Toyota Takes All-Hybrid Plunge With Its Best-Selling US Vehicle

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(Bloomberg) — Toyota Motor Corp. is scrapping the gas-powered version of its best-selling vehicle in the US as the Japanese carmaker doubles down on its push into hybrids.

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The latest generation of the RAV4 compact crossover available later this year comes equipped with a standard or plug-in hybrid powertrain, dropping the gas-powered option that makes up the bulk of current sales, the company said Tuesday. The move follows last year’s shift to an all-hybrid Camry sedan. 

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“The success overall that we’ve had with selling hybrids gave us complete confidence we could do it with this car too,” Mark Templin, Toyota Motor’s chief operating officer in the US, said of the new RAV4.

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Toyota has long been skeptical on the industry push to go all-in on fully electric vehicles, opting instead for a multipronged approach that sees a place for hybrids, gas-guzzlers and even hydrogen-powered cars in its lineup. While the slow roll out of EVs left the carmaker open to criticism, the strategy has helped Toyota weather a cooling in demand for all-electric cars.

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At the same time, demand for hybrids has skyrocketed in recent years and Toyota has emerged as the US market leader. Electrified models accounted for more than half of Toyota and Lexus volume in the US in the first three months of the year, up from just 37% in the same period a year ago. 

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A 25% US tariff poses a major threat to the new RAV4, with imports accounting for more than 60% of US sales volume. Nearly half the 475,000 RAV4s sold in the US last year came from Canada and almost 20% were made in Japan. The company hasn’t disclosed pricing as it awaits more clarity on trade policy.

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Templin said Toyota doesn’t plan to stop importing RAV4s from its factories in Ontario and Japan, and remains hopeful for some reprieve on tariffs from President Donald Trump’s administration.  

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“We need more capacity than we can crank out of any one of those plants. We need all three of them,” Templin said in an interview. “I believe there will be some form of tariff, I just don’t think it’s going to be 25%.”

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The RAV4 competes with similar compact crossovers such as the Honda CR-V, Nissan Rogue, Hyundai Tucson and General Motors Co.’s Chevrolet Equinox. Those models also have depended on foreign production for at least some US sales volume. 

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The current RAV4 debuted seven years ago and has begun to show signs of age. It ranked sixth of of eight in a comparison test by Car and Driver magazine. But it’s still the top-selling vehicle outside of pickups.

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Hybrid Options

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Michael Speigl, dealer principal at a Toyota in Ann Arbor, Michigan, said he’s confident the new version will be a hit with buyers, noting the current RAV4 hybrid is among his dealership’s most popular vehicles.