As the growth of all-electric vehicle sales falls behind expectations, major automakers are adjusting their strategies to meet consumers halfway.
While significant investments are being made in all-electric vehicles, an increasing number of companies are reassessing the potential of hybrid cars and trucks.
Hybrid vehicles, which combine traditional internal combustion engines with EV battery technologies, present a middle-ground solution. They offer the automotive industry a way to reduce fuel consumption and emissions in the short term while helping consumers transition to vehicle electrification.
Traditional hybrid electric vehicles (HEVs), like the Toyota Prius, have outpaced all-electric vehicles in sales for 2023, according to Edmunds.
HEVs accounted for 8.3 percent of U.S. car sales, totaling approximately 1.2 million vehicles sold through November of this year.
This share increased by 2.8 percentage points compared to total sales last year. Heading into December, EVs constituted 6.9 percent of sales, approximately 976,560 units, marking a 1.7 percentage point increase from total sales last year.
Sales of plug-in hybrid electric vehicles (PHEVs) only made up 1 percent of U.S. sales through November.
“There’s been so much talk over the past few years about the move toward electrification and sort of forgoing hybrids, but ... hybrids are not dead. There’s a lot of consumers out there that are interested in electrification, maybe not ready to go fully electric,” Jessica Caldwell, Edmunds' executive director of insights, told CNBC,
Hybrids also offer cost advantages and address concerns associated with EVs, such as range anxiety and the lack of charging infrastructure. According to Edmunds, the average hybrid cost $42,381 this year, which is below the averages for an EV ($59,400), a PHEV ($60,700), and a traditional vehicle ($44,800).
EV Startups Have Little Chance of Surviving Longterm
And when it comes to making cars, it truly is a jungle out there and only the strongest will survive. History has a way of showing us this.
There were 253 active automobile manufacturers in 1908. By 1929, there were only 44, and about 80 percent of the industry’s output was accounted for by Ford, GM, and Chrysler.
The Great Depression wiped out most of the remaining independents, with Nash, Hudson, Studebaker, and Packard hanging on until after WWII.
The car industry is changing again as companies shift from traditional engines to electric ones. Just like before, there are new electric vehicle startups trying to make a name for themselves.
“With capital significantly more expensive today [and] an interest rate environment moving up, we’re seeing more EV players squeezed,” Wedbush analyst Dan Ives told Kelley Blue Book in May.
The automakers best positioned are the legacy companies whose gas- and diesel-powered vehicles are underwriting the move to EVs, says Carlos Tavares, the CEO of Stellantis N.V., which owns Chrysler, Citroën, Dodge, Fiat, Jeep, and Maserati.
"What we believe is that the guys who are using what we would call as a shortcut, the legacy business, to fund the future are going to be the guys who are going to be in the best position to accommodate to those different scenarios, because basically, we are doing very good money with the legacy business," Tavares said at Goldman Sachs' 15th Annual Industrials and Autos Week.
If only state economic developers in Georgia and North Carolina -- those who granted billion-dollar-plus incentive packages to Rivian and VinFast respectively -- understood that only the Fords, GMs, Toyotas, Volkswagens, and Hyundais will be standing at the end of the day.
Profit has to be made on a $25,000 car or else a company will be in trouble by excluding middle-class buyers, Tavares said.
“Because we see that the offensive on BEVs can be Tesla in the U.S., can be the Chinese in Europe is going to put a lot of pressure on pricing on MSRPs,” he said, referring to manufacturer’s suggested retail price.
“So, if you want to have good margins in terms of EVs, you have to be super sharp on cost, because if you want to attract the middle classes, you need to have pricing at the core of the market that makes you profitable,” he said.
And that is quite beyond the pale of any EV startup. Rivian lost $33,000 per vehicle sold in the second quarter this year despite selling them for more than $80,000 on average.
VinFast, a Vietnamese company that only began making cars in 2018 and switched to an all-electric strategy in 2022, has yet to sell many cars and reported a net loss of $623 million in the third quarter.
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