Despite ongoing criticism, last week Toyota (TM 0.99%) CEO Akio Toyoda reaffirmed his plan to continue funding a variety of electrified vehicles rather than committing all of his resources to all-electric cars and trucks.

"EVs are just going to take longer to become mainstream than media would like us to believe," Toyoda said, adding that "Toyota can produce eight 40-mile plug-in hybrids for every one 320-mile battery electric vehicle and save up to eight times the carbon emitted into the atmosphere."

He has a point.

According to the U.S. Bureau of Transportation, the average American drives 29 miles per day. This means most Americans could drive a Toyota plug-in hybrid model and rarely, if ever, use gas. Unlike traditional gas-electric hybrids, which run on gasoline with an assist from an electric motor, plug-in hybrids can run solely on electricity for short distances. And their sales are increasing. Automakers sold 176,000 plug-in hybrids in 2021, up from 69,000 in 2020. And analysts expect their sales to top 180,000 in 2022. 

So you'd think Toyota would be in the catbird's seat, with models like the RAV4 Prime, which can run 42 miles on electricity. But it isn't.

Sales are down

Even though every Toyota model is offered with a hybrid driveline, the Jeep Wrangler 4xe made by Stellantis (STLA 1.78%) has become the best-selling plug-in hybrid in America. Toyota, which claimed the sales crown from General Motors (GM 0.87%) as the top seller of cars in the United States, will most likely lose the title this year. Toyota and Lexus sales in the United States through the first three quarters of the year fell by 15.4% to 1,571,714, while GM sales fell by 7.2% through the first nine months to 1,639,591.

Supplier woes

Toyota blamed its production system, which is constraining production and profitability as the company faces supplier constraints, although the company says it's selling every car it can build. This led to a 42% drop in quarterly profit in the second quarter. 

So, what's wrong?

Toyota has said supplier shortages of items such as semiconductors will affect electric vehicle manufacturing. But it doesn't seem that Toyota is serious about EVs, considering Akio Toyoda's reluctance to embrace EVs and its recent recalls (including a do-not-drive order) of the 2023 bZ4X, its first EV -- though it plans to have 15 EVs on the market by 2025.

But given its track record, it remains to be seen how long it will take Toyota's EVs to become successful or profitable. That's especially prescient given the competition from domestic manufacturers such as Ford (F 0.41%), GM, Tesla (TSLA 3.17%), and Rivian (RIVN 4.92%), which are already producing pure battery electric vehicles without such issues.

Meanwhile, the company continues to flog its hybrids and Mirai fuel cell vehicle, which is an anomaly in the U.S. market. (A fuel cell vehicle is an EV that uses a hydrogen-powered fuel cell to generate electricity rather than a battery.) Such insistence on plug-ins weighs heavily on its stock as the automotive market is clearly going EV.

How green is Toyota?

And while Toyota considers its hybrids green technology, others disagree.

"The fact is: a hybrid today is not green technology. The Prius hybrid runs on a pollution-emitting combustion engine found in any gas-powered car," The Sierra Club wrote in an August blog post. 

While Akio Toyoda may be right about vehicle electrification, his honesty is being seen as reflecting the company's reluctance to be a more forceful EV competitor. This reinforces the perception that Toyota is not a cutting-edge automaker as it lacks the EVs that consumers are embracing even as inflation concerns could be a drag on future sales. Given the problems the company is facing building one EV model, Toyoda's opinions could be undermining the company's stock valuation, ensuring that other automotive stocks could be better buys.