameplate in its US lineup with a hybrid option.  Some nameplates are even hybrid-only.  There are hybrids focused on efficiency, hybrids focused on performance, and hybrids for trucks that are supposed to tow. 

Toyota (still!) makes the smoothest hybrids

Not all hybrids are the same.  There have been some whoppers over the years from various automakers.  However, the Toyota hybrids that are focused on efficiency -- these days, usually paired with a 2.5 liter regular gasoline engine in most instances for the US market -- are simply extremely smooth and reliable.  The only other hybrids in the market that can match it are from Ford -- the Escape (Kuga in Europe) and Maverick.  They feel similar to Toyota’s hybrids.

Hybrids from other automakers can also be good, but I have found that they are simply not as smooth as Toyota’s.  Maybe they will get there some day.  Ford clearly managed to match Toyota every step of the way in the nameplates in which their system was offered (The system in the F-150 hybrid is completely different, as is for that matter the system in Toyota’s body-on-frame trucks too). 

Just to show you that Toyota finally also got its exterior design department together, this is the all-new 2024 Land Cruiser which is hybrid-only for this generation: 

 

Plug-in hybrids: The next natural step

Once you have a great hybrid architecture in place, making a plug-in hybrid (PHEV) variant is not really that difficult.  Yet, this is where Toyota has been relatively unsuccessful to date.  Its first PHEV versions of the Prius, for example, were far from class-leading, to put it mildly.

Other automakers embraced PHEVs and have done a great job.  This includes Volvo in particular, but frankly almost all automakers that have gone down the PHEV path seem to have done a better job than they did in the non-plugin hybrid world.  General Motors had the best PHEV powertrain of them all with the Chevrolet Volt, but that model was discontinued over five years ago. 

Toyota’s next move: Bring PHEV to everything

Toyota has already brought hybrids to almost every nameplate, and will likely plug the remaining holes in the next couple of years.  Its signature PHEV today is the RAV4, but it’s doubtful to call it class-leading even though it’s pretty good. 

The current generation RAV4 came out in November 2018 and is due for a replacement within months from now.  I suspect that the imminent all-new RAV4 will place a higher emphasis on a more competitive PHEV version, just like its “regular” hybrid RAV4 has been class-leading all along, from a powertrain perspective. 

Moving into the 2025-2030 timeframe, I then suspect that Toyota will outfit almost all of its nameplates with a PHEV option that will be more competitive as well.  It just seems to be the natural thing to do.  

Toyota was right all along: Hybrids was the way to go

In terms of improving efficiency in a truly economical (unsubsidized) way, Toyota found a winner in a hybrid system that was perfected around two decades ago.  It cuts fuel consumption materially and painlessly, at a relatively modest cost.  

The industry has taken an expensive and resource-destructive detour into the heavy and expensive large battery madness, but the time has finally come to recognize that Toyota was right all along by perfecting a relatively inexpensive and resource-frugal hybrid system.  More evidence of this thesis to come over the next several months and years.