Hybrids will remain an important part of the transition. It's estimated they will have 15% to 20% of U.S. sales once the next generation of EVs are available. In February, hybrid market share was 8.9%, according to Edmunds.

"At least for the next five years, we think hybrids deserve at least as much investment focus in terms of volumes they can expect from customers until we get to a level ... when EVs can make money and we're at a level of scale where it all kind of makes sense," said Andrew Loh, managing director and senior partner at Boston Consulting Group. "The second generation of EVs, in our opinion, it's still the transition period where hybrids will still play a big role just because it's going to continue to be hard to make money."

'Chasing the consumer'

Ford is investing in hybrids along with EVs, Gjaja said, noting that the learnings from getting the forecast wrong include the value of a robust core business in hybrids and internal combustion engine vehicles, which the Dearborn automaker calls its Ford Blue division. GM recognizes it, too, saying it will reintroduce plug-in hybrids into its North American lineup in a reversal from its "all in" on EVs mantra. Stellantis NV has emphasized that its STLA (pronounced "Stella") platforms were designed for all-electric vehicles but can support hybrid and internal combustion engine powertrains, too.

But to meet the U.S. Environmental Protection Agency's "strongest vehicle pollution technology standard ever" finalized last week, the companies need to sell EVs. Forecasting demand for them, though, has been trickier than expected.

Gjaja noted that vehicles typically take about five years to develop. In 2018, EVs made up 1% of U.S. new vehicle sales, and the prediction for 2023 wasn't much more at the time. That increased by a couple of percentage points in the next couple of years, but the picture really changed, he said, in 2021, when global EV sales doubled, and in 2022, when the U.S. projections climbed to more than 10% penetration. EVs last year ended up having a roughly 8% market share.

"Everyone said, 'Well, that's a disappointment,' but if you actually look back in time when we had to make the capital commitments and make the calls, we were five years out saying it's going to be 1-2%," Gjaja said. "Suddenly, we're seeing that the consumer was accelerating their adoption dramatically, and we realized there was a lot more demand out there than we had accounted for. So what you saw in the industry was everyone chasing the consumer."

What perhaps was somewhat overlooked, though, was the unique circumstances of the time, Gjaja said. The industry was facing a global microchip shortage that depleted inventories of all kinds of vehicles. Meanwhile, Tesla was ramping up production of its Model Y SUV and had a reliable supply chain of semiconductors for them.

"Some people moved into EV from ICE maybe a little faster because that was what was available," Gjaja said. "It feels like a big slowdown when, in reality, what happened was we had a temporary period of dramatic acceleration, and now we're back to maybe a more normal growth curve and adoption curve."

In the United States, Gjaja said over the next few years that looks like 20-40% growth, which is big for any segment. Even still, Ford says it pushed back $12 billion in EV investments, including scaling back the size of its battery plant in south-central Michigan's Marshall by 43% and delaying the launch of production at one of its battery plants with SK On in Kentucky. It's decreased production volumes of the Mustang Mach-E SUV and F-150 Lightning pickup, as well.

...continued

©2024 www.detroitnews.com. Visit at detroitnews.com. Distributed by Tribune Content Agency, LLC.