Next Big Business
Toyota is undoubtedly a leader in the global automotive landscape, competing against the likes of Volkswagen Group and Hyundai Motor Group. The Japanese automaker may be best known as a vehicle manufacturer, but moving forward, it also plans to expand its role as an engine supplier, targeting €1.5 billion (about $1.7 billion) in annual revenue by 2032.
According to Automotive News, the engines and hybrid systems could arrive in 2027, with plans to sell them to automotive partners. No customers have been named yet, but Subaru, Mazda, Suzuki, and Daihatsu are among the potential frontrunners. There’s one potential obstacle: while Subaru and Mazda already use some Toyota technology in their vehicles, they are developing new engines of their own, which differ from Toyota’s offerings.
Not Quite on the Same Wavelength
Subaru typically uses boxer engines, which, by the way, celebrate their 60th anniversary this year. Boxer or flat engines have become a signature of the brand, along with its all-wheel-drive system, so adopting Toyota’s new inline-fours could be complicated. Subaru’s next-generation boxer engines are targeting improved fuel-air mixing and 50% thermal efficiency, which could be crucial, especially considering the automaker plans to stop selling combustion-engine vehicles in Europe by the end of 2027 at the latest due to stricter emissions and other regulations.
Meanwhile, Mazda is developing a proprietary hybrid system, which will be paired with its new 2.5-liter Skyactiv-Z inline-four engine. The powertrain is expected to arrive in the CX-5, the brand’s best-selling model, by the end of 2027. The company is also developing rotary engine technology, a signature that has defined the brand with models like the RX-7. In this context, these projects could further complicate Toyota’s engine-supply ambitions.
Toyota’s new inline-four engines include a 1.5-liter naturally aspirated, a 1.5-liter turbo, and a 2.0-liter turbo. The 1.5-liter engines are intended for hybrid applications, while the 2.0-liter turbo could be used independently or with a hybrid system. These engines are intentionally downsized to help manufacturers meet stricter emissions requirements without abandoning combustion powertrains. They’re also compact enough to fit various vehicle designs, including those originally intended for EVs, enabling a multi-powertrain approach.
A Billion-Dollar Side Hustle
It remains to be seen whether Toyota can meet its 2032 target, especially with some of its biggest partners developing their own engines. Still, Toyota and its Japanese alliance partners account for roughly 16 million vehicle sales annually. That doesn’t mean all those vehicles will use the automaker’s new engines, but it highlights the potential scale of its engine-supply business.
In addition, Toyota aims to expand its Arene software platform from two to 50 nameplates and 10 million vehicles annually by 2030, with plans to eventually share the technology with alliance partners.
