Toyota Targets Sharp Growth in Plug-In Hybrids as EV Momentum Slows

Toyota Motor Corp. is aiming to significantly expand its plug-in hybrid electric vehicle (PHEV) offerings in the United States, targeting a fivefold increase in sales by 2030 amid slowing momentum for fully electric vehicles and mounting regulatory uncertainty.

The Japanese automaker plans to grow the share of PHEVs from just 2.4% of its U.S. sales last year to nearly 20% by the end of the decade, according to company officials.

“We are going to grow our PHEV volume through the lineup over the next few years,” said David Christ, head of the Toyota brand in North America. “We love the PHEV powertrain, and we’re focused on increasing the number of miles drivers can travel on EV-only range.”

PHEVs, which can operate as electric vehicles for short distances before switching to gasoline power, are seeing renewed interest. While not new, Toyota introduced the Prius plug-in hybrid to U.S. buyers in 2016, PHEVs are gaining popularity as a middle ground between traditional hybrids and full battery-electric vehicles (BEVs).

The move comes as Toyota seeks to navigate an evolving regulatory landscape. California’s Advanced Clean Cars II rule mandates that all vehicles sold in the state must be zero-emissions by 2035, but that policy is expected to be rescinded under President Donald Trump’s administration.

Toyota’s 2030 target would bring the automaker in line with the PHEV limit allowed under California’s regulations. Executives cautioned, however, that plans could shift based on customer acceptance, policy changes, and affordability of electrified technologies.

A Practical Bridge in a Shifting Market

Toyota has ramped up investment in battery technologies and continues to develop all-electric vehicles. Still, executives remain cautious about a full transition to EVs, noting infrastructure gaps, affordability concerns, and mixed consumer sentiment.

The company’s PHEV strategy is part of a broader push to expand its “electrified” vehicle offerings. The automaker currently sells more than 20 hybrid models and continues to explore where plug-in variants can be introduced effectively.

“We’re looking across the lineup and asking, ‘How many powertrains can we offer per model?’” Christ said. “We are going to increase the percentage of hybrids and PHEVs significantly.”

Market Response and Sales Performance

Toyota’s plug-in hybrid sales, including those under the Lexus brand, jumped 39% in 2024. The increase was driven by the Prius and RAV4 models as well as the Lexus TX PHEV, which saw an 88.6% year-over-year spike in sales.

This upward trend comes as U.S. market analysts forecast modest growth for PHEVs over the next five years. S&P Global Mobility estimates PHEVs will make up just 5% of the U.S. vehicle market by 2030. AutoForecast Solutions expects the share to remain relatively flat at around 3.3%.

“The dual powertrain system makes PHEVs more expensive to build,” said Chris Hopson, principal analyst at S&P Global Mobility. “Automakers already invested in the platform may benefit, but new entrants will face cost challenges.”

The 2025 RAV4 PHEV, for example, carries a $15,000 premium over the base model and a $12,000 markup compared to the standard hybrid version.

“It’s kind of like getting two cars in one,” said Cooper Ericksen, Toyota North America’s senior vice president of product and battery electric vehicles. “And if it serves a compliance benefit, we may consider pricing incentives to increase adoption.”

Consumer Awareness Still a Hurdle

One of the challenges Toyota faces is educating consumers about how PHEVs work and the benefits they offer. The automaker believes better awareness could lead to a major shift in market behavior.

“Once we educate people, by far the biggest swing from all the powertrains is to PHEV,” Ericksen said. “There are consumers who will consider a PHEV but will not go for a BEV.”

Toyota's executives point to research that suggests interest in PHEVs increases dramatically once buyers understand they can operate like EVs for short trips and still run on gasoline when needed.

The lack of consumer understanding has hurt earlier plug-in models. General Motors discontinued its Chevrolet Volt in 2019 after slow sales, partly due to confusion about its plug-in hybrid system.

Electrification with Options

Toyota’s long-term strategy is rooted in offering consumers multiple options across different propulsion systems. That includes internal combustion engines, traditional hybrids, plug-in hybrids, and full battery-electric vehicles.

“We’ve got ICE, hybrid, plug-in hybrid, and EV,” said Ericksen. “It’s like loading all the bases in baseball, our odds of scoring are higher than if we bet everything on one powertrain.”

Toyota expects electrified vehicles, including both hybrids and PHEVs, to make up more than 50% of its total U.S. sales this year, up from 46% in 2024 and just under 30% in 2023.

As the electric vehicle market confronts headwinds, from high sticker prices to slow infrastructure rollout, Toyota sees plug-in hybrids as a practical and scalable solution to meet emissions targets and consumer expectations without overcommitting to a single technology.