Some Automakers Are Betting On EVs – But Only Halfway

Hot for Hybrids

The auto sector is gradually moving away from gasoline-powered engines. Numerous auto makers have stated their goal to go fully electric in the coming decades, and a massive spending bill passed by Congress this summer aims to accelerate the nation’s push toward EVs.

At the same time, the numbers suggest consumers are most interested in hybrid vehicles, which utilize battery power as well as gasoline or diesel. Consumer-research site Edmunds says through August of this year, hybrids spent just 12 days on dealership lots before being sold. By comparison, EVs spent 16 days on the lot, while internal-combustion vehicles spent 23.

Difference of Opinion

In talking to people within the auto industry, most expect the market will eventually be 100% all-electric vehicles. The question becomes how long it takes to get there, and what role hybrid vehicles play in the process.

Toyota (TM), which pioneered the hybrid model with its Prius in the late 1990s, remains among auto makers focused on developing new hybrids. Volvo (VLVLY) and Hyundai (HYMTF) are similar in this regard. All three companies have introduced more hybrid models in recent years.

Some of this strategy is rooted in thinking surrounding consumer trends and comfortability. The other factor is infrastructure. For example, coastal areas along the East and West Coast are electrifying more rapidly, meaning recharging sites are more available. This is also a concern for a company like Toyota that sells millions of vehicles in developing nations, where electricity is scarce or unreliable.

Supply Shortages

Car prices have been rising over the past couple years, partly driven by a shortage of parts and components. In the case of hybrids, demand seems to be easily outpacing supply. This is likely being helped along by gas prices that are up near $4 per gallon in most spots, making hybrid’s reduced need for fuel attractive.

Car dealers report consumers see hybrids are gold star vehicles. Some dealerships have orders for hybrids that are backlogged by more than a year. There’s a clear movement in the market toward electric vehicles, as evidenced by new legislation and an increased focus on the environment. In order to get there, a “hybrid” approach may make the most sense.

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