Toyota bets on a combustion engine that uses alternative fuels

While many automakers predicted an imminent all-EV future, Toyota made progress by emphasizing hybrids over all-electric vehicles, a move that earned it ridicule before being vindicated last year as EV sales plummeted. They staggered. Now it’s doubling down with a new version of the traditional car engine.

The world’s largest automaker said Tuesday it would develop smaller internal combustion engines that are more optimized for hybrid vehicles and can accept alternative fuels such as biofuels, liquid hydrogen and synthetic e-fuels in an effort to reduce emissions. The CEOs of Subaru and Mazda have also committed to producing new engines, they said Tuesday at a news conference with Toyota CEO Koji Sato.

The new engines, while still mostly powered by gasoline, will allow for more compact, efficient vehicles that get better fuel economy as part of a decarbonization effort that treats “carbon as the enemy,” according to a Tuesday news release. .

Sato said that while the auto industry is focused on battery-powered vehicles, there is still room to improve combustion engines.

“To offer our customers various options to achieve carbon neutrality, it is necessary to take on the challenge of developing engines that are in tune with the energy environment of the future,” he said in a statement on Tuesday.

Toyota’s move is an extension of the company’s so-called “multi-track” approach, which includes offering consumers a variety of options to reduce emissions from their vehicles, including hybrids and electrics. For years, former Toyota CEO Akio Toyoda hesitated about electric vehicles and pushed to diversify their offerings.

After electric vehicle sales nearly doubled between 2020 and 2021, then-CEO Toyoda warned that an all-electric future for the auto industry is “going to take longer than the media would like us to believe.” In January, Toyoda, now the automaker’s president, went further and said electric vehicle adoption would peak at 30% of all auto sales.

Toyoda’s unpopular stance sparked criticism from investors, analysts and environmentalists, who said the company was wrong to bet against the inevitability of an all-electric future. Amid the pressure, Toyoda resigned as CEO to become president.

After all that, the all-electric future has been a long time coming. Some traditional automakers, including Ford, have had to backtrack on their ambitious electric vehicle plans. US electric vehicle giant Tesla has also quietly lowered its sales targets, following CEO Elon Musk’s warning in January of “markedly lower” sales growth this year.

Meanwhile, Toyota’s diversification has slowly picked up steam as global sales of electric vehicles have stagnated and customers turn to hybrids as an alternative. In February, the company raised its net profit guidance to a record $30.3 billion, driven in part by strong hybrid sales.

The automaker’s shares on the Nasdaq have risen 20% since January.

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