In 1908, the Model T sparked an explosion for Ford’s sales with a boom heard around the world. After the U.S. was introduced to hybrids before 2000, noises were heard, but advocates still look forward to a “game changer.”
One big reason for hybrid and plug-in vehicles has been to reduce emissions and petroleum consumption, but in many cases maximum savings at the pump has ironically been by vehicles perceived too costly for the majority to buy.
Today 42 U.S. hybrid models, seven plug-in hybrids and 11 electric cars comprise 3.9 percent of vehicles sold in a 15.5-million unit annual market. In July hybrids accounted for 3.1 percent and the two plug-in sub-segments were 0.40 percent each.
Over the past four years, plug-in sales have grown faster compared to the whole U.S. passenger car and truck market. Being a new category, any new model spikes the numbers proportionately more. Now almost 15 years into it, hybrids have been close to flat, paralleling the growing mainstream market near 3 percent. Market percentage 2010: 2.50 percent; 2011: 2.51 percent; 2012: 3.23 percent; 2013: 2.67 percent.
Up for debate is whether automakers could do more now to create volume-selling alternatives, if they were truly determined to do so. As it is, the average new car price presently hovers around $32,000. This is not cheap for a large number of folks shopping $10,000 or more below that.
There are a slew of electrified vehicles from $20,000-$32,000, some do make sense, but mainly come as hatchbacks or sedans. Beyond that, the “green car” movement has heavily catered to upper socioeconomic demographics and volumes have been limited.
Government incentives have had positive effect, but said Consumer Reports green car editor Eric Evarts, start-ups like Fisker essentially made Uncle Sam their biggest customer, instead of meeting actual customer needs.
Tesla however is a counterexample. It has started upscale, but repaid taxpayers early and with its gigafactory hopes to shift economies of scale to induce its own Model T effect for its Model 3 and subsequent offerings. It has made its patents free as well, and hopes to provoke others to follow.
Also “disruptive” is a government-enforced “all of the above” regulatory approach holding automakers accountable, and some are rolling out viable choices while preparing for when they will have to do more.
For now, there are no average-priced electrified SUVs, minivans, or pickups – meaning a vast potential market for the biggest fuel wasters has found no automakers providing electrified solutions.
For armchair pundits wanting things to happen sooner, the watchword is patience – and be glad anything is happening at all. Remember “Who Killed the Electric Car?”
The term for limited-market cars that raise an automaker’s fleet average mpg to satisfy regulators is “compliance car,” and often speaks of plug-ins. Only a few out of 18 EV and PHEV models are sold nationally.
Less well noticed is an equal number of hybrid models selling in volumes that make one wonder why their makers bother at all. Most are by more-respected brands that fly under the public’s radar that targeted Cadillac’s ELR, a plug-in which with help from rebates and perks, has moved 578 units this year. One is Audi, which from January through July sold 182 Q5 Hybrids – six less than the ELR sold in July alone.
Want more examples of very low volumes after seven months’ sales? BMW Active Hybrid3: 104; BMW ActiveHybrid5: 92; Lexus LS 600 h: 54; Mercedes-Benz E400H: 120; Lexus GS 450 h: 145; Volkswagen Toureg Hybrid: 21, to name a few.
Automakers are businesses whose primary mission is to sell cars. Ultimately they, like many buyers, make amoral decisions based on what’s perceived best for them.
While happy to promote “sustainable” reputations, carmakers market what they think they can and must. They’ve long since sold all kinds of vehicles, and most profits do not flow from the greenest varieties.
Progress is taking place against a conundrum of variables including internal combustion engines that are much better and “horsepower wars” that have led to more 500-horsepower cars being produced presently than hybrids.
Perhaps equally perverse, the electrified market appears overly focused on low-volume cars for the well off. More than a quarter of all electrified cars today sell poorly next to conventional alternatives, and aren’t bought primarily for their superior economic value.
