Fork in EV road: Is hybrid or fully electric best way?
The world's largest automakers agree the industry's future centers on electrified vehicles, but they don't agree on the best path there.
The global auto industry is becoming increasingly divided as companies place expensive bets on future lineups of battery-electric and hybrid vehicles. Ford Motor Co., Fiat Chrysler Automobiles and Toyota Motor Corp. believe gas-electric hybrid vehicles have a place in the market. Others, including General Motors Co. and Volkswagen AG, plan to drop hybrids in favor of the battery-only vehicles that buyers around the world have been slow to adopt.
The result is two different routes toward the same goal: lessening the impact of fossil-fuel powered cars, trucks and SUVs on the environment. But one route might prove less risky — and more profitable short-term — than the other.
"If you pick one path and go with it, then it significantly reduces your development costs," said Sam Abuelsamid, industry analyst with Ann Arbor-based Navigant Research. "If you know you're going full-EV, you don't have to design hybrid powertrains. The downside is that if people don't buy EVs, you're stuck."
Consumer acceptance and market growth of battery-electric vehicles depends on a number of variables besides whether automakers can build electrics that are the kinds of products that consumers actually want, like SUVs and trucks.
In its best-case scenario, Navigant Research data predicts automakers won't sell more than 20 million electric vehicles globally until 2030, at which point they're expected to account for about 15% of the market.
By comparison, automakers sold fewer than 5 million electric vehicles in 2018, just 1.4% of the global market.
Hedging their bets
Any sharp increase in EV adoption over the next decade depends on lower prices, longer range and capability — and making recharges fast and convenient.
That's part of the reason some companies think the best plan is to build hybrid vehicles that pair gasoline engines with electric motors until the market warms to fully electric cars: There's the assurance that gas stations are there as a backup until the charging infrastructure is built out.
"These are big bets," said Ted Cannis, Ford's global director of electrification. "We are as concerned as anybody about climate change. But all of the customers are not in the same place, they're not in the same regulatory environment. We try to let the customers make the choice of what is best for them."
Ford has said it will introduce its EVs alongside hybrid and plug-in hybrid variants of most models in its lineup, bridging the gap between traditional internal-combustion engines and the electric vehicles most predict will dominate the industry at some point. All told, Ford plans to spend $11 billion on electrification over the next few years to bring 16 battery-electrics and 24 hybrids to market.
The Dearborn automaker will introduce an all-new battery-powered sporty crossover for the 2021 model year. It has promised a battery-powered version of its best-selling F-150 pickup.
Fiat Chrysler has committed nearly $10 billion to develop more than 30 hybrid or electric vehicles worldwide, including Jeeps. More than half of its portfolio, depending on geographic region, will be electrified before 2023.
In July, Morgan Stanley investment analyst Adam Jonas wrote that hybrid vehicles are simply "transition technology" out of combustion engines, adding complexity and costs without meeting emissions standards in the Europe or China. He was more excited by Ford's moves into battery-electric vehicles.
"We don’t believe auto companies can afford extensive parallel development of hybrid technology and [battery-electric vehicles] in a dual-pronged approach in a profitable manner," Jonas wrote. "It’s time to pick a path and commit to it."
GM has already tried the hybrid route, said Doug Parks, GM's vice president of autonomous and electric vehicle programs. Its Volt hybrid and the hybrid variants of other models were not big sellers, and GM sees more opportunity spending all of its research and development dollars on the battery-electrics it thinks are the endgame.
"We've been on this path for a while," he said. "We've done a lot of hybrids, but we think that EVs are the real answer. We think they're the long-term answer."
GM plans to launch battery-electric SUVs, compact sport utilities and trucks over the next few years. All told, it says it will introduce 20 new electric models by 2023.
"We believe we're really on the verge of an inflection point here," Parks said. "Is there a risk? The bigger risk for us is not being a leader in this future EV space. It'd be more risky to take a backseat position in the future."
The potentially lucrative Chinese auto market and its powerful regulators could be driving decisions there, according to Navigant's Abuelsamid. GM and VW have large footprints in China, where the government is driving EV adoption. Ford, meantime, has been more successful than its competitors selling hybrids in North America.
Like GM, VW is working toward an electric future without investing much in hybrids. The automaker plans to invest more than $1 billion in Germany to build a battery plant and get behind new offerings like a battery-electric minibus for 2022.
The German automaker was required to invest in zero-emission vehicles as part of a $14.7 billion settlement over allegations VW engineers rigged hundreds of thousands of cars to cheat U.S. pollution standards. In 2016, some politicians said that requirement would give VW a headstart on EV research.
Most companies expect a majority of sales will come from traditional combustion engines for a while: "It's not going to change overnight," said Parks. "What we do know is there's a transition happening, and we believe the EV is the better play."
U.S. Rep. Debbie Dingell, D-Dearborn, and others said at a recent town hall meeting in Canton that government mandates and incentives are needed to encourage that transition. Without government intervention and added incentives, electric vehicles likely will take longer to catch on.
Automakers, analysts and politicians largely agree the future belongs to electrics. The next decade will tell which carmakers made the right bets to get there.
Detroit Staff Writers Breana Noble and Kalea Hall contributed.