When it came to the US at the turn of the
millennium, the hybrid car was considered a
revolutionary step toward a less polluted future.
It wasn't exactly exotic or luxe, but Hollywood
celebrities loved its green image, while
ordinary, cash strapped consumers adored its
exceptional fuel economy.
At a time when gasoline prices were on their way
to record highs.
But since then, EVs have stolen the spotlight for
all electric with electric.
Vehicles, the.
Tesla model Y becoming the best selling vehicle in
California.
While EVs stole the show, the company, once lauded
for bringing hybrids to the mainstream, received
extensive criticism from environmental groups for
being slow to adopt EVs and for lobbying against
tougher climate legislation. But EV sales
have slowed in the US, going from selling in just
25 days at the beginning of 2023 to 72 days just
over a year later.
Meanwhile, hybrids are flying off lots faster
than even plain internal combustion cars and
winning awards.
Hybrid sales grew five times faster than EVs in
February 2024.
Automakers are finally reading the room.
They're realizing that they still have to sell
cars right now, not in the future.
And that's this is what people want to buy.
Automakers, including some that had made bold
commitments to go all electric, are now pulling
back on EV manufacturing in favor of them.
But hybrids aren't as effective as EVs at
reducing greenhouse gases.
Defenders say they are a solid, short term
solution. Automakers, including some that had
made bold commitments to go all electric, are now
pulling back on EV manufacturing in favor of
hybrids.
Ev sales in the US had a banner year.
In 2023, a record 1.2 million units were sold.
Their market share is growing, and yet the oft
reported slowdown is real.
Data shows sales growth is leveling off.
One of the reasons legacy manufacturers are seeing
an EV sales slowdown has been Tesla's aggressive
price cuts throughout 2023, but legacy
automakers are still selling lots of hybrids,
especially standard ones without a plug.
You get a hybrid off of the truck at a dealership.
A lot of times that vehicle is already already
has a customer, so it's not even a point of if it
actually having to sell.
Comparing January 2023 and February 2024 data show
that hybrids continue to sell much better than both
internal combustion vehicles and EVs.
Look no further than the company that brought the
hybrid to the mainstream more than two decades ago.
Toyota Pro EV and environmental groups say
the world's largest automaker has been
lobbying to slow the EV revolution it missed out
on, though it has experimented with battery
electric vehicles before.
The company has long argued that the bridge to
full electrification will be a long one, and that
most consumers aren't ready for fully electric
vehicles. That said, it did in 2021 unveil plans
to release 30 EV models by 2030, with an annual
sales target of 3.5 million.
In January 2023, Toyota faced its first
shareholder proposal in two decades.
Investors insisted the company do more to combat
climate change and challenged the
reappointment of chairman and CEO Akio Toyoda.
The proposal was defeated and Toyota kept his board
seat, but he did step down from his role as CEO
as of early 2024.
Toyota has only two EVs, and neither sell in large
volumes, but in 2023, sales of its hybrids and
plug ins increased nearly 28% over the previous
year. They make up about 30% of the Japanese
Behemoth's portfolio.
Nothing has really changed within the Toyota
framework of product planning, and explain why
we have continued to say this very, very
succinctly. A year ago we were being mocked for it.
Today we were being congratulated for it.
We're not swayed by either one.
Toyota's American rival and sometimes partner
Ford, has been selling EVs for longer and in
larger volumes.
Sales of its acclaimed Mustang Mach E and the
F-150 lightning climbed nearly 18% in 2023
compared to the previous year.
Hybrids still outpaced that jumping by more than
a quarter. Ford CEO Jim Farley said the automaker
would postpone about $12 billion in planned EV
investment and pull back on production of the
electric F-150 pickup in favor of a hybrid version.
Success is a part of why everyone else maybe wants
to jump back in, because they're seeing these
brands have success with these vehicles seeing so
much demand. And not only are they selling fast,
they're selling at MSRP in many cases.
While Toyota may have pioneered the mainstream
hybrid, General Motors brought the plug in hybrid
to America in the form of the now discontinued
Chevrolet Volt.
