2023 Prius Prime on display, April 6, 2023.
Scott Mlyn | CNBC
DETROIT — As sales of all-electric vehicles grow more slowly than expected, major automakers are increasingly meeting their customers in the middle.
Increasingly corporations are reconsidering the viability of hybrid cars and trucks to appease consumer demand and avoid costly penalties related to federal fuel economy and emissions standards.
The shifting strategies run counterintuitively to industrywide EV messaging of recent years. Many vehicle corporations have begun to invest billions of dollars in all-electric vehicles, and the Biden administration has made a push to get more EVs on U.S. roadways as quickly as possible.
But hybrid vehicles — those with traditional internal combustion engines combined with EV battery technologies — could help the automotive industry lower fuel consumption and emissions in the short-term, while easing consumers into vehicle electrification.
Sales of traditional hybrid electric vehicles, or HEVs, akin to the Toyota Prius, are outpacing those of all-electric vehicles in 2023, according to Edmunds. HEVs accounted for 8.3% of U.S. automobile sales, about 1.2 million vehicles sold, through November of this yr. That share is up 2.8 percentage points compared with total sales last yr.
EVs made up 6.9% of sales heading into December, or roughly 976,560 units, up 1.7 percentage points compared with total sales last yr. Sales of plug-in hybrid electric vehicles, or PHEVs, accounted for under 1% of U.S. sales through November.
“There’s been a lot talk over the past few years about the move toward electrification and kind of forgoing hybrids, but … hybrids usually are not dead,” said Jessica Caldwell, Edmunds executive director of insights. “There’s rather a lot of consumers on the market which can be interested in electrification, perhaps not ready to go fully electric.”
Hybrids also can cost less and relieve many concerns typically related to EVs akin to range anxiety and lack of charging infrastructure. The common hybrid this yr cost $42,381, according to Edmunds. That is below the roughly $59,400 average for an EV; $60,700 for a PHEV; and $44,800 for a conventional vehicle.
Morgan Stanley earlier this month said Toyota Motor, Honda Motor and Hyundai Motor, including Kia, account for 9 out of 10 hybrid sales in the U.S. Representatives for those automakers said they’re actively attempting to increase production and sales of hybrid vehicles in the U.S.
“While the transition to full battery electric transportation will take time, hybrids and plug-in hybrids will play an equally vital role in Kia America’s near and mid-term goals,” Eric Watson, vice chairman of Kia America sales, said in an announcement to CNBC.
And other corporations, akin to the Detroit automakers, are following suit.
Detroit Three automakers
The Detroit automakers have various strategies for hybrid vehicles.
Ford Motor offers PHEVs but is leaning into HEVs, announcing plans in September to double sales of the V-6 hybrid model during the 2024 model yr to roughly 20% in the U.S. It’s part of Ford CEO Jim Farley’s plans to quadruple the company’s production of gas-electric hybrids.
Ford’s hybrid sales through November of this yr are up 23% over the same period in 2022 to greater than 121,000 units, or 6.8% of its total sales through that time. Compared, Ford’s EV sales are up 16.2% to roughly 62,500 units, accounting for 3.5% of its total sales.
Battery breakdown
Each hybrids and plug-in hybrids have a conventional engine combined with EV technologies. A standard hybrid akin to the Toyota Prius has electrified parts, including a small battery, to provide higher fuel economy to assist the engine. PHEVs typically have a bigger battery to provide for all-electric driving for a certain number of miles until an engine is required to power the vehicle or electric motors.
Chrysler parent Stellantis, for its part, is leaning on PHEVs for its electrification strategy, before introducing a number of EVs starting next yr. The corporate is the top seller of plug-in hybrid electric vehicles in the U.S., and the vehicles accounted for about 10% of the company’s third-quarter sales, led by Jeep Wrangler and Grand Cherokee SUVs.
But General Motors is not ready just yet to alter its EV plans, which include a goal to exclusively offer all-electric vehicles by 2035.
GM led the way for plug-in electric vehicles with the Chevrolet Volt during the 2010s. The corporate discontinued the vehicle in early 2019, citing demand and value concerns.
Since then, the automaker has not offered one other hybrid vehicle in the U.S. apart from the recently launched Chevrolet Corvette E-Ray, a hybrid version of the famed sports automobile. GM does offer hybrids, including PHEVs, in China.
2024 Chevrolet Corvette E-Ray hybrid sports automobile
GM
“We still have a plan in place that enables us to be all light-duty vehicles EV by 2035,” GM CEO Mary Barra said Monday during an Automotive Press Association meeting in Detroit. “We’ll adjust based on where the customer is and where demand is. It isn’t going to be ‘if we construct it they’ll come.’ We’re going to be led by the customer.”
Her comments come after GM President Mark Reuss told CNBC in August that he was “flexible” regarding hybrids as a way of meeting federal regulations.
“If it means we’ve to try this by law, then we’ve to try this by law,” he said. “If there’s regulations that get dealt on us, then we’re going to take a look at all the things in our toolbox to meet them.”
Federal regulations
Major auto corporations, including the Detroit automakers, were counting on EVs to assist in offsetting the emissions and low fuel economies of larger SUVs and trucks that may cost them a whole lot of thousands and thousands of dollars in fines by the federal government.
GM and Stellantis were forced to pay a combined $363.8 million in penalties for failing to meet federal fuel-economy standards for cars and trucks they produced in previous years, according to information published by the National Highway Traffic Safety Administration in June.
Such fines would significantly increase under current proposals by the Biden administration to improve fuel efficiency of vehicles and move toward EVs, according to automaker lobbying groups.
The American Automotive Policy Council, a bunch representing the Detroit Three, earlier this yr said the automakers would face greater than $14 billion in noncompliance penalties between 2027 and 2032 barring significant changes to their fleets’ overall fuel efficiency. U.S. automakers have individually warned the fines would cost $6.5 billion for GM, $3 billion at Stellantis and $1 billion at Ford, according to Reuters.
NHTSA in July proposed boosting fuel efficiency requirements by 2% per yr for passenger cars and 4% per yr for pickup trucks and SUVs from 2027 through 2032, resulting in a fleetwide average fuel efficiency of 58 mpg.
With EVs playing a lesser role than anticipated to boost those fleetwide averages, hybrids could save automakers thousands and thousands.
“Even without electric vehicles, there’s an expectation that electrification of an internal combustion engine goes to be crucial to meet regulations anyway,” said Stephanie Brinley, principal automotive analyst at S&P Global Mobility.
Industry leader
The resurgence of hybrids is particularly vital for Toyota. The world’s largest automaker is taken into account the pioneer of traditional hybrids, with the Prius.
The corporate sarcastically became a goal of environmental groups last yr for its strategy to move forward with a mixture of hybrids, PHEVs and EVs, which critics viewed as an absence of commitment to an all-electric future.
Toyota’s argument at the time, and still, is that it’s meeting consumer needs and planning for a more gradual global adoption that may naturally include some markets shifting to EVs ahead of others.
The corporate further says it takes into consideration the entire environmental impact of producing EVs compared with hybrid electrified vehicles, arguing it might probably produce eight 40-mile plug-in hybrids for each one 320-mile battery electric vehicle and save up to eight times the carbon emitted into the atmosphere.
“Persons are finally seeing reality,” Toyota Chairman and former CEO Akio Toyoda, who has been heavily criticized for the slower approach on EVs, said in October regarding EVs, according to The Wall Street Journal.
Toyota CEO Akio Toyoda speaks during a small media roundtable on Sept. 29, 2022 in Las Vegas.
Toyota