Hybrid Cars Making A Comeback And Chinese Brands Have Them Ready
Hybrid cars have made an unexpectedly dramatic comeback around the world. Toyota Motor’s nearly 80 percent profit increase (thanks to the new Prius) in the latest quarter reflects that shift in the global car market.
But the Japanese carmaker’s forecast of a significant fall in operating profit for the current financial year tells the true story: it is still playing catch-up on battery electric vehicles.
Interestingly, hybrid vehicle sales are keeping Honda’s profits moving upwards as Honda Japan reports a 23 percent rise in the first financial quarter of 2024. Booming award winning Honda hybrid sales, especially in Malaysia (e:HEV), home nation Japan and surprisingly the U.S., (where they keep pushing EV adoption) are rising. Honda management shared news that their net profit rose 8.7 percent to 394.6 billion yen (USD2.4 billion) in April-June 2024, while sales jumped 16.9 percent to 5.4 trillion yen.
Meanwhile, Toyota is reporting a USD2.2 billion profit for the second quarter of 2024. Toyota announced that they sold over 1 million Toyota Prius hybrids in Japan alone
Then in July this year, Stellantis said it would expand its line of affordable hybrid vehicles to 36 models in Europe by 2026, to meet growing demand for this engine type, an alternative to petrol-fuelled cars and electric vehicles.
According to a report by Jato Dynamics, there is a possibility of growth in hybrid electric vehicle sales in Asia.
Toyota’s conservative strategy in which it has held on to hybrids and plug-in hybrids as an important part of its portfolio as well as offering battery EVs has been criticized in the rapid shift to electric cars.
But it has paid off handsomely this year as EV demand growth slowed in many markets around the world, with operating profit of ¥1.1tn (USD7 billion) in the quarter to the end of March, up 78 per cent year on year.
True, the weak yen has also helped boost the value of its overseas sales. Hybrid demand in markets such as the US has more than offset Toyota’s relative weakness in battery-only EVs, which made up about 1 per cent of its global sales. The hybrid boom is unlikely to be a passing trend and Toyota is one of the biggest beneficiaries.
Interestingly, battery EVs still matter for Toyota because those vehicles are still propelling sales growth in China, one of its key markets. There, local manufacturers have been competing not just on price but also on the latest software in intelligent vehicles. Even as growth slows elsewhere, EVs are expected to account for half of all cars sold in China this year.
For Toyota, grabbing market share in China is becoming increasingly important: it expects operating profit to total ¥4.3tn in the fiscal year to next March, about a fifth lower than the year that just ended.
That forecast took into account supplier and dealer labour costs, as well as investments for a multipronged strategy that includes expanding its battery EV and hydrogen offerings.
