Toyota TM has decided to push back the production of electric vehicles (EVs) in North America, delaying its plans by several months to the first half of 2026. Originally, the company intended to start assembling a three-row electric sport utility vehicle (SUV) at its Kentucky plant in 2025, with an investment of $1.3 billion in the facility. However, recent reports indicate that Toyota has informed its suppliers of the revised schedule, marking the first known delay by a Japanese automaker in the region.

The company attributed the delay to "production preparation issues," signaling challenges in aligning its EV strategy with fluctuating market demands. The postponement also stems from changes to the design of its upcoming electric SUV. While Toyota remains committed to its goal of producing 1.5 million EVs globally by 2026, recent adjustments suggest the target could be reduced to around 1 million EVs, according to industry watchers.

The automaker also aims to launch 10 new EV models worldwide by 2026. The SUV expected to be produced at the Kentucky plant is one of Toyota’s next-generation electric vehicles, equipped with an updated chassis. Another EV model under review for production in North America is a Lexus crossover, which, rather than being built locally, will now be exported from Japan.

TM’s delay in U.S. EV production comes at a time when the EV market in the country is experiencing a slowdown. The high costs of electric vehicles, coupled with limited charging infrastructure, have made consumers hesitant, leading them to opt for more affordable hybrid options. Toyota, a leader in the hybrid segment, benefited from this trend as sales of its hybrid models continue to surge. The company’s slower approach to the EV market, once seen as cautious, is now proving to be a prudent move as competitors face challenges with their EV rollouts.

Other automakers are also recalibrating their EV strategies. Ford F, for instance, recently scrapped plans for a large three-row all-electric SUV and postponed the launch of its next electric pickup truck. Similarly, Volvo VLVLY walked back its ambitious goal of producing only electric cars by 2030, stating it would continue selling hybrid vehicles beyond that date. Even Tesla TSLA, the dominant player in the EV market, missed Wall Street expectations for third-quarter deliveries, putting it at risk of experiencing its first-ever annual delivery decline.

Toyota’s decision reflects broader industry dynamics, where automakers are grappling with the reality of slower-than-expected EV adoption. While e-mobility remains the future, consumer preferences and market conditions are prompting strategic adjustments across the board. TM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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