Tag: Akio Toyoda

DETROIT — As sales of all-electric vehicles grow more slowly than expected, major automakers are increasingly meeting their customers in the middle.

More and more companies 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 auto companies 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, such as the Toyota Prius, are outpacing those of all-electric vehicles in 2023, according to Edmunds. HEVs accounted for 8.3% of U.S. car sales, about 1.2 million vehicles sold, through November of this year. That share is up 2.8 percentage points compared with total sales last year.

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 year. Sales of plug-in hybrid electric vehicles, or PHEVs, accounted for only 1% 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,” said Jessica Caldwell, Edmunds executive director of insights. “There’s a lot of consumers out there that are interested in electrification, maybe not ready to go fully electric.”

Hybrids can also cost less and relieve many concerns typically associated with EVs such as range anxiety and lack of charging infrastructure. The average hybrid this year cost $42,381, according to Edmunds. That’s below the roughly $59,400 average for an EV; $60,700 for a PHEV; and $44,800 for a traditional 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 are 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 important role in Kia America’s near and mid-term goals,” Eric Watson, vice president of Kia America sales, said in a statement to CNBC.

And other companies, such as the Detroit automakers, are following suit.

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 year 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 year are up 23% over the same period in 2022 to more than 121,000 units, or 6.8% of its total sales through that point. In comparison, Ford’s EV sales are up 16.2% to roughly 62,500 units, accounting for 3.5% of its total sales.

Chrysler parent Stellantis, for its part, is leaning on PHEVs for its electrification strategy, before introducing a host of EVs starting next year. The company 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 isn’t 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 company discontinued the vehicle in early 2019, citing demand and cost concerns.

Since then, the automaker has not offered another hybrid vehicle in the U.S. other than the recently launched Chevrolet Corvette E-Ray, a hybrid version of the famed sports car. GM does offer hybrids, including PHEVs, in China.

“We still have a plan in place that allows 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’s not going to be ‘if we build it they will 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 have to do that by law, then we have to do that by law,” he said. “If there’s regulations that get dealt on us, then we’re going to look at everything in our toolbox to meet them.”

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 group representing the Detroit Three, earlier this year said the automakers would face more than $14 billion in noncompliance penalties between 2027 and 2032 barring significant changes to their fleets’ overall fuel efficiency. U.S. automakers have separately 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 year for passenger cars and 4% per year 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 millions.

“Even without electric vehicles, there’s an expectation that electrification of an internal combustion engine is going to be necessary to meet regulations anyway,” said Stephanie Brinley, principal automotive analyst at S&P Global Mobility.

The company ironically became a target of environmental groups last year for its strategy to move forward with a mix of hybrids, PHEVs and EVs, which critics viewed as a lack 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 will naturally include some markets shifting to EVs sooner than others.

The company further says it takes into account the entire environmental impact of producing EVs compared with hybrid electrified vehicles, arguing it can produce eight 40-mile plug-in hybrids for every one 320-mile battery electric vehicle and save up to eight times the carbon emitted into the atmosphere.

“People 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.