Hybrid sales have been on a tear in 2023, jumping 48% in the first three quarters compared to the same year-ago period, the Wall Street Journal reported. Last year, hybrid sales dropped about 6% compared with 2021.

“It’s a smoking-hot market,” David Christ, head of sales for Toyota’s North American business, told the paper, adding that Toyota is making as many hybrids—which save fuel by combining a gasoline engine with an electric motor—as it can.

Demand for electric vehicles, meanwhile, has chilled. The market is still expanding, but the pace of growth has slowed considerably. After growing 63% globally in the first half of last year, it rose only 49% in the same period this year, the Journal reported.

That has carmakers rethinking investments in EV production, among them GM and Ford. Part of the problem is that the first wave of buyers has already bought their EVs, and the next group of would-be buyers is less willing and more price-sensitive. 

“A large number of people are living paycheck to paycheck, and with a lot of debt, they have got credit card debt, mortgage debt,” Musk said on a third-quarter results call last month. “We have to make our cars more affordable.”

His comments came as Tesla disclosed its lowest quarterly earnings per share in two years, coming in 10% below already negative analyst forecasts.

Ford in its third quarter, meanwhile, reported a 41% increase in hybrid sales—easily outpacing EV sales—and said it expects to quadruple them in the next five years.

All this leaves Toyota chairman and former CEO Akio Toyoda, long a skeptic of the hype surrounding electric vehicles, feeling vindicated. He’s long felt the industry should hedge its bets on EVs by continuing to invest in hybrids and hydrogen-powered cars.

“People are finally seeing reality,” he said recently. 

A little over a year ago, he told dealers gathered in Las Vegas that electric vehicles “are just going to take longer than the media would like us to believe… Toyota is a department store of all sorts of powertrains. It’s not right for the department store to say, ‘This is the product you should buy.’”

Last year, Toyoda resigned as CEO as investors clamored for Toyota to do more by way of all-electric vehicles. 

“Toyota is not correctly responding to calls from the market to take a lead in electric vehicles,” Satoru Aoyama, senior director at Fitch Ratings, told the Financial Times in October last year, warning the company could “lose investor confidence.” 

As it turns out, more confidence was merited, not less.