Don’t fool yourself: The future of the car remains all-electric

Don’t believe the hype about hybrid gas-electric vehicles. It won’t last. All-electric vehicles are the future.
Worldwide sales of new cars running purely on batteries (battery electric vehicles, or BEVs) outsold plug-in hybrid electric vehicles (PHEVs) by more than two to one last year.
But PHEVs have been closing the gap. In the first seven months of 2024, global PHEV sales jumped by almost 50 per cent year-over-year, while BEV sales increased by just eight per cent.
During a global economic slowdown, and with high borrowing costs, strong sales for hybrids priced lower than BEVs were to be expected.
And for the many car buyers still worried about range between charging stations, a PHEV with two powertrains, one gas and one electric, keep the vehicle running after its battery-powered engine runs out of juice.
In July, the average price for a new BEV was $74,043 compared with the $65,590 average for all new cars, according to Autotrader, an online marketplace for vehicles.
Ford Motor forecasts that it will lose about $7 billion on its electric-vehicle production this year as demand for BEVs has waned.
BEVs cost more because of their much larger and more expensive batteries than PHEVs.
BEVs with about 640 kilometres of range achieve parity with the median range of gas-powered vehicles. A typical PHEV’s small battery provides about 60 km of range.
In fairness to the Western legacy carmakers, China’s BYD, the world’s biggest maker of electric vehicles, had a head start of more than two decades in making BEVs.
So did Tesla, the second-largest maker of all-electric vehicles, which has been developing only BEVs since its inception in 2003.
It wasn’t until the late 2010s that GM, Ford, Volkswagen and other legacy automakers began to commit to electric vehicles.
The legacy automakers have relied on the expedient of outsourcing software and other electric-vehicle components to third-party suppliers. By contrast, Tesla and BYD have kept their supply chains largely in-house.
The result for legacy firms has been delays in new products due to technological challenges not easily solved when you don’t fully control your supply chain.
Several legacy automakers have scaled back their electric-vehicle ambitions this year, including GM, Ford, Mercedes-Benz and Volvo.
But the end game is BEVs, and not just because prices will come down with ever-improving battery technology and reduced range concerns with expanded charging networks.
Prices of BEVs are falling faster than the average for all cars. In July, the average BEV price dropped almost 15 per cent over the previous year, while the decline in the average price for all new cars declined by just 0.7 per cent.
And Canada’s charging network grew by about 30 per cent last year, to 27,181 chargers at 11,077 locations across the country.
Analysis of real-world driving conditions shows that PHEVs consume between 46 per cent and 67 per cent more gasoline than advertised, according to the International Council on Clean Transportation (ICCT), a Washington, D.C., think tank.
And “PHEVs cannot deliver the same climate benefits as BEVs,” the ICCT says. “No matter the latest headlines, the future of the American car remains fully electric.”    
What most threatens future sales growth of PHEVs is government mandates requiring automakers to transition to fully electric vehicles.
Canada is targeting 100 per cent zero-emission light-duty cars and trucks by 2035, with interim targets of at least 20 per cent by 2026 and at least 60 per cent by 2030.
Led by California, the market that most influences global automakers, 17 U.S. states have mandated that only 20 per cent of new-vehicles sales can be PHEVs by 2035. The rest must be all-electric by that time.
And the European Union (EU), like Canada, will ban the sale of all gas-powered vehicles, including hybrids, by 2035.
With that phaseout of PHEVs on the horizon, automakers have incentive to apply almost all their financial and technological resources to making better and more affordable BEVs.
Given the lengthy development cycle for new vehicles, automakers are risking their future the longer they wait to go all-electric.
French automaker Renault isn’t taking that chance, recently announcing plans for new BEVs priced lower than its current models.
The apparent retreat from BEVs is actually a pause.
For example, Volvo isn’t scrapping its plans to go all-electric. Instead, it has pushed back its target for doing so to 2030 from 2025.
Ford has similarly delayed production of electric SUVs at its Oakville, Ont., assembly plant by two years to 2027.
Finally, governments and automakers have invested so heavily in BEVs that there’s no turning back.
In North America alone, more than $300 billion has been committed to an electric-vehicle supply chain. By 2027, it will be capable of turning out more than six million electric vehicles per year.
That promises to be a good investment, not least for the higher air quality and quieter city streets it will yield.