Manufacturers respond to lower demand for electric cars

A couple of years ago, brands began talking about dates to end the production of cars with internal combustion engines. The strategy of most manufacturers was to bet on electric cars, focusing investments and development of new products. But the market is capricious. In Europe the increase in Electric sales have slowed a lot at this start of the year and the majority response has been to reinforce the offer of plug-in hybrids.

Last week, the CEO of Volkswagen announced the same change in strategy. Now the priority is to expand the PHEV portfolio in the ranges. “The clients they want plug-in hybrids now, even in China and the United States,” Schäfer said in London. You have to keep in mind that in China they are far behind local manufacturers in 100% electric vehicles and already in 2023 they ruled out investing 2,000 million euros in a new electric vehicle factory in Germany.

They are not the only ones. Mercedes-Benz pointed out that it will sell cars with combustion engines for longer than expected… due to disappointing sales of electric vehicles. And in this uncertain panorama, Toyota is breaking sales and profit records thanks to its hybrids (most of which are not plug-in).

PHEV: Transition technology?

Plug-in hybrids, seen as a transitional technology on the path to total electrification, have regained momentum this year, coinciding with the lower growth in electric sales, which in the first quarter of the year remained at 12% of the market European (12.1% in the same period of 2023). Plug-in hybrids remain at 7.4%, according to ACEA figures, but a year ago they were only 7.2%.

Manufacturers depend on plug-ins to meet their CO2 emissions targets. And they increasingly have longer electric ranges, as we can see in models such as the renewed Volkswagen Tiguan or Cupra Formentor, which already exceed 100 km of electric range… figures until now reserved for premium manufacturers, since the need to include batteries and Separate combustion car transmissions kept the high costs.

Faced with a hesitant market, brands such as BMW and Audi are decisively betting on electric vehicles, “but if waves or fluctuations occur in the transition, we can react to them,” as Audi CEO Gernot Dollner pointed out last week. And Ola Kallenius, CEO of Mercedes, gave his opinion at the end of last month: “We believe that plug-in hybrids will still be relevant for many years”. Volvo also renews its portfolio of this type of vehicles.

We talk about premium brands because their products are the best sellers. In 2023, the best-selling PHEV in Europe was the Ford Kuga… but in 2024, the Volvo But are not the only ones. BYD, which only had electric vehicles in its European range, will have a PHEV version of the BYD Seal U in a few months. And Ford has already indicated that if they see a strong demand for plug-in hybrids, they will sell them… since the current demand for electric vehicles does not match the expectations that the brand had and implies changing the strategy.

Some handicaps of plug-in hybrids

Many consumers opt for a plug-in hybrid like the first step towards electrification total… and the next car they buy is a totally electric car. We are not saying it, the commercial director of Volvo Cars, Bjorn Annwall, said it in an interview.

One of the problems with these cars is having two propulsion systems… which will always result in an expensive product. Its emissions were also questioned, which are much higher in the real world… although the user is to blame there, not the technology. In any case, the European Union has begun to monitor plug-in hybrids with on-board diagnostics… and is expected to review its approval requirements in the coming years. We agree 100% on this: approved consumption figures do not serve consumers.

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