From an EV perspective, we also see this is our year
to really execute and see growth there.
So it's it's a strong performance in 23.
I'm really proud of the team.
But in early 2024, the company said it will
reintroduce plug in hybrids to its North
American lineup.
If you look at their core buyer base, a lot of these
people infrastructure is not built out in places
where they are living.
If they have folks that are coming back to
dealerships with their old General Motors brand
vehicles, it's going to be a much easier sell to
get these people into hybrids than it is to get
them into EVs.
Automakers are under great pressure to meet
continually tightening federal fuel economy
standards. A single company's fleet has to hit
an average target of 58 miles per gallon by 2032.
That is 18% higher than the current rule of 49
miles by 2026.
The EPA also issued standards in March 2024
that call for 35 to 56% of cars to be full EVs by
2032, with US household costs rising across the
board and gasoline prices at three and a half
dollars per gallon on average.
Hybrid vehicles offer a sweet spot for many.
Ice. Vehicles are losing market share, but EV sales
are flattening. The market is running out of
early adopters, and many say these vehicles aren't
ready for the mainstream.
Basically, in the last ten years, we've gone from
0% of the industry to 8%.
So we're about a ten year period of time.
The government's regulations to say, okay,
we've gone from 0 to 8% in ten years, but now in
the next eight years, we're going to grow by
60%, not grow by 60%.
We're going to take that number from 8% to 67%.
People are saying, wait, I don't know who's all
going to buy those right now.
As we move towards mass market, those folks are a
lot harder to sell to. They're a lot more price
conscious, a lot more product conscious.
They have a lot more questions in general.
Um, and I think that's going to really plague the
EV adoption rate for, for quite some time.
And that was always going to be the case.
On average, EVs were the most expensive powertrain
you could buy in early 2024.
Plug in hybrids were almost as pricey.
Standard hybrids were cheaper than everything,
including Ice vehicles.
I think right now in this country we are in an
affordability crisis amongst many industries.
But I think auto is being a big one because if we
look at how people have afforded vehicles in the
past, it's been because of low interest rates.
And now that is not the case.
The average interest rate on a new vehicle loan is
over 7% used.
It's over 11%.
So when we look at what we can afford, it probably
is less than what we afforded in the past.
It's a tough pill to swallow to say I can buy a
Ice vehicle.
Or even a hybrid vehicle at, let's say, $700 a
month and a Bev at 9 or 1000.
That's that's a significant bump.
Evs have strong selling points.
They are simpler and cheaper to maintain, and
the cost of charging is a lot less than refueling in
parts of the country where gas prices are
higher. But there are stubborn obstacles, still
relatively long charging times, and a lack of
public charging infrastructure.
But a lot of folks say, I just don't want the hassle
of owning an EV. Like my life is already
complicated enough. I don't need to go learn a
whole new system of doing things to just drive and
go places that I want to go.
It's easy to put on a piece of paper.
Hey, I spent X amount of gas, I'm going to spend X
amount of electricity. Great. I'm going to be
ahead of the game in 18 months in terms of cost,
but a convenience factor is priceless.
It's an idea that I might run my family four states
away for a vacation once a year.
I don't want to take three days to get there.
That convenience factor might completely take that
consumer 100% out of the Bev market, and it can't
be quantified.
83% of EV charging occurs at home, but J.D.
power data shows that 1 in 3 car shoppers don't
have a home charger, nor the ability to install
one. The firm runs a mix of studies on electric
vehicles, including a year round public charging
survey of 30,000 consumers in all 50 states
and D.C.. The most common reason people decide not
to buy an EV is the lack of public charging.
Ev owners say public charging issues are the
least satisfying aspect of the ownership
experience. Nearly 20% of the time, drivers visit a
public charger, they aren't able to charge.
Most of the time, that is because chargers are
failing or malfunctioning, but the
number of times a station is unavailable or the wait
is too long has doubled from 10% to 20% of
failures in just two years.
