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Toyota’s bet on hybrids was mocked, then vindicated. Now it’s trying to repeat the trick with an unlikely bet on the combustion engine

The automaker is developing new engines that accept alternative fuels.

While many automakers predicted a looming all-EV future, Toyota made gains by emphasizing hybrids over fully electric vehicles—a move that earned it derision before being vindicated over the past year as EV sales sputtered. The world’s largest carmaker said Tuesday that it would develop smaller internal combustion engines that are more optimized for hybrid vehicles and can accept alternative fuels such as biofuels, liquid hydrogen, and synthetic e-fuels in an effort to cut down on emissions. "In order to provide our customers with diverse options to achieve carbon neutrality, it is necessary to take on the challenge of evolving engines that are in tune with the energy environment of the future,” he said in a Tuesday statement.

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