TM Stock Analysis: Why Toyota Is the EV Stock to Beat

Stocks to buy

Toyota Motor (NYSE:TM) is the best electric vehicle manufacturer on the market bar none. TM stock might be the only EV maker worth investing in. The Japanese car company avoided the dramatic retrenching of its EV-focused rivals due to its healthy skepticism.

Toyota chose a diverse approach to EVs instead of focusing on just one type. The leading car manufacturer prioritizes hybrid vehicles, despite producing all-electric battery EVs like its competitors. This proved prescient as BEV demand declines and hybrid sales surge. 

Now with even Ford (NYSE:F) and General Motors (NYSE:GM) hedging their EV bets and swinging to the production of more hybrids, Toyota stands head and shoulders above the competition. It is way out in front of the pack and will be the dominant leader for some time to come.

Always Thinking About Tomorrow

Toyota has long been well ahead of the industry when it comes to making green vehicles.

Going as far back as the 1950s when it first introduced its cars to the U.S. market, they got excellent gas mileage. They might not have sold particularly well back then but the oil shocks of the 1970s and 1980s changed that.

While Detroit was consumed with still making gas guzzlers, Toyota was manufacturing cars that sipped gasoline, getting 30 miles per gallon.

It catapulted the Japanese automaker to the forefront of the industry. By the mid-2000s, Toyota surpassed GM as the world’s largest car seller, a position it has never relinquished.

Yet it was 2001’s introduction of the Prius that Toyota displayed its forward thinking and put itself ahead of the competition once again.

With gas mileage exceeding 50 mpg, it was an instant driver favorite. Since then, Toyota has continued to explore alternatives to mainstream thinking. 

Not only is Toyota the premier hybrid automaker, but it has invested heavily in hydrogen fuel cells, and not just for vehicles.

It is building Woven City, a 175-acre smart city powered by hydrogen fuel cells to test new technology, including autonomous vehicles and smart homes.

It has created the MONET Technologies joint venture with Softbank (OTCMKTS:SFTBY) and other Japanese automakers to develop autonomous vehicle services.

It has a battery JV with Panasonic (OTCMKTS:PCRHY) to develop EV batteries with a 1,000 kilometer range.

The Future of TM Stock

These are not just technologies for the future. Toyota plans to implement them today.

Its new batteries, for example, will appear in its 2026 model vehicles that will feature gigacasting manufacturing and a new computer operating system called Arene that may turn Toyota into the “Apple of EVs.”

These are advanced technologies Toyota is deploying that others are shrinking away from.

Tesla (NASDAQ:TSLA), for example, was supposed to begin using gigacasting manufacturing but has since abandoned the idea.

Gigacasting is like die casting Hot Wheels cars. It stamps out the underbody of a vehicle, which typically contain hundreds of pieces, as a single unit.

Where Toyota is moving forward with gigacasting, Tesla is sticking with its current three-part underbody.

And to cut costs further, Toyota is expanding its manufacturing operations outside of Japan.

While almost 80% of the automaker’s sales come from outside Japan, less than two-thirds of its manufacturing plants are located elsewhere. Getting manufacturing closer to its customers will save more money.

The Real EV Road Ahead

Toyota enjoyed massive profits in 2023 as its hybrid sales took off. It sold 3.4 million hybrids last year, up 31% from the 2.6 million it sold in 2022. BEVs, on the other hand, accounted for less than 1% of all the vehicles it sold, or some 104,000 vehicles. 

That continued in the first quarter where sales surged 20% from the year-ago period. EVs of all kinds now account for nearly 37% of total sales.

Yet Toyota doesn’t think BEVs will ever be a winning bet. The CEO of Toyota North America Ted Ogawa called them a “wasted investment.” It thinks they will garner just 30% of the total electric vehicle market.

Hybrid vehicles, fuel-cell EVs and hydrogen cars will account for the other 70%.

With Toyota Motor’s leadership position in all of those markets, its stock is a buy today.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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