BEV’s aspirations meet reality | Hybrids ready to return

The growth of battery electric vehicles is inevitable. This is certainly the wisdom that has prevailed among automotive industry experts and executives in recent years. However, market realities, including vehicle cost, range anxiety, and charging infrastructure limitations, have reduced consumer demand, increasing BEV inventories and slowing BEV movement.

In response, Admin Biden. recently eased regulatory restrictions, leading to a reduction in BEV production targets for 2032 from 67% to 35%. With this change, OEMs have reduced their investments and reduced the scale and scope of their BEVs. Additionally, regulatory adjustments are more favorable to hybrids, ensuring that they are more likely to play a significant role in product mixes in the years to come.

Battery range, infrastructure concerns spark BEV skepticism

Even among buyers considering switching to BEVs, significant skepticism remains. A recent McKinsey study found that 42% of interested BEV buyers have no plans to abandon ICE vehicles until battery range and infrastructure improve.

However, consumers remain open to eco-friendly options. According to a recent analysis by Accenture, 64% of consumers consider themselves “sustainably conscious” and would prefer their next vehicle to be an alternative to gasoline. This sentiment, coupled with current hurdles in the BEV space, opens the door for OEMs with well-developed hybrid offerings to succeed until all-electric capabilities become more mature.

Hybrids have a long history in the market and offer consumers a comfort factor that BEVs do not currently enjoy, and recent trends indicate strong interest in these vehicles. Consider the following statistics from Cloud Theory’s Horizon data platform:

In the first quarter of 2024, the year-over-year share of hybrid vehicle sales increased by 3.2 percentage points (11.6% compared to 8.4% in the first quarter of 2023).

Meanwhile, the share of non-Tesla BEVs increased by only 1 percentage point year-over-year (2.6% in Q1 2023 to 3.6% in Q1 2024). The inventory share of hybrids is significantly lower than sales (8% to 11.6%), indicating that supply can still grow to meet this demand.

Based on these parameters and the evolution of regulations, it can be assumed that hybrids will play a more important role in vehicle supply and in consumer choices in the medium and long term.

OEMs re-entering hybrids

Manufacturers are already beginning to change their production plans and advertising messages to reflect the growing importance of hybrid vehicles. Ford, for example, is expanding its offering of hybrid electric vehicles. By the end of the decade, the company plans to offer hybrid powertrains across its entire Ford Blue lineup in North America. To support this change, Ford has launched a new advertising campaign – “Your Vehicle, Your Choice” – which focuses on how the company offers “a range of gas, hybrid and electric products to meet the needs of almost everyone customers “.

General Motors CEO Mary Barra, who previously said the company was fully committed to an electric vehicle future, took a more balanced stance in 2024, saying GM plans to bring plug-in hybrid technology back to North America , Barra was cited in Detroit News as saying GM was doing so “to help us comply with the more stringent fuel economy and tailpipe emissions standards that are being proposed.” This report also highlights “a reversal in GM’s focus on battery electric vehicles as it watches (B)EV sales slow.”

Hybrid Shift Creates Challenge for BEV-Only OEMs

The move to hybrids will likely benefit OEMs that already have a strong hybrid lineup, while BEV makers will face an additional hurdle. A CNN report highlighted a return to Toyota’s hybrid focus after its CEO previously signaled a shift toward BEVs. “The Japanese company has done little to consider an all-electric future, but is sticking firmly to its popular hybrid cars.” Other manufacturers with well-established hybrid ranges – such as Hyundai, Honda and Stellantis – now have multiple routes to comply with the regulations.

In contrast, BEV-only manufacturers such as Tesla and Rivian face a more difficult path. Tesla, for example, has already suffered price cuts, executive departures and negative reviews over its recently launched Cybertruck, and saw its stock price fall almost 30% between December 2023 and the end of May. Additionally, Tesla announced significant layoffs within its global workforce in an effort to cut costs, according to a recent report. Reducing barriers to hybrids adds yet another challenge for OEMs focused solely on BEVs.

BEVs will continue to grow, but at a more realistic pace

Even at the lower 35% target level, EPA’s reduced requirements ensure that BEVs will play a much larger role in future industry offerings and consumer choices going forward. However, previous hyper-aggressive production levels and deadlines imposed by EPA regulations have given way to a more measured approach that reflects manufacturers’ current capabilities to produce these vehicles, as well as consumer comfort and financial realities when purchasing them.

Meanwhile, hybrid vehicles have a brighter future and will play a key role in bridging the gap between today’s ICE vehicles and a BEV-focused future.

Even if the BEV’s original intentions have proven unrealistic in the current time frame, this “hybrid” (pun intended) approach remains a victory for those who aspire to help the planet.

Rick Wainschel is vice president of data science and analytics for Cloud Theory, a software and AI company.