Take for example the Lexus GS 450 h which costs almost $13,000 more than the non-hybrid GS 350 – about $8,000 of it being extra features for upscale buyers. Evarts observed the content-rich phenomenon among Lexus and other automakers.
“There’s no shortage of willingness to pay for that so why would you not try to pass on some of the cost rather than eat it yourself?” he said.
Another less poignant example is the new Honda Accord Hybrid which is positioned atop the Accord lineup, but a fair value. This 50-mpg vehicle is doing pretty well but the base model is configured to Honda’s normally upper-tier “EX” level, and Honda says it’s aimed at households earning in excess of $90,000.
Experience has taught automakers that upper socioeconomic classes will appreciate a hybrid variant and Honda anticipated those customers will want the extras anyway.
Meanwhile that leaves many mainstream shoppers who would love to save at the pump more often choosing average-mpg cars. Even if electrified alternatives might ultimately pay back, their barrier to entry has turned away many buyers.
One notable exception is the Lincoln MKZ Hybrid. Ford’s up-line brand is trying to restore parity with Cadillac and charges the same for the hybrid as non-hybrid.
The 38-mpg combined MKZ with grafted-in Ford Fusion Hybrid powertrain wallops the non-hybrid four-cylinder MKZ by 12 mpg, and guess what?
Not unlike Tesla’s Model S, people are buying Lincoln’s hybrid in respectable volume. Through July, Lincoln sold 6,656 units – more than what Honda managed for the Civic Hybrid with aging Integrated Motor Assist powertrain.
The lesson? It’s not only about price. It’s about perceived value.
Speaking of which, also not helping things, said automotive analyst Alan Baum, is car dealers which may not be willing or able to sell more-expensive hybrid variants with sufficient gusto or plausibility.
“Selling a hybrid or plug-in requires more training and time,” said Baum. “Dealers are generally not compensated for this and therefore often guide buyers away.”
Tesla has said it bypasses the dealer franchise system because conventional automakers have conflicts of interest against Model S undermining their own internal combustion engine products.
Could it be Tesla is more correct than it knows? The numbers prove most upscale electrified powertrain vehicles do not internally compete well against conventional stable mates.
Critics at this point start to talk about “greenwashing.”
The volume leaders among hybrids are Toyota’s Prius family, Camry Hybrid, and Ford’s C-Max and Fusions Hybrid which can pencil out against conventional alternatives.
Among plug-in cars, it’s the Chevy Volt, Tesla Model S, Nissan Leaf, and Ford’s C-Max and Fusion Energi plug-in hybrid siblings. All these also benefit from being sold in all 50 states.
According to Intellichoice, which uses its total cost of ownership calculations to annually name value leaders, only a few are hybrids, and none are plug-ins.
In the hatchback segment, Toyota’s Prius Liftback vies with the non-hybrid Toyota Yaris.
Among sedans, the Camry Hybrid and Lexus ES 300 h rank with variants of the non-hybrid Acura ILX and BMW 528.
In the SUV category, Toyota’s Highlander Hybrid ranks alongside a number of non-hybrids from Toyota, Lexus, Chevrolet, and Volvo.
In the wagon segment, Toyota’s Prius v ranks with the Subaru XV Crosstrek – including the hybrid and non-hybrid versions.
What hybrid ranked in the convertible, coupe, truck, or van segment? None.
Plug-in cars can offer value too, especially if they recoup federal or applicable state credits and electricity is relatively inexpensive.
Payback for all electrified vehicles also depends on miles driven per year, as low-mileage drivers will take longer to recoup extra up-front expenses.
Because They Don’t Have To
Automakers have told us they will “have to” eventually build greener cars to meet mandates, but all along the line there have been objections that costs could be too high, or they could not sell them once they built them.
Federal Corporate Average Fuel Economy (CAFE) mandates are set through model year 2021. Standards for 2022-2025 are tentative, and being reviewed, with a decision expected by 2018. These could get stricter or easier.
