Toyota and Honda benefit greatly as hybrid cars explode in the US market

According to the US research firm Motor Intelligence, hybrid vehicle sales in February reached about 106,000 units, up 54% compared to the same period last year. The market share of hybrid vehicles in total vehicle sales also increased by 3 percentage points from about 5% a year ago to 8% in the first two months of this year.

With the trend of American consumers shifting to buying hybrid cars, Toyota is the car company that benefits greatly from this trend.

The Japanese automaker spent just $1,316 per vehicle, and the incentives were used by dealers to give discounts to buyers in February. That's less than half the industry average of $2,828.

“Toyota’s Camry hybrid and Corolla hybrid models are selling well without any discounts,” said Toshihide Kinoshita at SMBC Nikko Securities.

The company’s compact SUV, the Toyota RAV4, is also doing well. Of the 43,000 RAV4s sold in February in the U.S., hybrids accounted for more than 20,000, more than triple the number from last year.

For its "compatriot" Honda, the rapid increase in hybrid car sales has also helped this car company reduce the incentive to 2,113 USD (about 52.3 million VND) for each car sold.

“Sales incentives for the hybrid versions of the Accord and CR-V are currently half that of gasoline vehicles or virtually nothing,” Honda CFO Eiji Fujimura said. Of the 32,000 CR-Vs sold in February in the U.S., hybrids accounted for nearly half, or about 14,000.

This is in stark contrast to the huge costs incurred by US automakers such as Tesla and General Motors, which are also focusing on electric vehicles. Currently, US automakers’ profits are affected by whether they have hybrid products or not.

Hybrid cars are gaining ground in the US auto market thanks to improved fuel economy, widening the performance gap compared to cars using traditional internal combustion engines. Meanwhile, the selling price of hybrid cars is also decreasing compared to before.

A Toyota Corolla hybrid is currently listed at $23,500 (about VND582 million) on Toyota's US website, less than 10% higher than the price of gasoline-powered models.

Hybrids are generating revenue for Toyota. Toyota's North American sales (the U.S., Canada and Mexico) increased 17% from the same period in 2022 to 2.16 million vehicles in the April-December 2023 period.

Operating profit increased to $3.6 billion (about VND89,141 billion). Operating profit per vehicle also increased by 900%, to about $1,718 (about VND42.5 million).

Honda's North American sales rose 41 percent to 1.21 million units in the same period, including motorcycles. North American operating profit rose 68 percent to $2.68 billion.

The shift of consumers in the North American market in general and the US market in particular to buying hybrid cars was predicted by Japanese automakers when electric car prices remained high and charging stations were not yet available.

"This is a notable change from the previously bleak outlook for hybrids," said Jessica Caldwell, head of research at Edmunds. And Carl Vine, portfolio manager at M&G and a Toyota shareholder, said the automaker has suffered unfair criticism in recent years.

Faced with the trend of American consumers switching to hybrid cars, the giant of the US auto industry, General Motors, said it will reintroduce hybrid and plug-in hybrid models in the near future after deciding to completely eliminate this technology to switch to developing electric vehicles.

Meanwhile, Ford is betting on hybrid technology and predicts sales of hybrid models will grow 40% this year and double by 2023. Last year, Ford sold more than 52,000 Maverick hybrid pickups, making it the fifth best-selling hybrid vehicle behind Toyota and Honda hybrids.

However, much of the industry still believes that developing profitable electric vehicles is the most important long-term goal for automakers.