Toyota targets €1.5 billion in engine sales, but HORSE is already a step ahead

Toyota sees rivals as new customers

According to Automotive News, Toyota expects to generate around €480 million in revenue from powertrain sales to external customers in the current financial year. By 2032, the company wants to more than triple that figure. The first next-generation engines could reach customers in 2027. These figures refer to projected sales revenue, not profit.

The business plan centres on three four-cylinder petrol engines: a naturally aspirated 1.5-litre, a turbocharged 1.5-litre and a turbocharged 2.0-litre.

Toyota is developing them primarily for electrified powertrains. A more compact design allows more hybrid powertrain components to fit into the same engine bay, while the electric motor compensates for the smaller combustion engine's torque shortfall.

The new 1.5-litre turbocharged engine is expected to replace existing naturally aspirated 2.5-litre engines. Toyota aims to achieve comparable performance with lower weight and fuel consumption.

The 2.0-litre turbocharged engine targets more power than the current 2.4-litre turbocharged engine, but with more compact dimensions.

Toyota has not yet disclosed final power outputs or prices for the new powertrains.

HORSE Powertrain is Toyota's most direct competitor

What makes Toyota's plan particularly interesting is HORSE Powertrain, which Renault and Geely established in 2024. Renault and Geely currently each own 45% of the company, with Saudi Aramco holding the remaining 10%.

HORSE sells not just internal combustion engines but complete powertrains, including hybrid systems, transmissions, power electronics and range extenders.

The company has 18 factories, five development centres and around 19,000 employees. HORSE's production capacity exceeds eight million powertrain-related units a year. Its customers include Renault, Geely, Volvo, Nissan, Mitsubishi and Proton.

According to Reuters, HORSE is targeting annual revenue of €15 billion by 2029. That is ten times Toyota's planned €1.5 billion, although the figures are not directly comparable. HORSE's revenue covers a much broader product range and includes deliveries to car brands linked to its owners.

HORSE's greatest advantage lies in its business model. The company offers carmakers the option of abandoning their own internal combustion engine development and buying all the technology they need from an external supplier.

Toyota wants to move in the same direction, but has yet to prove that its powertrains can compete with the complete solutions offered by independent suppliers.

HORSE is already developing next-generation hybrid powertrains

HORSE's technological progress illustrates the competition Toyota faces.

In 2026, the company began production of the upgraded 2.0-litre HORSE V20 petrol engine at its Skövde plant in Sweden. The same engine family is suitable for both 48-volt mild-hybrid and 400-volt plug-in hybrid powertrains.

According to the manufacturer, the new plug-in hybrid version reduces fuel consumption by 7% compared with its predecessor. The engine meets European, US and Chinese emissions requirements.

Even more significant is HORSE X-Range technology, which allows a hybrid powertrain to be installed on platforms originally designed for electric cars.

This gives carmakers the option of using the same vehicle architecture for both electric cars and electrified models with internal combustion engines, reducing the cost of developing separate platforms.

Toyota's strength, by contrast, lies in full-hybrid technology refined over decades. The company can combine low fuel consumption, durability and high production volumes, which could make its powertrains particularly attractive to smaller carmakers.

Who else competes with Toyota?

HORSE is not the only company looking to benefit from reducing carmakers' powertrain development costs.

Key competitors include:

HORSE Powertrain: complete combustion and hybrid powertrains, transmissions and range extenders. Toyota's most direct competitor. Aisin: a Japanese supplier affiliated with the Toyota group that manufactures automatic transmissions and hybrid powertrain components. More of a partner, but active in the same powertrain market. ZF Friedrichshafen: a German technology company whose strengths lie in automatic transmissions and hybrid powertrains. BorgWarner: a US supplier that develops turbochargers, electric drive systems and hybrid system components. Bosch: a major manufacturer of powertrain control systems, fuel injection technology and electrification components.

The distinction is important. While HORSE can supply a carmaker with a complete powertrain, Bosch, ZF and BorgWarner focus more on components and systems.

Toyota therefore competes more directly with HORSE, while its competition with other suppliers is primarily across different parts of the hybrid technology value chain.

European emissions requirements could make engine suppliers more important

Euro 7 requirements take effect for new passenger car types on 29 November 2026 and for all new passenger cars on 29 November 2027.

Although Euro 7 retains many of the existing exhaust emissions limits for passenger cars, it tightens requirements for particle measurement, durability and testing.

This makes developing new engines increasingly expensive for smaller manufacturers.

Toyota and HORSE see the same opportunity here: why should every carmaker spend hundreds of millions of euros developing its own petrol engines when it can buy a compliant powertrain from a specialist supplier?

In Europe, such a solution could appeal particularly to smaller manufacturers, but larger groups may also decide to outsource some development work.

HORSE benefits from an extensive European production network. Toyota's advantage, by contrast, is its established hybrid technology, which European buyers already know.

Mazda, Subaru and Suzuki could get Toyota's business plan off the ground

Toyota's potential customers include Mazda, Subaru, Suzuki and Daihatsu. None has yet confirmed a purchase agreement for the new powertrains.

Mazda uses Toyota technology in the North American hybrid version of the CX-50, but is also developing its own Skyactiv-Z engine family.

Subaru continues to refine its boxer engines, while Suzuki already uses solutions based on Toyota's hybrid technology.

Toyota's potential customer base is therefore far from guaranteed. Carmakers must decide whether to abandon their own technology and buy powertrains from Toyota or HORSE.

This is where HORSE's role as an independent supplier could prove an advantage. Toyota remains a carmaker itself and competes with many potential customers in the same market segments.

The internal combustion engine becomes a new business opportunity

Toyota's and HORSE's strategies point to an important shift in the automotive industry. Developing internal combustion engines no longer has to be a core activity for every carmaker.

HORSE is betting on sales of complete powertrains and wants to serve as many car brands as possible. Toyota intends to use its hybrid technology advantage to increase production volumes and recoup development costs.

Toyota's biggest challenge, then, is not building a new engine but selling it to competitors. HORSE has already established a global supply network and demonstrated that its business model works.

Toyota must now show whether the efficiency and reliability of its hybrid technology outweigh HORSE's greater flexibility.

Both companies' success ultimately depends on how long the world's carmakers need new combustion and hybrid powertrains. Electrification in Europe limits growth, but elsewhere in the world this business could remain significant for decades to come.