Toyota is making big moves in the rapidly developing EV market. Is the Japanese giant changing with the times, or leading the charge? Here’ s what you need to know.
You probably don’t think of Toyota Motor (TM -3.92%) as a maker of electric vehicles (EVs). The Japanese automaker has been a dominant force in traditional gas cars for nearly a century. Toyota was a pioneer in hybrid vehicles, and the Prius is still a big seller after 27 years on the global market.
Toyota’s electrifying EV sales
But the times, they are a-changin’. Electrified vehicles accounted for 45% of Toyota’s total sales volume in 2024. Its car sales rose 4.2% last year but EV sales soared 56% higher. Long story short, Toyota remains a dominant leader in the automobile market, but its products are going electric at a tremendous speed.
And it’s not all about hybrids with or without plug-in charging ports, either. One of Toyota’s fastest-growing luxury models in 2024 was the Lexus RZ, an all-electric SUV starting at $44,000. Full-year sales of this model rose from 5,386 in 2023 to 9,697 in 2024 — a 79% jump. And on the mass-market side, the $37,000 Toyota bZ4X nearly doubled its sales from 9,329 to 18,570.
These numbers are still far behind ultra-popular names like the Toyota RAV4 8.5% growth to 475,193 units) and Camry (5.9% increase to 309,876), but the all-electric vehicles are catching up fast.
RAV4 and Camry, watch out: All-electric Toyotas are catching up
The car market is going electric, and Toyota is embracing the new market with great success. Smaller rival Honda Motor (HMC -3.75%) is planning to merge with Nissan Motor (OTC: NSAN.Y), perhaps including Mitsubishi in a three-part combination of Japanese car marques, largely because they want to catch up with Toyota’s hybrid-based leadership.
At the same time, the whole EV market relies on rapid expansion of charging networks. I recently found out first-hand that there’s work to do on that front. A recently updated Fool research report shows that my home state of Florida has 3,605 public charging stations and 11,098 ports — the third-largest port count in the country.
Yet, a short stint with an all-electric rental car taught me that the nearest charging point was nearly a half-hour drive away. Nearby gas stations had a few chargers with Tesla (TSLA -0.10%) supercharging ports, but the Hyundai in my driveway was only equipped with plugs for the ChargePoint (CHPT -1.23%) network.
That’s bad news for potential Toyota buyers in my neck of the Floridian swamps (and other areas in similar situations). The Lexus RZ and Toyota bZ4X are incompatible with Tesla’s chargers, though the company has struck a deal to offer ChargePoint home chargers when you buy these cars. The larger sales numbers of standard and plug-in hybrid models makes sense in this environment. If your Prius or hybrid Camry runs low on battery charge, a quick stop at the nearest gas station can keep you going in a less fuel-efficient manner.
The balance between consumer convenience and electric efficiency will develop over the next decade or so. 3,600 Florida charging stations is a big jump from 2,400 locations and 6,00 charging ports in 2022, and I expect the growth of widely compatible charging systems to accelerate.
Toyota is plugging into an electric future
There are deadlines involved in the evolution from fossil fuels to all-electric vehicles. For example, the U.S. government will not be allowed to add fossil-fuel light duty vehicles to its fleet in 2027 and should phase out all gas and diesel units by the year 2040. As a leading seller of cars and trucks to governments around the world, Toyota can’t afford losing that large market to other car makers — so the Japanese giant is building its own battery factories and planning an all-in approach to EVs in the long run. The future is electric, and Toyota plans to remain a global giant in a very different automotive market.
In the meantime, the company will keep pushing the hybrid solution until charging networks are ready to take the convenience mantle from today’s gas stations. Toyota’s stock has outperformed all other traditional car makers over the last four years, and for good reason; its reputation for engineering quality is a good match with a careful entry into the EV world.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
