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Death of the Hybrid Vehicle: GM and Volkswagen Say Goodbye

Summary:
GM and Volkswagen pulled the plug on hybrid cars. Ford and Toyota didn't. Only 3% of sales are hybrids. Why bother? With that hard to fault logic, GM and Volkswagen Pull the Plug on Hybrid Vehicles. “If I had a dollar more to invest, would I spend it on a hybrid? Or would I spend it on the answer that we all know is going to happen, and get there faster and better than anybody else?” GM President Mark Reuss said in an interview. GM’s view contrasts with other auto-making giants, including Toyota Motor Corp. and Ford Motor Co. which are working on full electrics but also expanding their U.S. hybrid offerings. The differing strategies show a division within the auto industry over what is the best path to full electrification, as manufacturers pivot from their more than century-old

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GM and Volkswagen pulled the plug on hybrid cars. Ford and Toyota didn't.

Only 3% of sales are hybrids. Why bother?

With that hard to fault logic, GM and Volkswagen Pull the Plug on Hybrid Vehicles.

“If I had a dollar more to invest, would I spend it on a hybrid? Or would I spend it on the answer that we all know is going to happen, and get there faster and better than anybody else?” GM President Mark Reuss said in an interview.

GM’s view contrasts with other auto-making giants, including Toyota Motor Corp. and Ford Motor Co. which are working on full electrics but also expanding their U.S. hybrid offerings. The differing strategies show a division within the auto industry over what is the best path to full electrification, as manufacturers pivot from their more than century-old reliance on gas-powered vehicles.

Last week, Continental AG, one of the world’s biggest car-parts makers, said it would cut investment in conventional engine parts because of a faster-than-expected fall in demand—yet another sign the industry is accelerating the shift to electric vehicles.

Hybrids, which were popularized by Toyota’s Prius last decade as a social statement, accounted for about 3% of U.S. sales in 2018, according to research firm LMC Automotive.

Aggressively Chasing the 3% "Social Statement" Crowd

David Filipe, Ford’s head of powertrain engineering. “We’re going to be aggressively chasing this space of hybrids.”

How can aggressively chasing 3% of the market make any sense?

Hybrids never made any sense to begin with.

They appealed to yuppies who wanted to make it appear they were doing something for the environment without really doing a damn thing.

Car Engine Technology

Electric vehicles account for only 1% of the market,even less than hybrids, but eventually the market will be electric.

Our strong preference is to go all-in where the market is heading, as opposed to hybrids as a way to hedge our bets,” said Scott Keogh, VW’s U.S. chief.

In contrast, Bob Carter, Toyota’s sales chief for North America, said that with U.S. electric-vehicle sales expected to lag behind Europe and China, the company needs a nearer-term remedy. “That’s why we feel so confident in hybrids,” Mr. Carter said.

Confident of the need to compete for 3%?! For the near term? Why bother?

Three Electric Issues

  • Technology: Batteries technology needs more miles per charge and that will happen.
  • Cost: The battery cost needs to come down and it will.
  • Convenience: There need to be more charging stations and that will happen too.

A hybrid system can add roughly $2,000 to a vehicle’s cost, while a fully electric version costs an additional $6,000 to $10,000, said Alan Baum, an independent Detroit-area auto analyst.

The Big Bet

Toyota and Ford bet on Hybrids. GM and Volkswagen bet on Electric.

Ford should let Toyota have the whole market.

Once price, performance, convenience are good enough, mass adoption of electric will take off.

Time Frame?

I don't know, but I am sure it will happen.

Meanwhile, judging from 3% market penetration, the hybrid hedge offers too little improvement at too great a cost to bother with. That consumer choice seems rational to me.

Mike "Mish" Shedlock

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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