Automakers and suppliers are racing to add capacity to build gasoline-electric hybrid vehicles for the U.S. market, betting consumer demand for a compromise between all-combustion and all-electric is a durable trend.
E.V. sales have been slowing, and if the trend continues, it could prompt some companies to dial back their electric-car goals and battery-plant plans. That would be a significant setback for the industry, which had planned to make E.V.s a more significant part of its portfolios by 2023.
As the market for E.V.s cools, carmakers are increasing production of hybrids, recognizing that they provide an attractive alternative for consumers worried about higher prices, limited battery ranges, and a lack of charging stations. Toyota and its luxury Lexus brand lead the way with 18 hybrid models, followed by Ford and Lincoln with six each. Hyundai and Kia offer seven, and G.M. offers three.
Car shoppers have responded by boosting hybrid sales, which have risen in the past few months and are forecast to hit an all-time high this year. A number of factors are at play, including the lower fuel economy required by federal standards and a shift in the emphasis placed on fleetwide efficiency. In the long run, E.V.s will be the dominant powertrain, but until they are more widely available, hybrids are the best way to satisfy government regulations.
The Detroit automakers and their supplier partners are also counting on hybrids to help them meet the stricter fuel economy standards that will take effect in 2027 and 2032. The companies will likely face $14 billion in noncompliance penalties if they don’t significantly improve their average fuel economy by those dates. The penalty amounts to $6.5 billion for G.M., $3 billion for the Chrysler group, and $1 billion for Ford, according to estimates by the American Automotive Policy Council, a trade group representing the Detroit Three.
Hybrids, which combine internal combustion with a smaller battery pack, are a less expensive way to comply with the new rules because they allow cars and trucks to stay on the road longer than electric-only vehicles. The new standards require automakers to achieve 58 mpg for their fleetwide average, and hybrids are expected to play an essential role in reaching that target.
Many who pontificate about the future of the car business have compared hybrids to the Goldilocks option in the Three Bears children’s story, saying they are just suitable for buyers hesitant to dive into the all-electric world. But experts say switching back to hybrids will delay carmakers’ time to invest in E.V.s fully. They will need to make up for lost ground by spending more money. That will ultimately cost them more in the long run, they say. “If you divert your capital back into hybrids, that slows your transition to where you want to be,” Sam Fiorani, an analyst at the research firm AutoForecast Solutions, told Reuters.