While EV adoption has hit some speed bumps, no one
expects demand to fall or even remain flat forever.
Globally, EV production is expected to double from
13,000,000 in 20 24 to 30 5,000,000 in 2031, while
hybrids are only expected to climb from 13 to 15
million in the US, EVs will see staggering growth
in the coming decade.
We're still very bullish on electric vehicles and
where the market is going to go.
You look at the investments that have been
made in vehicle electrification by the
manufacturers. I think that speaks loudly in
terms of where the manufacturers think the
market is going to go, an important distinction.
Standard hybrids are really just more efficient
gas cars, supplemented with a battery and
electric motor that extends the vehicle's fuel
economy. This is what the original Prius was and
what many hybrids are today.
Plug in hybrids have a charging port, battery and
at least one electric motor. Some of them can,
in theory, be run without gasoline at all.
Like an EV, the engine acts as a range extender,
in others the engine and electric.
Motor work.
Together.
With a plug in hybrid or a hybrid, you know, you get
to largely avoid that public charging scenario.
You're eliminating what is the worst aspect of
owning an electric vehicle?
There has been a slight increase in the number of
models available compared with standard hybrids
since 2019.
Still, though, they are the smallest category of
cars in terms of market share, and they aren't
especially cheap.
On average, they cost nearly as much as an EV.
They also don't offer a lot of the benefits of a
full EV. You still have to get oil changes and
maintain the internal combustion powertrain, and
you have to buy gas when driven on battery power
alone. Plug in hybrids have just a fraction of
the range found on a full EV.
In essence, what you're doing is you're taking two
different product technologies combining
into one. But it's it's not serving either
category all that well.
In other words, it might be the worst of both
worlds, but it does provide the convenience of
being able to rely on electric power for daily
driving, but having the gas as backup when needed.
The EPA electric range on the Prius Prime plug in is
44 miles.
The average American drives about 37 miles.
That's why you're seeing in the news from a lot of
the competitors. You are seeing everyone starting
to discuss it, but they're not discussing it
as a bridge strategy.
You're hearing them saying is, this is maybe
the best valued strategy.
I want to make sure we're clear. You're seeing a lot
of of momentum around plug in because of what
has been learned about the rejection of EV.
Another issue with plug in hybrids is that they
can be driven entirely on gasoline.
A 2022 study from the International Council on
Clean Transportation, a group that studies
alternative powertrains, found that plug ins might
be driving on electric mode 26% to 56% less than
one might assume from EPA labeling, and real world
fuel consumption may be 42% to 67% higher.
The study did note that at the time, the sample
size was small and more data were needed.
Plug in hybrids are great if you plug them in.
As we talked about, not everyone plugged them in.
So so the theoretical efficiency is higher than
the practical one.
J.d. power has found that plug in hybrid owners are
charging their vehicles pretty consistently about
five times a week on average, and they're using
that electric range about 70% of it per day.
Despite concerns some believe they may be the
best available option for moving the needle closer
to EVs.
You have to convince a consumer that a plug is
not a disruptor to their life, and the way you do
it is you introduce it to them in a little piece,
not an all you can eat concept.
Gil Towle, a professor at UC Davis, sees it somewhat
differently. Plug ins were originally conceived
as a bridge technology, a temporary compromise that
would obsolesce as EVs improved.
While they certainly can serve that purpose, they
may stick around a lot longer, at least for that
last 20 or 30% of the market that is unable to
make the full leap to battery technology.
California, which plans to ban the sale of
internal combustion engines by 2035, is still
allowing 20% of all new cars sold after that point
to be plug in hybrids.
For a very short while, we were all thinking that a
full electric Bev battery electric vehicle are going
to get us to 100% or the full transition.
I think we are learning to appreciate that it's
going to be hard.
So as long as we are thinking about 20% of the
sales, 30% of the sales, we can go with full
electric. But when we need to go to 50, 60, 70,
closer to 80, it's starting to be really
hard. And and then plug in hybrids starting to
make sense.