Toyota Is Upping Its EV Game to Catch GM, Ford, and Tesla

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The automotive giant

Toyota Motor

is starting to pivot away from hybrid electric vehicles and lean into the all-battery electric trend. That shift, which means more competition for the likes of Ford Motor and General Motors, makes those two look prescient in pursuing an all-battery electric strategy.

Wednesday,

Toyota

(ticker: TM) announced ¥730 billion, about $5.3 billion, in investments in battery production capacity destined for the U.S. and Japan. That money should yield 40 gigawatt hours of annual battery production, enough to power roughly half a million EVs. The capacity is slated to come online between 2024 and 2026.

Whatever Toyota does, of course, matters to the entire auto industry, so this plan for spending is a big deal. The company is the second-most valuable auto maker on the planet, behind

Tesla

(TSLA), and is one of the largest producers of cars and trucks.

The Japanese giant is a huge seller of electrified vehicles, but not of all-electric vehicles. In 2021, Toyota sold about 2.6 million hybrids worldwide, but only 14,000 vehicles powered solely by batteries.

Toyota simply prefers hybrids. But it is taking a strategy of multiple shots on goal, producing all powertrain options, from battery only to hybrid to fuel cell to traditional engines for car buyers around the globe.

It sounds sensible. The chief risk is that EVs get good enough, and batteries become inexpensive enough, that hybrids become essentially obsolete, leaving Toyota behind its competition.

A hybrid does, after all, have two powertrains: A gasoline engine and transmission, plus an electric motor and battery pack. That adds cost and complexity compared with either a gasoline-powered car or a battery-powered one.

Other auto makers, including Ford (F) and GM (GM), are focused only on all- battery EVs. Those two, along with many others, have made similar battery announcements over the past year. Adding it all up, global auto makers have announced enough battery capacity for the U.S. to power roughly eight million to 10 million new EVs a year. That capacity will come online over the next several years.

Whatever Toyota can build for its $5.3 billion won’t be its only battery capacity. And it is preparing to launch more battery electric vehicles, such as its new bZ4X SUV, now on sale in the U.S. Toyota still sounds a little more cautious than its peers though.

“This investment is aimed at enabling Toyota to flexibly meet the needs of its various customers in all countries and regions by offering multiple powertrains and providing as many options as possible,” the news release says.

Toyota stock fell 0.2% in overseas trading. Futures on the

S&P 500
and

Dow Jones Industrial Average
were up about 0.2% and 0.1%, respectively, early on Wednesday morning.

Write to Al Root at [email protected]