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Was Toyota Right To Prioritize Hybrids Over Full Electric Cars?

March 11, 2025March 12, 20257 hours ago Paul Fosse 0 Comments

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Last Updated on: 12th March 2025, 12:57 am

When I first heard about Toyota’s decision to prioritize hybrids over full electric vehicles (EVs), I was skeptical. As a cleantech enthusiast and proud owner of several electric cars over the last 14 years, I’ve long believed that EVs are the future of transportation. But after digging into the data and considering how this strategy plays out across different markets—China, Europe, emerging markets, and the United States—I realized the answer isn’t black-and-white. Was Toyota right to bet big on hybrids? It depends on where you’re looking. In this article, I’ll break it down market by market, explore Toyota’s climate strategy, and share some personal reflections along the way. I expect to receive some negative feedback on this article, since if I say anything good about Toyota, some people go a bit crazy. But I think it is important to point out both where Toyota has been right and wrong. This is an updated take on the excellent article by Jennifer Sensiba called “Was Toyota Right about Hybrids?”

The Positives: A Smart Play for the US Market and Short-Term Climate Wins

The US Market: Hybrids as a Practical Choice

In the United States, Toyota’s hybrid strategy shines as a pragmatic move. EV adoption here is growing but still trails far behind China and Europe. As of Q3 2024, EVs accounted for just 7% of new car sales in the US, according to our latest update by Zachary Shahan. Many American buyers—including some of my own friends and family—hesitate to go fully electric due to range anxiety, spotty charging infrastructure, and the higher sticker price of EVs. Toyota’s hybrids, like the RAV4 Hybrid and Corolla Hybrid, offer a compelling middle ground: lower emissions without the leap to full electrification.

The political climate adds another layer. With a Republican Congress and Trump presidency, EV incentives could take a hit, as we have covered extensively and written about most recently here. In this uncertain environment, hybrids could stay relevant for years. For Toyota, leaning into hybrids in the US feels like a calculated bet that aligns with where consumers and policy might be headed in the short to medium term.

Climate Strategy: Maximizing Impact with Limited Batteries

Toyota also pitches its hybrid focus as a climate win, and there’s a solid case to be made here—at least for now. With battery supplies still limited, Toyota argues it’s smarter to build multiple hybrids, each cutting emissions by about 30%, rather than a single full EV. Imagine you’ve got enough battery resources for one EV or 50 hybrids. Those 50 hybrids could collectively slash more carbon and fuel use than that lone EV, especially in the short term.

Given short-term battery constraints, this logic tracks. Production is ramping up, but it’s not yet at a point where EVs can flood the market unchecked. Hybrids, then, become a practical way to spread emissions reductions across more vehicles right now. It’s a classic Toyota move—pragmatic, efficient, and rooted in real-world limitations.

The typical criticism of this progress is these people should have all purchased EVs. Having talked to many of my friends that have purchased hybrids recently, after I tried very hard to explain the advantages of EV technology, these people are just not ready to take they leap. It could be they are followers and still use a flip phone. It could be they live in an area with very few chargers. It could be they have consumed too much propaganda that electric cars are bad for the environment, catch fire frequently, need expensive new batteries after just a few years, or just that they will look like a progressive to their MAGA friends. Regardless, I can tell you there is no chance they are buying an EV right now. But if I can talk them into a hybrid or a plug-in hybrid, it’s a gateway drug to EVs. They will find themselves bragging to their friends about the money they saved and how reliable they are. And you don’t have to buy a Prius anymore to get the economy of a hybrid. These friends wouldn’t be caught dead in the classic Prius that marked you as a virtue signally liberal in their eyes. The new Prius might be OK, since it doesn’t look (or drive) like a Prius.

On the supply side, Toyota couldn’t have ramped up production of full EVs. Now that is their fault for not planning ahead, but it is true nonetheless.

