The next generation of the Toyota Camry, the best-selling sedan in the U.S. market, will come with only a gas-electric hybrid powertrain, the boldest move yet by the Japanese automaker to push hybrid technology into the heart of the U.S. market.

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The 2025 Camry will combine a 2.5-liter gasoline engine with an electric drive system tuned to deliver more power in both front-wheel drive and all-wheel drive versions of the car, Toyota said.

Compliance with tougher U.S. fuel economy rules was a factor in Toyota's decision to make the new Camry an all-hybrid vehicle line, dropping four- and six-cylinder combustion models that made up about 85 per cent of sales in the current model year, David Christ, head of the Toyota brand in North America, told Reuters. Another factor behind the decision was "the performance we were able to get out of the hybrid," he said.

While Toyota has accelerated development of electric-vehicle technology, it is still betting that demand for hybrids and plug-in hybrids will remain robust as the automaker takes a "multi-pathway" approach seeking to satisfy customer needs in every market.

The hybrid powertrain and a new electronic all-wheel drive system deliver 232 combined horsepower – nearly 15% more than the outgoing Camry with a mechanical all-wheel drive system, Toyota said.

Toyota executives unveiled the ninth generation of the midsized Camry sedan on Tuesday in Los Angeles, ahead of the Los Angeles Auto Show that opens on Friday.

The new Camry will compete in a segment largely abandoned by the Detroit brands, with the exception of General Motors' Chevrolet Malibu. The new Camry's direct competitors - putting aside scores of compact and midsized SUVs - will include a few remaining sedans such as the Honda Accord, the Hyundai Sonata and Tesla's all-electric Model 3.

The Tesla Model 3 outsold the Camry in California, a key market for Toyota, during the first nine months of 2023, according to data from the California New Car Dealers Association.

Toyota did not disclose pricing or fuel-efficiency figures for the 2025 Camry, due in showrooms next spring. The cheapest Camry hybrid model currently sells for about $2,400 more than the most inexpensive combustion Camry.

Most of the hybrid powertrains sell at a $1,500 to $2,000 premium to combustion models, Christ said. "We think the value the hybrid powertrain brings is worth that kind of premium."

A current Camry hybrid is rated at 52 miles (84 km) per gallon in combined city and highway driving, compared with a 32-mpg rating for the conventional four-cylinder Camry. The hybrid saves $650 a year in fuel costs compared with the combustion model, according to U.S. government fuel economy data.

Toyota previously switched its Sienna minivan to an all-hybrid powertrain approach. The Sienna is "our second-fastest turning car and the car we have the most reservations for," Christ said.