When Toyota starts losing money, you know these are strange times for the automotive industry. In terms of putting bums in seats and staying in the black, few carmakers can match the company.

Yet the world’s largest car manufacturer is getting its clock cleaned these days. For the first time in its 70-year history, it lost a significant amount of money, dropping US$1.7 billion worldwide in the first three months of this year. To put this in context, Toyota returned an operating profit of some US$28 billion in 2008. In the words of Toyota Canada’s managing director, Stephen Beatty, carmakers—and not just his—have been coping with a “volatile” market. “The auto industry has been doing its best to adjust to this volatility,” he explained at a recent vehicle launch in Vancouver, “but it has not been an easy ride for anyone.”

Toyota Canada’s answer? Go green and make it lean—greener than ever and leaner than ever. According to Beatty, his company has introduced 10 new fuel-efficient vehicles since the beginning of 2009, in all market categories. “Toyota’s first growth spurt in North America was the provision of fuel-efficient vehicles in the height of the 1973 oil crisis,” he says. “It is the reason why we continue to move forward.”

Thus the company’s “more power, less fuel” marketing push. Here’s the message: the next time you’re shopping for a new car and you think you need a V-6 or V-8 engine, consider the same model but with a smaller, thriftier power plant. Toyota is offering larger and more refined four-bangers than ever, and you can get them in large and midsize vehicles as well as small ones—models like the Highlander, RAV4, and Venza SUVs, plus the ever-popular Camry. Toyota is upping the content of these models so that buyers don’t have to compromise in terms of creature comforts when they opt for a less potent drive train.

The Highlander, for example, is a full-size sport ute that, until now, has been available with either a V-6 or a V-8 engine. Not anymore: you can now choose a front-wheel-drive version with a gas-sipping 187 horsepower, 2.7-litre four-cylinder engine that, in tandem with its two-wheel-drive layout, will deliver some 10.4 litres per 100 kilometres in town and 7.3 litres per 100 kilometres on the highway. This engine is also found in the Venza and the RAV4, and it’s bigger than some V-6s.

And almost as smooth. One of the engineering drawbacks of a four-cylinder engine is that the larger the displacement, the greater the internal vibration. Toyota’s solution is to fit engine counterbalancers that reduce the amount of unwanted vibes and even out the power delivery. This isn’t news—many manufacturers employ the same strategy and have been doing so for years. It’s proven, and it works.

During a quick test drive in and around downtown Vancouver, the new front-drive Highlander exhibited none of the rambunctiousness and roughness you might expect from a four-cylinder engine of this girth. It wasn’t exactly a powerhouse and it isn’t blessed with an abundance of reserve power, but it does the job and is comparatively easy on gas. Which is precisely the point.

Toyota’s perennial bestseller, the Camry, also gets a bit of a tweak. As of the 2010 model year, the four-cylinder SE model has been bumped up in power to 179 horsepower and delivers fuel economy better than that of the previous version. And this just in: the Camry Hybrid outsells the Prius hybrid in Canada by almost two to one.

The Camry doesn’t have the same credibility with cab drivers, though. Vancouver has more Prius taxis than any other Canadian city, and the drivers love ’em. Glen Beggs, who drives for Yellow Cab, tootles around the city in a 2004 Prius with some 300,000 klicks on the odometer. His business partner, Andrew Grant, owned a first-generation 1999 Prius that racked up over a million kilometres before Toyota bought it back and gave Grant a new one, gratis.

According to Beggs, the Prius cabs are virtually indestructible, and even with hundreds of thousands of kilometres on them, they still feel like new—most of the time. “The goddamn push-start button has broken three times, and it cost $384 to fix it every time,” he complains. “I think there’s still a couple of fucking screws rattling around in there.”

But perhaps the best thing about the Prius, at least as far as the cabbies are concerned, is the fact that you save all kinds of money on fuel. Taxis spend a lot of time not going anywhere, and an idling automobile still costs money to run. Since the Prius’s internal combustion engine shuts off when the car isn’t moving forward, that means less fuel being consumed—up to $20 worth a shift in some cases.

But I digress. In keeping with its “more power, less fuel” theme, Toyota has boosted the size of the 2010 Prius’s engine: up to 1.8 litres from the previous 1.5 litres. This, while increasing horsepower and decreasing fuel consumption. It’s now the most fuel-efficient car sold in Canada, returning some 3.8 litres per 100 kilometres. Hybrid technology, once considered a temporary stopgap until fully electric cars were perfected, is clearly here to stay. And so are four-cylinder engines.

Look for a report on a road test of the new Prius in this space as soon as I can get my hands on one.