Toyota bets on new line of combustion engines in challenge to Tesla

Toyota has unveiled plans for a new generation of internal combustion engines, betting on a continued need for older technologies even as car buyers shift towards Tesla and other electric-vehicle makers.

In a rare joint appearance, the heads of Toyota, Mazda and Subaru pledged to continue investing in fuel-based technology, a move that would also benefit hundreds of suppliers struggling with the shift to electric vehicles.

“In an era when the development of battery electric vehicle technology is accelerating, there is a new role we can pursue for the internal combustion engine as well,” Toyota’s chief executive Koji Sato said, noting that the engines were designed to be used alongside batteries in hybrid vehicles.

Toyota’s commitment to internal combustion engine technology — which has traditionally relied on petrol or diesel as fuel — comes as sales of fully electric cars have slowed due to concerns about costs and insufficient charging networks.

That has led to a boom in demand for hybrids, prompting global rivals to increase investment in the models, which combine batteries and fuel engines.

Toyota said on Tuesday its new engines should go into production around the time that updated EU emission regulations are due to be phased in from the end of 2026.

Although Toyota would not comment on its level of investment in the new engines, the group’s chief technology officer, Hiroki Nakajima, said it was a “magnitude smaller” than the funding being poured into electric vehicles and battery development.

Japan’s biggest carmaker has long been a proponent of hybrid vehicles and slower to adopt electric vehicles, a stance that has been validated in recent months by soaring sales.

“Both the batteries for electric vehicles and international combustion engines are important,” Nakajima said, adding that Toyota would continue to invest in both technologies and prioritise whichever would help it hit emission targets.

Toyota’s chair Akio Toyoda has predicted that demand for battery electric vehicles will hit a ceiling at 30 per cent of the global market, opening the way for more hybrid sales.

Toyota’s new engines will be between 10 and 20 per cent smaller and will allow for greater output when paired with batteries. They are expected to be used first in hybrid cars and then plug-in hybrids, according to one person familiar with the matter.

“This is in line with Toyota’s strategy of spreading their bets across different technologies,” said James Hong, auto analyst at Macquarie.

Hong said Toyota was “basically developing small-sized engines for hybrids...that can be mounted without modifying the design of their next-generation vehicles”.

Variants of the engines will be capable of running on diesel and petrol as well as on lower-emission or carbon-neutral fuels such as hydrogen or so-called e-fuel.

This is part of a wider bet that alternative fuels made using electricity from renewable hydrogen and other gases will allow carmakers to keep selling combustion-engine vehicles that meet environmental regulations.

Mazda and Subaru, both part-owned by Toyota, also unveiled prototype engines on Tuesday.

Written by: David Keohane and Kana Inagaki in Tokyo

© Financial Times