Toyota Motor Corp. is hedging its bets as the auto industry confronts the existential challenge of climate change.

The world's biggest carmaker envisions selling about 3.5 million electric vehicles per year by 2030, a third of its current annual sales, and converting its luxury Lexus line to all-electric by then. But it's not one of the six automakers that pledged last year to work towards phasing out fossil-fueled vehicles by 2040.

Toyota just introduced an amped-up version of its Prius model, signaling it's not planning on giving up on hybrids. It's also the rare automaker that's investing heavily in hydrogen as a fuel for both trucks and passenger vehicles.

Toyota is squarely in the middle of the pack in terms of its vehicles' greenhouse gas emissions, according to the latest EPA data — but it did post the largest year-over-year emissions reductions.

Tom Stricker, Toyota's vice president of sustainability and regulatory affairs, argues that the uncertainties inherent in battery cost and supply chains — and the fact that a billion people still lack electricity — require placing bets on other technologies, too.

This interview has been edited and condensed for clarity.

What is your message here at Stanford?

When it comes to sustainability around our vehicle strategy, we are looking not at how many vehicles of a certain technology we can put on the road. We are looking at how can we reduce carbon the quickest?

We sell 10 million vehicles in 170 countries. That's a lot of diversity. We need options that are across the board, that are affordable. Our philosophy is we leave no one behind when it comes to affordable, carbon-reducing transportation. So that's why we're doing hybrids. That's why we're doing plug-in hybrids. That's why we're doing battery-electric vehicles, and that's why we're doing hydrogen fuel cells. Carbon is the enemy. That's what we're trying to avoid and/or reduce.

Reuters reported Toyota is considering a reboot of its electric car strategy to better compete with Tesla. Is there a rethink going on?

I'm not deeply involved in that part of the planning process. We're always looking at the best way to run the business and design the vehicle. So maybe that's what we continue to do.

There's a lot of different ways you can configure vehicles. You can have [battery electric vehicle]-dedicated platforms, you can have platforms that can accommodate multiple powertrains. And they each have their advantages and disadvantages.

To what extent will you be able to meet the manufacturing and sourcing requirements under the Inflation Reduction Act?

It's clear the objective of the bill is to recognize that pretty much right now the supply chain is through China, and to change that and to localize it. We've broken ground or under construction of our battery plant in North Carolina. That started out as a $1.3 billion investment. It's now up to a $3.8 billion investment.

From an industry basis, there's going to probably be very few vehicles that qualify to start, but we're still waiting on guidance from the Treasury Department on a number of open issues. I don't know that there'll be any earth-shattering open issues that will change that outlook, but what you'll see and what you are seeing, is the industry moving towards trying to localize more, but it's tough.

What specific guidance are you waiting on?

I'll give you a simple example: When does the mining and processing of minerals end and the production of batteries begin? Because those fall under two different parts of the tax credit.

Manufacturing a battery is an incredibly complex thing to do. It involves multiple suppliers in multiple locations. And so to figure out and be able to delineate where you stop counting what's considered mining and processing, and then where you start counting what's considered battery production, is not as straightforward as you might think.

Is permitting reform particularly important to you?

It's very important. One of these mines can take 10 years to bring online, and part of that is the permitting process. One bottleneck we're concerned about in the future is the critical minerals supply. The minerals are there. They're in the ground. We don't get to choose where they are. They are where they are.

People like to talk about, 'Battery prices are coming down.' And they are coming down, but mineral prices are starting to go up, they've been going up, and with the demand that may be coming from the auto industry to meet regulations and markets, we're concerned about that being another pinch point.

And affordability is really the No. 1 issue from consumers in terms of buying electric vehicles. Yes, there's concern about range, having access to charging and things like that, but affordability is still really at the top of the list. Those things converge.

There are conflicting goals: We want to produce electric vehicles cheaply, but also produce them domestically.

There's a lot of uncertainty going forward about how this is all going to come together. From our viewpoint, the solution to uncertainty is diversity. That is yet another reason why we're pursuing the portfolio of options. Because we want to be able to have something there that can reduce carbon if something doesn't pan out the way we thought, and nobody's been investing in any alternatives to that.

And so by having all of the different clean powertrains, not only can more people get in them now, but it's also a hedge in the future if needed.

Toyota has an online tool that maps emissions of different cars under different use cases. What are you trying to say with this?

The point is just simply that what seems obvious to most — that BEVs are always the best choice for all drivers in terms of carbon — is not necessarily the conclusion that you see in the real world. Oftentimes the BEV is the cleaner vehicle, but oftentimes it's not.

If you have a battery electric vehicle with a 300-mile battery, it's a big, heavy, expensive battery. And you're driving 30 miles a day. Your electrical efficiency isn't that great, so you're not getting as much range per charge as you should. And if you're driving a plug-in hybrid, this is a 50-mile plug-in, you're pretty much driving all-electric also. And you're using one-sixth of the amount of battery.

This isn't BEV versus the plug-in; we need them all. But if you were to take that 300-mile battery and cut it into six pieces and make six 50-mile plug-in hybrids, you will have a lot more electric miles driven for the amount of battery, and we just talked about all the challenges and the potential bottlenecks in getting this huge volume of battery, so let's use it effectively.

What that doesn't mean is, 'Let's not do BEVs and let's do PHEVs.' What it means is, don't make the regulations artificially restrict what could be a very viable carbon-reduction technology.

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