US carmakers to build more hybrids amid sliding EV sales

As US sales of petrol-electric hybrid vehicles surge and electric-vehicle sales cool, carmakers and suppliers are betting consumer demand for a compromise between all-combustion and all-electric is a durable trend.

Carmakers and suppliers are adding capacity to build petrol-electric hybrid and plug-in hybrid vehicles for the US market, responding to increased consumer demand for technology that General Motors and other carmakers once planned to phase out in favour of all-electric fleets, industry executives and analysts said.

US sales of hybrids grew five times faster than EV sales in February, Morgan Stanley said. A plug-in hybrid version of the Jeep Wrangler SUV accounted for half of total US Wrangler sales in the second half of 2023, up from 37% in the first half of the year, Stellantis said.

Sales of Ford Motor hybrids rose nearly 37% during the first two months of the year, driven by demand for the hybrid Maverick compact truck that starts at $25,315.

“The hottest car on our lot is the Maverick hybrid,” said Scott Simmers, GM at Palm Springs Motors in Cathedral City, California.

The hybrid Maverick now accounts for about half the model’s sales and dealers said they could sell more if Ford could build them.

“We had to rush to add capacity for Maverick,” said Jim Baumbick, Ford vice-president for product development. “We added a whole third shift to respond to demand.”

The industry shift towards hybrids challenges the Biden administration’s pro-EV climate policies, and environmental groups that want carmakers to phase out CO₂-emitting internal combustion engines as quickly as possible.

The White House is expected this month to issue vehicle CO₂ emissions standards designed to force carmakers to increase the share of fully electric vehicles they sell to as much as 60% by 2030.

Big hedge

The November US presidential election puts the White House’s EV subsidies and emissions rules at risk. Most legacy carmakers lose money on EVs and hybrids are a more profitable path to reducing CO₂ emissions if a future administration changes course, analysts said.

“Hybrids are a big hedge against an administrative change that cools down the push from a regulatory standpoint,” said Mark Wakefield, head of AlixPartners’ global carmotive practice.

Supporters of strong limits on combustion-engine emissions are concerned the Biden administration could offer incentives for carmakers to sell more plug-in hybrids with combustion motors.

“If the hybrids are flying off the lot, there is no need for EPA [the Environmental Protection Agency] to further encourage their sale with loopholes that allow more pollution,” said Dan Becker of the Center for Biological Diversity in Washington.

Led by Toyota, Ford and Honda, North American production of hybrids could rise to as much as 20% of total light-vehicle production by 2025, compared with 14% for EVs, according to data by AutoForecast Solutions.

“While the EV outlook has been depressed by about a million units in the last year, hybrid models have surged by about the same volume,” AFS vice-president Sam Fiorani said.

Suppliers such as Schaeffler are making long-term investments to expand capacity for hybrid production.

The German company plans to invest $230m in a new factory in Dover, Ohio, to increase production of electric axles used in hybrid drive systems. Schaeffler now supplies key components for the hybrid systems offered in Ford F-150 bakkies.

Ford has said it plans to double the share of hybrid F-150s to 20% of sales. Marc McGrath, chief of Schaeffler’s US operations, said he expects even wider adoption of hybrid power trains for heavy-duty bakkies and large sport utility vehicles.

“We see discussions with all the major (carmakers) in that segment,” McGrath said.

Hybrid demand is fuelled by consumers such as Jeremy Ashton of East New Market, Maryland.

Poor economy

Frustrated by the poor fuel economy of his V8-powered Ford F-150 bakkie, Ashton shopped for a replacement and bought an F-150 hybrid for about $61,000. Comparable petrol-only trucks “were priced the same. Some of the petrol ones are more expensive” Ashton said in an interview.

Ashton said he did not like the looks of Ford’s all-electric Lightning bakkie or the challenge of charging. So far, Ashton said his white hybrid F-150 is delivering 9.4-10.2 l/km. “It is much better on [petrol].”

Dave Wilson, head of the Preston dealership group in Maryland, said he began ordering more hybrid models last August and September. “We were bullish on them,” he said. In December, hybrids accounted for about 35% of total F-150 sales at the dealership.

For the 2024 model year, Ford F-150 hybrids will start at the same price as F-150s with 3.5l turbocharged EcoBoost engines.

Toyota, long the leader in the US hybrid market, plans significant increases in the number of hybrid models and overall sales of hybrids, Toyota brand chief David Christ said.

“Last year, 29% of sales were hybrid. Year to date it is 37%. We expect this year to be closer to 45% of our total volume,” Christ said.

Toyota’s next-generation Camry sedan launching this year will be offered only with hybrid power trains.

Toyota has narrowed the price premium it charges for hybrids over comparable combustion-engine vehicles as it has scaled up production. The price gap used to be as much as $6,000 to $7,000, Christ said. Now, it is $1,500 and $2,000.

“That’s more attainable and the consumer sees more value in the car,” he said.

Reuters