In a move that seems to buck the industry trend, Toyota is pushing forward with the development of a new generation of internal combustion engines, with plans to offer them to other automakers. This strategy comes as many manufacturers are focusing on improving existing powertrains to meet stringent emission standards like Euro 7, while simultaneously facing the immense costs associated with the transition to electric vehicles.
A Bold Move in the Age of Electrification
While the automotive world largely accelerates towards electrification, Toyota is charting a different course. The Japanese giant is not only investing in the creation of advanced internal combustion engines but also intends to make them a viable business by selling them to competitors. This ambitious plan aims to generate significant revenue from powertrain sales, even as the industry grapples with electrification investments and R&D budget constraints.
Financial Targets and Development Timeline
According to a report by Automotive News, Toyota is targeting approximately 1.5 billion euros (around $1.6 billion USD) annually in external powertrain sales by 2032. For the current year, the company has set an order goal of 500 million euros (approximately $530 million USD). The new generation of engines and hybrid systems is slated for delivery as early as 2027.
Leveraging Partnerships
Toyota’s strategy is bolstered by its strong relationships with other Japanese automakers. With Daihatsu as a wholly-owned subsidiary and significant stakes in Subaru (21.5% voting rights) and Mazda (5.1% shares), Toyota can access a vast production ecosystem. This network collectively accounts for an annual output of roughly 16 million vehicles, with over half of those produced by Toyota, Lexus, and Daihatsu themselves.
The Vision: Continued Relevance of Internal Combustion
Toyota’s core belief is that even with the industry’s accelerated shift to EVs, there will remain a substantial market for lower-emission internal combustion engines for many years to come. Rather than confining its technological advancements to its own brands, Toyota aims to transform its engine expertise into a profitable venture by supplying other carmakers.
Next-Generation Engine Specifications
Toyota first showcased its new engine lineup in 2024, featuring three distinct configurations: a 1.5-liter naturally aspirated four-cylinder, a 1.5-liter turbocharged four-cylinder, and a 2.0-liter turbocharged four-cylinder engine. These new engines are designed to be more compact and more efficient than their predecessors.
The 1.5-liter turbocharged engine is expected to deliver power comparable to current 2.5-liter naturally aspirated engines. Meanwhile, the 2.0-liter turbocharged variant aims to surpass the performance of the existing 2.4-liter turbocharged engine while simultaneously improving fuel economy.
Integrated with Electrification
Crucially, the development of these new engines has considered electrification from the outset. Both 1.5-liter engine options can be paired with hybrid systems. The 2.0-liter turbocharged engine is designed to function independently or in conjunction with electric drive systems. Their smaller physical dimensions also facilitate easier integration across various vehicle platforms, supporting a wider range of powertrain configurations.
