Some Automakers Still Bet on Hybrids—The EV Middle Ground

For consumers not ready to go fully electric, a hybrid model could be the answer.

October 10, 2022

ALEXANDRIA, Va.—Some automakers are betting that car buyers aren’t ready to rely solely on electricity to get their motors going, reports the Wall Street Journal. Toyota, Sweden’s Volvo Car AB and Korea’s Hyundai Motor Co. are among other carmakers investing in hybrid car models, which are in hot demand by car shoppers.

Hybrids are purchased within 12 days of hitting the car dealer lot this year through August, reports the Journal, compared to 16 days for EVs and 23 days for internal-combustion-engine (ICE) vehicles. Some auto dealers are reporting that their hybrid backlog is into the thousands of vehicles.

Longo Toyota in El Monte, California, has around 1,500 orders for the hybrid RAV4, which is a backlog of more than a year, dealership president Doug Eroh told the Journal. “The demand we have for hybrids far exceeds the supply we have for hybrids,” he said.

Dealers and executives say that hybrid models are a way for buyers to get in on the EV movement. They may want an EV but don’t live in areas that have easy access to reliable charging stations.

“If it has a hybrid engine on it, it has a gold star in the customer’s mind,” Adam Simms, CEO of California-based dealership group Price-Simms Inc. told the Journal, estimating that he could sell 6,000 more hybrids if he had the supply.

However, U.S. consumer access to EV charging stations could change, as the Biden Administration approved all 50 states’ electric vehicle charging plans. The plans, which also include Washington, D.C.’s, and Puerto Rico’s, cover about 75,000 miles of highway. The chargers must have at least 600 kilowatts of total capacity, with ports for at least four cars that can simultaneously deliver at least 150 kilowatts each. The chargers also need to be accessible to the general public or to fleet operators from more than one company. President Biden has a goal of ultimately installing 500,000 EV chargers in the U.S. and building a network of fast-charging stations across 53,000 miles of freeways from coast to coast.

Last year, hybrid vehicle sales were up 73%, though they have fallen 5% through August, but the slip can be blamed on supply constraints at Toyota, which is the hybrid sales leader. The company reports that hybrids, including plug-in vehicles, were about 20% of U.S. sales in September, but has said that rate could have been double if not for supply constraints.

“There are a lot of people who will leap into an EV, and there are others who will prefer a hybrid, especially depending on what part of the country you live in,” said Randy Parker, Hyundai Motor America chief executive, told the Journal.

Other car makers don’t see the need for hybrid vehicles, including General Motors and Volkswagen, and instead, are choosing to focus their efforts on going fully electric.

“Our strategy is focused on battery electric vehicles as they represent the best solution,” said GM CEO Mary Barra during the company’s annual shareholder meeting in June.

Toyota disagrees, and the company has been vocal about consumers’ switch to driving electric vehicles. According to Toyota CEO Akio Toyoda, EVs “are just going to take longer than the media would like us to believe,” he said in a recent interview. The CEO said the company will offer the “widest possible” of powertrains to propel cars cleanly. “That’s our strategy and we’re sticking to it,” he said.

Environmentalists and shareholders are critical of Toyota’s soft stance on EVs, accusing the company of clinging to its 25-year history with the gasoline-electric Prius hybrid, for which Toyota was once lauded.

“The fact is: a hybrid today is not green technology,” Katherine Garcia, director of the Sierra Club’s Clean Transportation For All campaign, wrote in a blog post last month. “The Prius hybrid runs on a pollution-emitting combustion engine found in any gas-powered car.”

Toyota is the No. 1 hybrid seller in the U.S., thanks to the hybrid RAV4 SUV, which is the nation’s top-selling hybrid vehicle. The company believes that the government needs to encourage hybrid vehicles as they aim to cut carbon emissions. According to CEO Toyoda, the automaker could make eight plug-in hybrids with the same number of batteries in a single 320-mile-range EV. Those eight plug-in cars would help cut carbon emissions more than the one electric car, he told reporters.

Still, Toyota is investing in an EV future. The company will spend 4 trillion yen, or $28 billion, to roll out 30 EVs by 2030. Ford, in comparison, is investing $50 billion in its EV initiatives.

“Our investments may appear smaller than others’, but when you look at what Toyota has been doing over the last 20 years, the total amount might not necessarily be small,” Toyoda said.

A recent NACS survey found that while higher prices have led them to reconsider everyday household purchases, higher gasoline prices haven’t translated into greater interest in electric vehicles. Of drivers who say they intend to buy or lease a new car within the next two years, only one in three (36%) would consider purchasing an EV, with convenience a concern.

“EVs are undoubtably an important part of our future, but there is debate about the timeline for adoption. Today’s drivers of gasoline-powered vehicles express range anxiety because of uncertainty around charging infrastructure availability. This is a valuable opportunity for retailers and others to address and educate future EV consumers,” said Lenard.

The NACS EV Charging Calculator allows retailers to assess the cost and profitability of offering EV chargers at their sites. The calculator focuses on what retailer utility costs associated with EV recharging are and what the corresponding revenue must be to recover those costs after allowing for potential ancillary in-store visits and purchase profitability.