Amidst electric vehicle (EV) prices and charging infrastructure concerns, consumer interest in EVs has waned. As a result, hybrid vehicles have emerged as the favored choice, blending gasoline and electric power. Over the last five years, hybrid sales, including plug-ins, have experienced a remarkable surge. In 2023, Americans purchased a record 1.2 million EVs, marking a 46% annual increase, while hybrid sales soared by 65%. Hybrids, including plug-ins, accounted for approximately 10% of all new car sales in the U.S., outstripping pure electric vehicles with a 7.6% market share.

Furthermore, with the Biden administration fine-tuning auto emissions regulations to curb carbon emissions from passenger vehicles, manufacturers of plug-in hybrids and conventional gas-electric hybrids are poised to reap the benefits.

Despite these challenges, Ford managed to surpass expectations with adjusted Q4 earnings of $0.29 and revenue of $43.21 billion, exceeding Wall Street estimates.

The Duel of Hybrid Auto Stocks: Ford vs. Toyota

The Tale of Ford’s Hybrid Sales Surge

In a recent conference call coinciding with the Q4 release, CEO Jim Farley expressed optimism stating, “Our global hybrid sales were up 20% last year, and we expect them to be up 40% this year.”

Ford Stock Analysis

The average analyst recommendation for Ford stock currently stands at a “Hold,” a decline from the “Moderate Buy” consensus three months prior. Of the 18 analysts covering Ford, five rate it as a “Strong Buy,” while two suggest a “Moderate Buy,” eight recommend a “Hold,” and three label it a “Strong Sell.” Ford’s average analyst price target is $13.70, indicating a potential 3.2% upside in the coming year. Bank of America analysts raised their Street-high price target to $21 post the Q4 earnings release, implying a possible 58.18% rally from current levels.

Toyota’s Dominance in the Hybrid Arena

Valued at a substantial $341.6 billion by market cap, Toyota Motor Corporation, established in 1933, leads the market in hybrids with around 40% market share in the U.S. Toyota shares have delivered an impressive 82.5% return over the past 52 weeks, outperforming the SPX. Over the last decade, the stock has yielded nearly 123%. Additionally, Toyota has been consistently paying dividends to shareholders for 37 years, offering an annualized dividend of $4.00 per share, equivalent to a 1.58% yield.

Toyota’s Growth Driven by Hybrid Dominance

Toyota, a pioneer in hybrid cars since the late 1990s, reported fiscal Q3 sales of $79.50 billion in early February, a 23% increase year-over-year, with net income rising by 86.5% annually to $9 billion. Notably, Q3 hybrid car sales surged by 47% annually to 951,000 units, constituting 32% of global retail sales. Toyota anticipates further growth in hybrid sales, with expectations to reach 5 million units by 2025, up from 3.4 million in 2023. Toyota’s forecast aligns with the belief that hybrids are a realistic solution for achieving carbon neutrality.

Ford vs. Toyota: The Verdict

Automakers like Toyota and Ford, with strong positions in the hybrid EV market, are well-positioned for long-term growth amidst increasing hybrid EV adoption. While Ford has a slight edge in the EV market, Toyota’s reputation for innovation and robust financial standing position it as a potential leader in the hybrid EV market. Coupled with Toyota’s consistent and reliable dividend payments, it presents itself as a more compelling choice for investors.