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.
