A year ago, my wife and I bought our first hybrid car. In spirit, we wanted to go fully electric – penance for the previous decade spent driving a gas-guzzling Toyota 4Runner – but in the end, a hybrid was a more practical compromise for navigating Vermont’s harsh winters. So, we bought a Volkswagen XC90 Recharge, a plug-in you can charge in your normal garage outlet overnight that gives you 30 miles of battery power in the winter and 40 in the summer – perfect for my wife’s 22-mile commute to her job five days a week (yes, it’s technically “her” car… sigh).
Sure, our home electric bills are higher due to all the overnight charging – powering up a car uses quite a bit of electricity, as it turns out – but that’s more than offset by the fact that we very rarely have to buy gas, at least for that car (my humble 2017 Subaru Outback is another story…). We couldn’t be happier with our new Volkswagen, and deciding to buy a hybrid was the best of both worlds.
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These days, many environmentally conscious Americans are making the same “split-the-difference” decision, as the chart below (courtesy of Wards Intelligence) demonstrates:
Sales of both battery electric vehicles (BEVs, i.e., fully electric cars) and hybrids have spiked in the last five years, but hybrids have maintained their lead, especially when you include plug-in hybrids like my XC90, as a more popular alternative to EVs as they are both a more practical and cheaper option. While Americans bought a record 1.2 million electric vehicles last year – up 46% from 2022 – hybrid sales surged 65%. When you include plug-ins, roughly 10% of all new cars purchased in the U.S. in 2023 were hybrids, vs. a 7.6% market share for pure electrics.
And while electric vehicle stocks were all the rage in 2020-21, they have since fallen out of favor, with everything from Tesla (TSLA) to Rivian (RIVN) still trading well below their late-2021 peaks as sales growth – while still quite robust – has slowed since the pandemic-era shopping spree. Hybrid sales growth has slowed too, but investors have started gravitating more to the companies that sell them. Invariably, those are well-established, big-name car companies made famous by many decades of selling internal combustion engine vehicles; most aren’t ready to fully abandon their roots but want to tap into the surging national (and global) appetite for electric, so – like my family did a year ago – are turning to hybrids as a compromise.
As a result, these once-stodgy car companies are tapping into new revenue streams, and their share prices are surging accordingly. Here are three auto stocks that are getting the biggest hybrid bumps.
3 (Partially) Electric Vehicle Stocks Getting Hybrid Bumps
Toyota (TM)
The Toyota Camry has long been the top-selling car in America. And starting next year, it will be a hybrid-only vehicle. Mind you, the Camry has been available as a hybrid since 2007, and Toyota has a history of being ahead of the environmental curve, dating back to its 1997 launch of the Prius. Soon, Toyota will have a hybrid version of every car in its lineup – the Supra, the GR86 and the aforementioned 4Runner are its only models left that don’t. This spring alone, Toyota plans to launch nine new hybrid-only cars, including one from its Lexus luxury brand.
It’s no wonder as to why Toyota is beefing up its hybrid fleet: Last year, the company sold more than 640,000 hybrids in America, 29% of its total U.S. sales. While hybrids comprise less than 8% of total U.S. sales, for Toyota, it’s nearly four times as much, a reflection of its fixture as a hybrid maker for more than a quarter century.
With hybrids now accounting for nearly a third of all Toyota sales – and set to top 40% in 2024, according to David Christ, general manager of the company’s North American division – Toyota is growing like it hasn’t in years, with sales up 17%-18% in each of the last three quarters. Total sales haven’t grown more than 9% on an annual basis in more than a decade.
Wall Street likes Toyota’s newly rediscovered growth: TM shares are up 69% in the last year and 27% in 2024 alone, reaching new highs on almost a weekly basis. And yet, the stock remains cheap due to the company’s accelerating growth, trading at just 12 times forward earnings and 1.08 times sales. It’s not too late to buy.
Honda (HMC)
The other Japanese automaker that dominates the U.S. market doesn’t yet produce as many hybrids as Toyota but is growing even faster – Honda’s hybrid sales nearly tripled in 2023, to 294,000 units. Its popular Honda Accord and CR-V sport utility vehicle models are now more than 50% hybrid in terms of sales. The result? Honda’s sales grew by 14% in the latest quarter after four straight years of mostly declining sales. And shares are up 33% in the last year and 13% in 2024. And they’re even cheaper than TM’s, trading at a mere 7.5 times forward earnings estimates and with a price-to-sales ratio of a measly 0.44. That combination of value and growth/momentum is rare, and Honda can thank its booming hybrid sales for it.
Hyundai (HYMTF)
Yet another eastern car company that has cracked the hybrid code in America (perhaps not a coincidence?). The South Korean automaker, maker of the Kia, is fully embracing hybrids, with plans to invest $12 billion in factories in Georgia and Alabama after achieving record U.S. sales in 2023. As Steve Center, CEO of Kia America, told the New York Times, a pure electric vehicle might not serve “a cowboy in Montana with a pickup truck,” but a hybrid could. Hyundai’s hybrid and electric vehicle sales (its new Ioniq EV has become a top seller) expanded by 77% last year. On the heels of a very strong quarter (12% sales growth, 32% EPS growth), Hyundai shares (which only sell on U.S. markets as an American Depositary Receipt, or ADR, under the “HYMTF” ticker symbol) have exploded, rising from 41 to 59 since the end of January. The stock is up more than 65% in the last year.
With a price-to-sales ratio of a paltry 0.25, there’s plenty more upside.
Like hybrid vehicles themselves, these three stocks are cheaper and more reliable alternatives to electric vehicle stocks. And right now, they’re outperforming their EV counterparts by a wide margin. Buying any one of these three “hybrid car stocks” would make for a smart long-term investment.
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