Toyota Targets $1.7 Billion Selling Engines, Hybrid Systems Without Named Customers

US$1.7 billion a year is the scale Toyota is targeting from a new supplier business built around its next-generation combustion engines and hybrid systems. The automaker plans to offer the technology to other vehicle manufacturers, potentially putting Toyota-developed hardware inside more rival-brand cars.

The target is annual revenue, not a signed order book or guaranteed return. Toyota has not identified prospective customers or announced supply contracts, and the reported timetable does not call for the business to reach US$1.7 billion annually until 2032. The next-generation powertrains themselves are due to begin rolling out in 2027.

That five-year interval gives Toyota time to introduce the engines in its own vehicles, establish production and pursue external programs. It also shows how far the plan remains from becoming a business at the stated scale. Automotive powertrain agreements generally have to align with vehicle-development cycles, manufacturing plans and model-specific engineering requirements; a revenue target alone does not establish how many brands or vehicle programs will participate.

Smaller engines designed around hybrid assistance

The planned supplier push centers on new 1.5-liter and 2.0-liter four-cylinder engines previewed in 2024. Toyota showed the 1.5-liter in naturally aspirated and turbocharged forms. It is intended to replace the company’s existing engines of the same capacity while occupying a 10% smaller footprint.

A smaller engine package can create more room for the other parts of an electrified powertrain, including electric drive hardware and associated vehicle structures. It can also give vehicle engineers greater flexibility over hood height and component placement. The practical value will still depend on the complete installation rather than engine dimensions alone.

Toyota’s new turbocharged 2.0-liter engine is positioned to take the place of applications now served by its 2.4-liter turbo. Together, the two engine families support Toyota’s broader commitment to lower-emissions combustion engines with more extensive hybrid assistance, announced jointly with Mazda and Subaru in 2024.

For an outside automaker, obtaining an engine and hybrid system from one established source could reduce the need to develop every major component independently. But integrating a powertrain into another company’s vehicle remains a systems task. Mechanical packaging, cooling, electrical architecture, software behavior and the calibration of engine and electric assistance must work as a complete vehicle. The announced plan does not specify whether Toyota would offer standardized systems, customer-specific variants or different levels of component supply.

Existing partnerships show several possible routes

Toyota already supplies or shares selected hybrid technology with other manufacturers. The US-market Mazda CX-50 is available with a Toyota-sourced 2.5-liter hybrid powertrain also used in the RAV4. The new Subaru Forester takes a different approach, combining a Toyota battery and electric motor with Subaru’s boxer engine.

Those examples illustrate two distinct supplier models: providing much of a complete powertrain or contributing selected electrification components around another manufacturer’s engine. Toyota has not disclosed which approach it intends to emphasize with the new generation.

Toyota’s stakes in Subaru, Mazda and Suzuki make those affiliated automakers plausible early candidates, but none has been confirmed as a customer. Their individual engineering strategies also prevent a simple assumption that they will adopt Toyota’s systems wholesale. Mazda is developing its own hybrid system for its upcoming 2.5-liter Skyactiv Z engine and also appears to be developing range-extender vehicles using rotary generators. Subaru, meanwhile, abandoned development of its e-Boxer hybrid technology earlier this year, potentially increasing the relevance of outside hybrid components without confirming a future supply agreement.

Toyota enters the effort with substantial internal volume. Toyota and Lexus delivered 4,433,503 hybrids last year, accounting for 42.1% of their combined deliveries. In Australia alone, Toyota delivered a record 115,953 hybrid vehicles during 2025, representing more than half of the country’s hybrid deliveries.

That production base gives Toyota experience manufacturing hybrid systems in large numbers. Turning it into a US$1.7 billion external business will require a different measure of progress: named customers, awarded vehicle programs and production commitments. With the first new powertrains expected in 2027 and the revenue target set for 2032, those contracts are now the missing link between Toyota’s engineering plan and its multibillion-dollar goal.

By Thomas Caldwell — AMI’s senior editor for mechanical and mobility engineering, covering vehicle electronics, systems integration, electrification, chassis systems, propulsion, and safety policy.