The Flip Side: Where the Strategy Falls Short

However, Toyota’s hybrid-first approach isn’t a silver bullet. While it has clear strengths, especially in the US and for short-term climate goals, it’s starting to show cracks in other markets and over the longer haul. Let’s break down the drawbacks.

China: A Massive Missed Opportunity

In China, the world’s biggest EV market, Toyota’s hybrid bet is costing it dearly. EV sales there are booming—53% of December sales were plugins, (29% fully electric) with no sign of slowing down. Government incentives and a national push for clean energy have turned China into an EV juggernaut. I saw this firsthand on a trip to Shanghai in 2018, when consumers were fawning over mostly Tesla at the time. Now there are many brands that have caught up to Tesla in many ways and also serve the lower price points that Tesla hasn’t offered anything yet.

Toyota, meanwhile, has been slow to pivot. Its hybrids, like the Prius, have fans, but Chinese buyers are flocking to full EVs and more recently to plugins. The result? Toyota’s sales in China tanked by 7% in 2024, with the market quickly pivoting to fully electric and plugins, Toyota is likely to continue to lose share. In a market racing toward electrification, Toyota’s hybrid focus looks like a misstep.

Europe: Falling Behind the EV Curve

Europe is another trouble spot. The European Union’s plan to ban new gas and diesel cars by 2035 is driving a massive shift to EVs. But short term targets have been relaxed, as outlined by in this recent article. In Norway, EVs already make up over 96% of new car sales, and across Europe, for 2024 plugin sales will take up 23% (16% BEV). Hybrids still have a role, especially where charging networks lag, but the tide is turning fast.

Competitors from China are bringing in lots of great EVs, although they are somewhat slowed by the tariffs. As the Chinese build European assembly plants to avoid the tariffs, the pressure will increase. Toyota risks being left behind with a hybrid-heavy lineup might have made sense a few years ago, but in today’s Europe, it’s starting to feel outdated.

Emerging Markets: The Unexpected Rise of EVs

Then there’s the wildcard: emerging markets like Southeast Asia, South America, and Africa and smaller developed markets like Australia. Many people thought these markets would be the last to transition, but EVs are gaining ground here faster than expected. In many of these regions, gas cars are out of reach for most, and motorbikes rule the roads. But as EV prices drop and Chinese exports grow (due to low tariff barriers)—thanks to cheaper batteries and local production—they’re starting to compete on cost with motorbikes.

This could flip the script. Just as mobile phones skipped landlines in the developing world, EVs might leapfrog hybrids and gas cars entirely. Toyota’s hybrid strategy might not be nimble enough to keep up with this shift.

Conclusion

So, was Toyota right to prioritize hybrids? It’s a split decision. In the US, where EV adoption is sluggish and policy could stall, hybrids are a smart play. Short-term, they might even cut more emissions given battery constraints. But in China and Europe, where EVs are taking over, Toyota’s lagging behind. Emerging markets could surprise us with an EV boom, and long-term, full electrification is the climate champ.

But no article on Toyota could be complete without mentioning the difference between what they say and what they do behind the scenes. They have always supported a clean environment to their customers, but behind the scenes, they have long lobbied for laws that would have the effect of slowing the transition to electric vehicles. In addition, it has been recently fined $1.6 billion for cheating on emissions testing for its diesel trucks.

So, overall, Toyota’s strategy has been successful in some of markets, but it is catching up to them quickly. As Abraham Lincoln may or may not have said (people are always fighting about quotes), “You can fool all of the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.” Or, as P. T. Barnum may or may not have said, “There’s a sucker born every minute, but with the birthrate in a death spiral, maybe every other minute.”

If you want to take advantage of my Tesla referral link to get up to $1000 off a new Tesla vehicle, here’s the link: https://ts.la/paul92237 — but as I have said before, if another owner helped you more, please use their link instead of mine. If you want to learn more about Tesla’s new referral program (August 2024), Chris Boylan has written an excellent article on it.

Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], NextEra Energy [NEP], and several ARK ETFs. But I offer no investment advice of any sort here.

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