In recent months, consumer preferences and OEM investments have shifted from electric vehicles (EVs) towards hybrids as a bridge solution, according to JPMorgan analyst Bill Peterson. High costs, sparse charging infrastructure and politicized adoption have slowed EV momentum, while hybrids gain traction.
Peterson's research note highlights how hybrid adoption impacts metals and critical minerals, revising forecasts for battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and hybrids globally and in the U.S. for 2024-2035. The implications include BEV deceleration and hybrid acceleration, with a modest impact on rare earths forecasts.
Sluggish Near-Term US EV Adoption
Global EV/PHEV sales growth in 2024 has been led by China's market, with flat or declining performance in the U.S. and EU-5 countries.
In April 2024, China, EU-5 and U.S. combined EV/PHEV sales reached approximately 1.06 million units, with a sales penetration of 28.6%. China recorded meaningful gains (+6.7% Y/Y), while the U.S. saw a slight rebound (+1.5% Y/Y) and the EU-5 experienced a slight decrease (-0.4% Y/Y).
The U.S. EV/PHEV sales penetration rose to 9.6% in April 2024, with EV-specific penetration increasing to 7.5%. However, EV incentives declined 26.0% M/M in April, driven by Tesla Inc's
Despite these cuts, EV inventory remained elevated, with a 90-day supply, highlighting the struggle to boost sales.
'The Chicken And The Egg' Issue
The "chicken and the egg" issue persists with charging infrastructure, as operators are hesitant to install chargers in low-utilization areas, while EV adoption hinges on reliable charging, the analyst notes.
In 2023, 90% of global fast charger growth occurred in China, with the U.S. lagging.
High-density areas and multifamily dwellings face additional challenges, increasing lifetime charging costs by $10,000-$26,000.
Hybrid Vehicles: A Cost-Effective Alternative
Hybrid vehicles have reached cost parity with internal combustion engine (ICE) vehicles eliminating the need for high-power charging infrastructure.
In April 2024, 118,435 hybrid electric vehicles (HEVs) were sold in the U.S., up 17.8% Y/Y, with Toyota Motor Corp
The average price of a hybrid is around $44,000, similar to ICE vehicles and up to $10,000 lower than EVs.
US Automakers Shift Focus To Hybrids Over EVs
U.S. automakers are increasingly focusing on hybrids over EVs. Toyota's hybrid sales accounted for 45% of its total volumes, while Ford Motor Co
Hybrids Offer A Viable Bridge Solution
Hybrid penetration is expected to remain significant in the U.S. through the midterm, with forecasts predicting a stable mix of hybrid, PHEV and BEV sales. The global market, previously not expected to exceed 20% hybrid penetration, is now anticipated to reach this level in the next 2-3 years, driven by markets outside China, Peterson notes.
While EV adoption faces challenges, hybrids offer a viable bridge solution.
As cost and charging infrastructure barriers are addressed, EVs may eventually gain broader acceptance, but hybrids are set to play a crucial role in the transition to a greener automotive future.
