After years of pushing forward on its all-electric path, General Motors Co. is now reviewing whether to bring hybrid vehicle options back to vehicles it sells in the North American market.
The potential strategic reversal would be a dramatic move by GM. The Detroit automaker has championed plans for an all-electric fleet even as such rivals as Toyota Motor Corp. pursue an all-of-the-above powertrain portfolio that is proving prescient as demand for EVs falls short of expectations and charging infrastructure lags.
“GM is currently assessing potential future investment,” GM spokesperson George Svigos said in a statement Tuesday, adding: “No final decision has been made. GM is committed to an all-EV future globally. On that pathway, we continue to study consumer preferences and powertrain options, to ensure we best respond to customer demand and comply with an uncertain, complex and increasingly stringent regulatory landscape for 2027 and beyond.”
GM produced the plug-in hybrid Chevrolet Volt from 2011 to 2019 for the North American market at its Detroit-Hamtramck plant, which is now making fully electric models. And GM still does have one hybrid: the Chevrolet Corvette E-Ray revealed in January this year. Still, in recent years, GM executives have generally disregarded hybrids to focus on building out a battery electric vehicle lineup with options across all four of its brands.
It hasn’t worked out that way. After CEO Mary Barra earlier called 2023 the “breakout year” for GM’s Ultium electric platform with multiple EV launches taking place, the automaker, in recent months, has delayed some expansion of its EV production. GM has withdrawn its production target of 400,000 EVs by the first half of 2024, but executives on GM’s third-quarter earnings call said the automaker is still planning to reach annual EV capacity of 1 million units in North America at the end of 2025.
“GM has been notable for its stance on an accelerated all-electric future — a desirable goal in theory but one that may represent missed revenue opportunities and an overly ambitious read on market dynamics,” said Paul Waatti, manager of industry analysis at AutoPacific Inc., in a statement. “There is clear growth in EV market share, but it is still in its infancy in the U.S. market, and a complete transition to EV will be measured in decades, not years.”
EVs accounted for about 5.5% of U.S. sales in 2022, and they’re on track for about 8%-to-9% in 2023, Waatti said: “Even the most ambitious EV forecasts are 30-40% share by 2030, leaving well over half the market to other powertrain options.
“Consumers want a seamless transition to EV ownership, and hybrids are an excellent option for dipping toes into electrification and reaping benefits when used as intended.”
The ‘humble hybrid’ makes a comeback
Since 2020, GM leaders have pushed their coming electric vehicles based on its new Ultium platform. In the meantime, some of those same leaders have appeared to have tossed the idea of hybrids aside. In a December 2022 interview with Business Insider, GM President Mark Reuss said: “We’re not going to dilute our investment with hybrids.”
Meanwhile, such competitors as Toyota and Ford Motor Co. kept producing vehicles with hybrid options even as they pursued all-electric options to keep pace with emerging government mandates in the United States, European Union and China, the world’s largest market.
“Hybrids have actually gained a lot of traction in the last couple of years,” said Sam Abuelsamid, principal e-mobility analyst at market research firm Guidehouse Inc., noting that more than 25% of Toyota sales in North America are hybrids now. Japan’s No. 1 automaker is on track to reach 50% hybrid sales in a couple of years.
Hybrids accounted for 11.4% of the market in October, up from 6.5% in October 2022, according to data from Edmunds.com Inc. Meanwhile, EVs claimed 7.5% of the market in October 2023, up from 6% a year prior.
“It is hilarious how the humble hybrid has made such a comeback,” said Ivan Drury, director of insights at Edmunds. “The benefits of just normal hybrid, or plug-in hybrids, I think that people are revisiting that because they’re realizing, ‘look our infrastructure is not there for full EV adoption.'”
Beyond the market opportunity with hybrids, GM also will need to make changes to adhere to proposed stringent federal emissions rules. In April, the Biden Administration released the “strongest ever” tailpipe emissions standards, expected to push automakers to accelerate the proportion of EVs in their U.S. sales to 67% by 2032. The proposed rules by the Environmental Protection Agency call for a 56% reduction for the applicable model years 2027 to 2032.
And then in July, the Biden administration announced it plans to cut vehicle fuel consumption almost in half by 2035. The proposed Corporate Average Fuel Economy standards would require automakers to meet an estimated 58 miles per gallon average fuel economy by model year 2032 and require automakers to improve fuel efficiency by 2% every year for cars and 4% per year for light trucks beginning in model year 2027.
“They (GM) need vehicles with better fuel efficiency, lower greenhouse gas emissions, they’re going to need that to hit late ’20s CAFE targets,” Abuelsamid said. “In order to boost their CAFE numbers, they need to do something with what’s left of their internal combustion fleet. They need to hybridize those.”
Automakers aren’t the only ones concerned about stringent EV mandates. A U.S. car dealer group, EV Voice of the Customer, wrote in a letter to President Joe Biden released Tuesday that most U.S. car buyers are not yet interested in buying battery electric vehicles even if there are government incentives available.
“The reality,” said the letter reported by Bloomberg, “is that electric vehicle demand today is not keeping up with the large influx of BEVs arriving at our dealerships prompted by the current regulations. BEVs are stacking up on our lots.”
EV production delays
GM’s reconsideration of hybrids comes as the automaker recently revised its EV plans and after the automaker completed a difficult set of contract talks with the United Auto Workers — including a 46-day strike at targeted plants.
As the strike remained underway, the automaker reported it led to an $800 million loss. The larger toll could be known as soon as Wednesday: the automaker is holding a business update for financial investors that is expected to detail new deals with the UAW and Unifor, the union representing autoworkers in Canada, that have been ratified.
“GM is hedging its bets, and we believe a smart strategy given the turmoil with the UAW the last few months,” said Dan Ives, managing director and senior equity analyst at Wedbush Securities, in a statement, adding while there are a “lot of moving parts … having some hybrids is a smart bet for GM at this point.”
In October GM said it was delaying the start of EV truck production at its Orion Assembly plant another year, pushing the launch there to late 2025, which will leave the plant sitting idle for up to two years. In the meantime, the Chevy Silverado EV and GMC Sierra EV will still be manufactured at GM’s Factory Zero Detroit-Hamtramck Assembly Center.
“We saw from competitors and from market dynamics, a little bit of a slowing of the growth rate in EV adoption,” GM Chief Financial Officer Paul Jacobson said on the third-quarter earnings call. “We saw this as an opportunity to actually push it out a year before we significantly scale up, and it’ll give us a chance to build that foundation of profitability and improve it before going forward.”
Also in October, GM and Honda Motor Co. Ltd. said they were nixing an affordable electric vehicle program they jointly announced last year.
Barra told investors during the third-quarter call that the company “is taking immediate steps to enhance the profitability of our EV portfolio,” which includes “moderating the pace” of its EV push next year and in 2025 “to maintain strong pricing.”
Besides delaying EV truck production at Orion Assembly, GM is delaying launches of the Chevrolet Equinox EV, the Silverado EV RST for retail customers and the Sierra EV Denali “by only a few months,” Barra said.
Three months earlier, Barra told investors the automaker was experiencing “unexpected delays” in its EV production ramp-up because an unnamed automation equipment supplier was struggling with “delivery issues that are constraining module assembly capacity.”
Jacobson reported during third-quarter earnings that the situation was improving.
GM had to halt production of its BrightDrop electric commercial vans at its CAMI Assembly plant in Ontario until next spring because of issues with battery module supply.
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