Toyota Bets on Alternate-Fuel Engines in an Electric Future

(Bloomberg) -- Toyota Motor Corp. revealed prototypes of internal combustion engines capable of running on hydrogen, along with gasoline and other fuels, seeking to popularize alternate technologies to reduce carbon emissions.

The world’s biggest carmaker, alongside Mazda Motor Corp. and Subaru Corp., said they’re making progress on developing smaller, more efficient engines that can work with electric-vehicle manufacturing platforms and capable of meeting strict emission regulations in the future.

Emboldened by robust hybrid-car sales, Toyota and its partners say fuel-burning engines have a role to play even as the industry shifts to battery EVs in a global push to decarbonize. The Japanese manufacturers have long been criticized for hesitating to fully embrace electrification, while BYD Co. and Elon Musk’s Tesla Inc. take the lead in battery-based EVs.

“To become carbon neutral, what’s most important is to reduce emissions,” Toyota Chief Executive Officer Koji Sato said at a joint briefing with the CEOs of Mazda and Subaru on Tuesday. “What we need is an engine that can efficiently use various types of fuel.”

Hiroki Nakajima, Toyota’s chief technology officer, declined to give a timeframe for when Toyota’s new engines would show up in its vehicles, but said the carmaker will make sure to have them in the market before stricter emission rules are enforced. He didn’t specify any geographies.

Toyota said Monday it’s conducting a study with petroleum company Idemitsu Kosan Co., heavy machinery maker Mitsubishi Heavy Industries Ltd. and oil refiner Eneos Holdings Inc. to roll out carbon neutral fuels in Japan by 2030.

Still, a banner year marked by record-breaking output, operating income and share prices have given Toyota the momentum and cash it will need to make good on promises to roll out millions of battery EVs within the next few years. Last year, Sato vowed Toyota would sell 1.5 millions battery EVs annually by 2026, and 3.5 million by 2030.

At the same time, Toyota has long argued that mutiple options will be needed to navigate the shift to electrification — an approach that it calls a “multipathway” strategy that offers customers a broad choice  of powertrains, including hybrids, hydrogen fuel cells and combustion engines, as well as battery EVs.

Toyota, Mazda and Subaru touted engine protoypes that were more compact than existing technology, saying they would allow for more flexibility and creativity in design. 

Subaru said it would stick to its signature horizontal boxer engine to retain its identity with consumers, but adapt it to burn alternative fuel. Toyota showed off 1.5 liter and 2.5 liter engines that were shorter and smaller, but more powerful.

“The engine can’t survive in its current form. It needs to change,” Sato said.

Despite the detailed plans to develop new engines, Toyota said it remains committed to EVs. Earlier this month, the company said it will spend an additional ¥500 billion ($3.2 billion) on research and development to decarbonize and develop next-generation software.

At the end of the day, the carmakers said that decisions around developing engines with alternative fuels will depend on whether the technology make sense business-wise.

“It’s more about business feasibility, whether it makes economic sense,” Tetsuo Fujiniki, Subaru’s CTO, said. 

(Updates with Toyota CEO comment in sixth paragraph, details on engine technoogy)

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