- The second half of 2023 isn't boding well for electric vehicles.
- This dilemma is finally dawning on automakers.
While car companies try desperately to gin up demand for their latest electric models, consumers are begging for a compromise: hybrids.
It's clear that US consumers will pay extra for convenience. That's been clear in the success of apps like Uber, DoorDash, InstaCart, and more. In the auto industry, the same logic applies to hybrids, which can provide a more convenient bridge to full EV adoption.
The days of selling to wealthy early adopters – who were willing to pay beaucoup bucks for cars that still had lots of quirks – are largely over. And the auto industry needs to do more to tap into a new cadre of EV-curious buyers, who are the key to continued growth.
These shoppers are quite eager to go electric, but still can't make the case for the wholesale lifestyle change that comes with charging an electric vehicle. Even hefty discounts aren't enough to sway these shoppers to full electrics, and they're instead willing to forego a deal and potentially pay a bit more than the sticker price on a hybrid instead.
The average electric car is listing for $61,699, but selling for $59,674 with discounts of $2,024, according to Edmunds data provided to Insider. That's compared to regular hybrids, which are cheaper but selling slightly above sticker price at $40,437 on average, while plug-in hybrids go for around $56,786.
"It's a huge problem (for shoppers) that automakers have largely ignored hybrids," Chris Harto, a senior analyst at Consumer Reports, told Insider. "The market just isn't delivering them in significant volumes, so it's hard to get your hands on one even if you really want to buy one."
That's clear in their rapid ascendance since 2019:
The EV market is undergoing a change
The second half of 2023 isn't boding well for the near-term future of EVs. Auto dealers have been sounding the alarms for months, saying electric cars are piling up on their lots, they're taking longer to sell than their gas counterparts, and they require all sorts of discounts and incentives to convince a customer to take them home.
This dilemma is finally dawning on the automakers spending billions of dollars to electrify their product lines. Several auto executives in recent weeks have voiced concerns about slowing EV demand and the impact that will have on their bottom lines for the foreseeable future.
Meanwhile, hybrids and plug-in hybrids are gaining traction as a middle-ground way for car buyers to get some of the benefits of driving a cleaner car, without fully committing to an EV.
But the increase in demand and lack of availability driving up the cost of hybrids can erase some of the financial benefits of going green.
A recent study of hybrid prices and cost of ownership by Consumer Reports found that first-time owner net savings on a hybrid can add up to $2,000 when accounting for lower fuel and maintenance costs, among other factors. In the long term, the average hybrid owner can save more than $4,000 over the life of the vehicle when compared to internal-combustion engine vehicle ownership, the study found. But those savings get quickly erased when dealers add mark-ups to the sticker price, Harto said.
"You still have the environmental benefits and those day-to-day savings not going to the gas station," Harto said. "But on net, your savings may not be there if you have to pay a significant markup."
Hybrid revolution
This need for hybrids isn't new. Akio Toyoda, chairman of the world's largest carmaker, Toyota, has long said the world needs hybrids before relying on fully-battery-electric powertrains.
Dealers are hopping on the bandwagon, too.
When "trying to flip every single customer that drives a truck right away into an EV," Cameron Johnson, CEO of Magic City Auto Group, a Virginia dealership group, said, "the demand is just not there.
"Quite frankly, we need more hybrid options," he added. "That is the easiest way to walk a customer from a gas car."
And other executives are catching on. Ford said this week it would postpone $12 billion in new EV investment as the company assesses demand going forward. Meanwhile, the company is planning to double production of the hybrid F-150 amid strong demand for the truck. That's a clear sign that even from a brand that has leaned so heavily into pure electrics with the Lightning, there can be room for the hybrid customer in there as well.
"You could really argue that, what was everybody thinking — other than maybe Honda and Toyota — in terms of not wanting to have a bigger discussion about the benefits that hybrids can offer and how they can bridge the gap in terms of a cleaner environment going forward?" Martin French, managing director at Berylls, said.