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Why Toyota Is Launching a Whole New Line of Engines

The upcoming Lexus LC 500 is one of many Toyota products that will soon incorporate all-new engines and transmissions. Image source: Toyota Motor Corporation. 

Toyota Motor Corporation (NYSE: TM) said that it will roll out a slew of new engines and transmissions and boost its hybrid technology in a bid to significantly reduce carbon dioxide emissions by 2021 -- all while improving performance. It's part of a larger Toyota effort to overhaul the way it designs and builds its products. 

What Toyota said: New engines and much more

In a press conference in Tokyo on Tuesday, Toyota said that it will soon launch a new family of gasoline engines, along with new transmissions and new hybrid systems, including a "high-performance" gasoline-electric hybrid system built around one of the new engines. 

Toyota executives Hirohisa Kishi and Toshiyuki Mizushima shared details of the company's new engines and transmissions at a press conference in Tokyo on Tuesday, Dec. 6, 2016. Image source: Toyota Motor Corporation.

The company said that it's reorganizing its research and development efforts to share ideas more broadly within the company and bring new technologies to market more quickly. It's also planning to increase the number of employees working on hybrid and electric-vehicle technologies by about 30% between now and the end of 2021.

New engines and transmissions will improve both efficiency and performance

Toyota said it plans to introduce nine different engines, four new transmissions (including "a new kind of continuously variable transmission," it said), and six different hybrid systems. Toyota gave details on just a few of those new products on Tuesday. 

The new engine lineup includes an all-new 2.5-liter four-cylinder gasoline engine that (like the other new Toyota engines, apparently) takes advantage of several new technologies to deliver exceptional efficiency. That engine will be offered both as a stand-alone unit and as part of a new "high-performance" hybrid system for rear-wheel-drive vehicles.

Toyota released this image of its new 2.5-liter four-cylinder engine coupled to a new 8-speed automatic transmission for front-wheel-drive vehicles. Image source: Toyota Motor Corporation. 

The new transmissions include two new automatics, an 8-speed unit for front-wheel-drive applications and a 10-speed unit for rear-wheel-drive models. Both were developed for increased efficiency. But performance wasn't neglected: Toyota says the new 10-speed will be one of the fastest-shifting units in the world, with smooth shifts "suitable for a premium rear-wheel-drive vehicle." The Lexus LC 500 coupe, coming next year, is expected to use the new 10-speed transmission. 

There's also a new lithium-ion battery pack for Toyota's plug-in hybrids that should boost the vehicles' electric-only range to 60 kilometers (37 miles) or more. 

Toyota said the new engines were developed to improve both "environmental performance" and "driving performance." Together with the new transmissions, the company said that the upcoming new powertrains will achieve roughly 20% improvements in fuel economy over current Toyota products, while also improving vehicle acceleration by 10% or more. ("Powertrain" is the industry term for a combination of engine and transmission.) 

Image source: Toyota Motor Corporation. 

It doesn't take much reading between the lines to get at least one hint: Toyota is planning some hot new rear-wheel-drive products that will incorporate hybrid technology.

Why this is important: Toyota is changing the way it designs and builds cars

Toyota executives on Tuesday explained that these new engines and transmissions are the next phase of the company's move to what it calls the Toyota New Global Architecture, or TNGA. 

TNGA replaces traditional vehicle "platforms" with a set of modules that can be combined in different way to create a wide variety of vehicles that can be manufactured on common assembly lines, sharing many components under the skin.

One of Toyota's intentions with TNGA is to produce vehicles with lower hood lines and lower centers of gravity, in hopes of improving both styling and handling performance. These new engines are designed to fit in with that vision: Toyota said that they're light, compact, and have low centers of gravity. 

The new-for-2016 Toyota Prius was the first production model created with TNGA. Image source: Toyota Motor Corporation. 

The latest Prius and the all-new C-HR crossover were the first Toyotas to be developed using TNGA. At least right now, their powertrains are based on carryover Toyota designs, but that may change when the vehicles are refreshed in a few years.

Toyota expects that the new TNGA powertrains will be featured in 60% or more of the vehicles it sells in Japan, the United States, and China by 2021.

The takeaway for investors: Lower costs and better products

TNGA is expected to lower Toyota's engineering costs, streamline its manufacturing, make it easier and less expensive to introduce new model variants, and -- Toyota hopes -- make its its products more desirable. 

Toyota's largest rivals are pursuing similar approaches. Volkswagen (NASDAQOTH: VLKAY) has developed several sets of modules (what it calls "toolkits") and a number of vehicles based on them, though it arguably has yet to realize the theoretical cost advantages. General Motors (NYSE: GM) has also begun the process of moving to modular architectures. GM expects most of its products to be based on these new architectures by about 2025. 

But in some ways, Toyota is ahead of both of its big global rivals, and it may be first to realize the bottom-line advantages of the shift. 

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John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.