Major automakers are meeting their customers in the middle as sales of all-electric cars grow slower than expected.
Hybrid cars and trucks are becoming more popular as companies look to satisfy consumer demand and avoid expensive penalties related to federal fuel efficiency and emissions standards.
The changing strategies are counterintuitive to the industrywide EV messages of recent years. Many auto companies have begun to invest billions of dollars into all-electric cars, and the Biden Administration has been pushing to get as many EVs onto U.S. roads as soon as possible.
Hybrid vehicles, which combine traditional internal combustion engines with EV batteries, could help reduce fuel consumption and emissions while assisting consumers in the transition to electrification.
According to Edmunds, sales of hybrid electric vehicles (HEVs), such as the Toyota Prius, will surpass those of all-electric cars in 2023. Through November, HEVs represented 8.3% of U.S. auto sales. That’s about 1.2 million vehicles. This is an increase of 2.8 percentage points in comparison to total sales last year.
In December, EV sales accounted for 6.9%, or 976,560 vehicles, a rise of 1.7 percentage points over total sales in the previous year. Plug-in hybrid electric vehicle (PHEV) sales accounted for just 1% of U.S. car sales in November.
Jessica Caldwell is Edmunds’ executive director of insights. She said: “There has been so much discussion over the last few years about electrification and the sort of abandonment of hybrids. But… hybrids have not died.” Many consumers are interested in electrification but are not yet ready to go fully electric.
Hybrids are also less expensive and can alleviate many of the concerns associated with electric vehicles, such as lack of charging infrastructure and range anxiety. According to Edmunds, the average hybrid cost $42,381 this year. This is below the average price of a PHEV, EV, and traditional car, which are all around $59,400.
Morgan Stanley said earlier in the month that Toyota Motor, Honda Motor, and Hyundai Kia account for nine out of ten hybrid vehicle sales in the U.S. The representatives of these automakers stated that they are actively trying to increase production and sales in the U.S.
Eric Watson, Kia America’s vice president for sales, told CNBC that hybrids and plug-in hybrids would play a similar role in Kia America’s short- and medium-term goals.
Other companies, like the Detroit automakers, are now following suit.
Detroit Three automakers
Detroit automakers use a variety of strategies to market hybrid vehicles.
Ford Motor Ford offers PHEVs but is leaning towards HEVs. In September, Ford CEO Jim Farley announced plans to double the sales of the V-6 Hybrid model in 2024 to approximately 20% in the U.S. This is part of his plans to quadruple Ford’s production for gas-electric hybrids.
Ford’s hybrid sales in November this year, which totaled more than 121,000 vehicles, are up 23% compared to the same period of 2022. This represents 6.8% of Ford’s total sales. Ford’s electric vehicle sales, on the other hand, are up 16.2% to 62,500 units. This means 3.5% of Ford’s total sales.
Chrysler parent Stellantis, on its part, will rely heavily on PHEVs to electrify its fleet before introducing a variety of EVs next year. The company is the largest seller of plug-in hybrid electric vehicles (PHEVs) in the U.S. These vehicles made up about 10% of its third-quarter sales. Jeep Wranglers and Grand Cherokees were the most popular models.
You can also read about it here: General Motors isn’t yet ready to change its EV plans. These include a goal of offering only all-electric cars by 2035.
GM was the pioneer of plug-in electric cars with the Chevrolet Volt in the 2010s. The vehicle was discontinued by the company in early 2019, citing cost and demand concerns.
Since then, GM hasn’t offered another hybrid car in the U.S., other than the Chevrolet Corvette E-Ray that was launched recently, a hybrid version of the famed sports vehicle. GM offers hybrids in China, including PHEVs.
2024 Chevrolet Corvette E-Ray hybrid sports cargo
Mary Barra, GM’s CEO, said at a meeting of the Automotive Press Association in Detroit on Monday that “we still have a plan” to make all light-duty cars EV by 2035. We’ll adapt based on the needs and demands of our customers. “If we build it, they will come” is not the case. We are going to follow our customers.”
Her comments follow GM President Mark Reuss’s August statement to CNBC that he is “flexible” in regard to hybrids as a means of meeting federal requirements.
He said, “If we must do it by law then we will.” “If we are faced with regulations, we will use all the tools in our arsenal to comply.”
Federal Regulations
Detroit automakers and other major auto companies were counting on electric vehicles to help offset the high emissions and poor fuel economy of large SUVs and trucks, which can result in hundreds of millions in fines from the federal government.
Published in June by the National Highway Traffic Safety Administration, it was revealed that GM and Stellantis had to pay a total of $363.8 million in penalties because they failed to meet federal fuel economy standards for vehicles and trucks produced in prior years.
According to automaker lobby groups, such fines would increase significantly under the current proposals of the Biden Administration to improve fuel economy and move towards EVs.
The American Automotive Policy Council (AAPC), a group that represents the Detroit Three automakers, said earlier this year that the automakers could face penalties of more than 14 billion dollars between 2027-2032 if they do not make significant improvements to the overall fuel efficiency of their fleets. Reuters reports that U.S. automakers warned separately of the costs associated with fines. GM would be hit by $6.5 billion in penalties, Stellantis $3 billion, and Ford $1 billion.
In July, NHTSA proposed increasing fuel efficiency standards by 2% annually for passenger cars and 4% for pickup trucks and SUVs between 2027 and 2032. This would result in an average fleet fuel efficiency of about 58 mpg.
Hybrids can save automakers millions of dollars, as EVs are less important than expected in boosting fleetwide averages.
Stephanie Brinley is the principal automotive analyst for S&P Global Mobility. She said that even without electric cars, it’s expected that an internal combustion engine will need to be electrified to meet regulations.
Industry Leader
Toyota is particularly interested in the resurgence and popularity of hybrids. Toyota is the world’s biggest automaker, and the Prius was the first hybrid car.
Last year, the company was targeted by environmental groups for its strategy of moving forward with a mixture of hybrids (PHEVs), EVs (Electric Vehicles), and PHEVs. Critics viewed this as a lack of commitment to the future of all-electric vehicles.
Toyota’s argument was, and is, that it meets consumer needs while planning a gradual global adoption, which will include certain markets moving to EVs earlier than others.
The company also claims that it considers the environmental impact of hybrid electric vehicles versus EVs. It says it can produce up to eight plug-in hybrids per 320-mile battery-electric vehicle and save as much as eight times carbon emissions into the air.
According to the Wall Street Journal, Akio Toyoda – former CEO and Chairman of Toyota – said that “people are finally seeing reality” in October regarding EVs.
