Toyota, Mazda Motor Corp and Subaru Corp said they have made progress in developing smaller, more efficient engines that can work with electric vehicle manufacturing platforms and be able to meet stringent emissions regulations in the future.

Buoyed by strong sales of hybrid cars, Toyota and its partners say fuel engines will still play an important role even as the global auto industry shifts to electric vehicles to drive decarbonisation. Japanese manufacturers have long been controversial for their reluctance to fully embrace electrification, but BYD and Tesla are leading the way in electric vehicles.

Toyota CEO Koji Sato said: “To achieve carbon neutrality, the most important thing is to reduce emissions. What we need is an engine that can use a variety of fuels efficiently.”

Toyota Chief Technology Officer Hiroki Nakajima declined to say when Toyota’s new engine would be applied to its vehicles, but said it would ensure it was brought to market before stricter emissions rules were implemented.

Toyota also said Monday it is working with oil company Idemitsu Kosan Co., Heavy machinery maker Mitsubishi Heavy Industries Ltd., and refiner Eneos Holdings Inc. Collaborate on a study to launch carbon-neutral fuels in Japan by 2030.

Still, record production, operating income and stock price have given Toyota the momentum and cash to deliver on its promise to roll out millions of electric vehicles in the coming years. Last year, Sato pledged that Toyota would sell 1.5 million electric vehicles a year by 2026 and 3.5 million by 2030.

At the same time, Toyota has long argued that a variety of options are needed to guide the shift to electrification – what Toyota calls a “multipathway” strategy that offers customers a rich selection of powertrains, including hybrids, hydrogen fuel cells and internal combustion engines, as well as electric vehicles.

Toyota, Mazda and Subaru have all touted their engine prototypes as more compact than current technology and said their designs would be more flexible and creative. Subaru said that in order to maintain its image in the minds of consumers, it will stick with its signature horizontally opposed engines but retrofit them to burn alternative fuels. Toyota showed off 1.5-liter and 2.5-liter engines, which are shorter and smaller but more powerful.

Despite detailed plans to develop new engines, Toyota says it remains committed to electric vehicles. Earlier this month, the company said it would spend an additional 500 billion yen ($3.2 billion) on research and development to decarbonize and develop next-generation software. Ultimately, the automakers say the decision to develop alternative fuel engines will depend on whether the technology makes commercial sense.