Baum noted the automakers, particularly concerned over trucks, agreed to rules that are harmonized with California rules on the condition that the tightest standards yet pending could be further reviewed.
Regulations are otherwise pushing the pace, including also California’s Zero Emissions Vehicle mandates followed to varying degrees by 10 other states.
Automakers are often criticized, sometimes unjustly. They have markedly improved their products, and must face regulations, costs, and many other challenges.
It takes a lot of money to develop, market, sell, and warrant new vehicles, and automakers don’t normally want to create what they believe will be marginally accepted.
Toyota’s alternative energy spokesman Moe Durand, Ford’s Aaron Miller, and GM’s Kevin Kelly all said their employers – like other automakers – are constantly reviewing what is possible.
Automakers also frequently say they do not believe in shoving tech on consumers. This sounds reasonable, but includes some inside-the-box assumptions.
Durand said Toyota’s eEVT transmission is disliked by drivers preferring a stepped automatic and Toyota is married to this for its Hybrid Synergy Drive. Hyundai, Kia, and some Germans do however offer automatic transmissions and Honda even offers a manual in the CR-Z Hybrid.
Technologies to innovate more do exist, but may not be seen as acceptable.
Durand said people have asked about a hybrid minivan such as the Estima and Alphard hybrids Toyota brought from Japan to demonstrate in Michigan last year, but Durand said federal versions would be heavier, and may not be as competitive.
Kelly observed GM has the largest battery lab in North America, is committed to a second-generation Chevrolet Volt, and will have more electrification as it spends billions to back this assertion.
But automakers are usually risk averse. GM’s “political punching bag” the Volt has been an example of no good deed going unpunished, and the dark years it and GM faced – up to today – are experiences GM would like to put behind it.
Also out there, said observers interviewed, are intangible factors. These include blatant corporate greed, out-of-touch or inept marketers, and obtuse bound-up institutional thinking from companies that make decisions by committee.
Further, production costs for electric motors, controllers, and batteries are still perceptibly up there, though these are coming down.
Electrified vehicles – especially plug-in – also face similar challenges to consumer electronics in that each new model stands to seriously outdate previous examples, and this can make both automakers and buyers standoffish.
Generally, it’s been observed consumers are reactive, and may make long-term decisions based on short-term feelings.
CR’s Evarts observed in 2008 many were stuck in 13-mpg SUVs and felt stung not having anticipated fuel price spikes. Numerous sources also show consumers have been slow to comprehend alternatives even when they could benefit from them.
What Energy Crisis?
While electrification advocates “get it,” others push back or question the validity of climate change theory, technological readiness, or whether energy security is a concern.
Mainstream reports have documented America is now “awash” in newfound fossil fuels from horizontal drilling and fracking. This plus prospects for bio- and man-made fuels also attenuate the sense of urgency.
Plus, Americans pay less per gallon than others for gas, so they feel less pain. Some may hedge against it, but others are not alarmed, and memories can be short.
Last month GM’s media sales report said improved U.S. employment and fuel prices have reduced concerns, and growth for SUVs and pickups is expected to be strong.
Stakeholders otherwise predict internal combustion will be with us for decades to come, if not indefinitely.
Unknown also is the wild card of fuel cells, which Toyota, Hyundai, Honda and Daimler have spoken about, with more expected to follow.
If environmentalists, energy hawks, or other proponents have moral or ethical interests woven into desire for more battery electrification, it’s clear their passion is either not sufficiently embraced or battling contrary sensibilities and agendas.
Automakers – mindful of regulatory mandates – say they are pushing as hard as they can and do celebrate acknowledgments for their “sustainable” efforts.
Today’s limited-market cars are providing lessons for tomorrow’s expected competitive market. Projections are for 4.5-times global plug-in electrified vehicle growth over the next decade, and hope is for technological improvement and economies of scale to kick in sooner or later.
Ultimately, what we have to date is the result or a raft of variables both for and against electrification and more is coming as we travel along the road to somewhere.