Elon Musk, the visionary CEO of Tesla (TSLA), once dismissed hybrid vehicles as a temporary trend. In contrast, Toyota Motor (TM) steadfastly invested in hybrid technology, which has proven to be a smart move as hybrids continue to gain popularity, while demand for pure electric vehicles (EVs) wanes.
Hybrids vs. EVs
Toyota’s unwavering commitment to hybrid vehicles, blending battery power with internal combustion engines, has paid off handsomely. Consumer reluctance towards higher-priced fully electric cars, coupled with concerns over charging infrastructure, has dampened enthusiasm for EVs across global markets.
Toyota’s stock performance tells a compelling story – while TSLA is down 20% year-to-date, Toyota stock has surged by over 29% during the same period. Over the past year, Toyota’s stock has skyrocketed nearly 70%, dwarfing Tesla’s meager 2% increase.
Various types of hybrids, including plug-in hybrids (PHEVs) and full hybrids, dominate the hybrid market in the U.S., with Toyota leading the pack alongside Honda (HMC) and Korean manufacturers Kia and Hyundai.
Even domestic manufacturers like General Motors (GM) and Ford Motor (F) are recognizing the potential of hybrids, with GM reintroducing plug-in hybrids and Ford forecasting a 40% surge in hybrid sales.
Hybrids Are a Moneymaker for Toyota
Hybrid vehicles prove to be highly profitable for Toyota, boasting double-digit profit margins that surpass traditional ICE and plug-in hybrid cars. This shift towards hybrids has significantly bolstered Toyota’s financial standing, with hybrid sales climbing to 3.4 million vehicles last year.
In its latest quarter, Toyota witnessed a remarkable 47% year-on-year increase in hybrid sales, contributing to a revised operating profit forecast of $33 billion for the year ending in March.
Toyota’s chairman, Akio Toyoda, foresees a ceiling of 30% for all-electric vehicle demand, creating a lucrative opportunity for hybrid sales. The company aims to sell 5 million hybrids annually by 2025, compared to 3.5 million EV sales per year post-2030.
Toyota’s Solid-State Battery Strategy
Choosing a distinctive path in the realm of EV batteries, Toyota is spearheading research on solid-state battery technology instead of the conventional lithium-ion batteries championed by Musk.
Toyota’s progress in solid-state batteries, especially the development of next-generation batteries at a mass-production scale, could revolutionize the global EV market.
Solid-state batteries, known for enhanced safety and efficiency, are poised to address critical EV battery concerns such as charge time, capacity, and safety risks. Toyota’s forthcoming electric cars powered by solid-state batteries boast an impressive range of 750 miles and a rapid charging time of under 10 minutes.
TM Stock Is a Buy
With Toyota’s innovative strategies and robust hybrid portfolio, the company is poised to maintain its status as the world’s largest automaker. In 2023, Toyota sold a staggering 11.2 million passenger vehicles worldwide.
The Toyota New Global Architecture (TNGA) program, designed to streamline vehicle development and reduce manufacturing costs, further underscores Toyota’s commitment to innovation and sustainability.
For investors seeking stability and growth potential, Toyota stock presents an enticing opportunity, especially during market downturns, priced under $250.