When the Toyota Prius was first introduced to the United States back in 2000 (and to Japan earlier in 1997), it set the stage for a distant future tsunami of hybrid models. However, early hybrid models were aimed at meeting fleet fuel economy standards, and were often billed as "compliance cars," requiring state or federal incentives and long-term ownership for buyers to recoup the higher cost of the electrified powertrain. To make matters worse, these early hybrids were typically hatchbacks, such as the original or current Honda Insight which, until recently, were at the bottom end of U.S. consumer preferences, regardless of their global appeal. The shift from hybrid powertrain to electric vehicles generally followed the same narrow approach, with Chevrolet's Bolt and Nissan's Leaf adopting the same hatchback configuration as the early hybrid entrants.
That's not to say that all early attempts fell into the hatchback category. In fact, in 2008 GM introduced a mild hybrid version of its full-size truck-based SUVs. However, the high purchase price of the hybrid variant at the same time as the U.S. hit its recession deterred consumers from purchasing the vehicles. While the 21 mpg overall rating was impressive for a vehicle of its size, it was a far cry from the comparable Prius and those who could stomach the asking price were less concerned with fuel costs as they plummeted in the wake of the recession.
However, GM may have been in the right place at the wrong time. Trucks and SUVs are growing in market share, reaching 63% of U.S. sales in 2017, corresponding with a continuous drop in sales of sedans. In fact, SUVs alone are projected to make up at least 50% of the U.S. market by 2020. In the meantime, transaction prices are up between 39-51% between cars and SUVs sharing the same platforms, indicating that profit margins continue to rise for SUVs over their sedan counterparts. Ford has clearly taken note of this trend by announcing tit is pulling out of the sedan market.
The German manufacturers have finally taken note of this trend and have aimed to exploit the higher profit margins of SUVs to help dull the costs of electrification. For example, Mercedes Benz with its EQC, Audi with its E-tron Quattro, and BMW with its iX3, have all targeted the electric SUV market with their offerings. Similarly, Chinese manufacturer, Byton has taken the same approach, and we expect more electric SUVs entrants to challenge Tesla's Model X. On the non-all-electric front, Volvo's XC90 and BMW's X5 also come in powerful hybrid powertrains, which use performance as a vice to draw in buyers. Others, such a Ford, aim to highlight technology's versatility to move higher-priced electrified powertrains. In 2020, Ford expects to introduce a version of its popular F-150 with a hybrid powertrains that doubles as a power supply or a generator for operating tools or camping equipment.
In all of these cases, the higher profit margins of trucks and SUVs provide the desired cushion necessary to absorb the extra cost of the electrification technology, hopefully enabling manufacturers to start regularly selling electric or electrified vehicles at a profit rather than a rumored loss, as in many of today's market entrants. Even Porsche is taking aim at the market with its all-electric Taycan. While the Taycan takes the form of a sedan rather than as an SUV, Porsche, with its luxury manufacturer built-in higher profit margins, is attempting to prove that any vehicle can be a profited electrified vehicle if it falls in a high-margin industry segment. The history of hybrids in the United States may be a cautionary tale that automakers are finally starting to appreciate. The future release of electric or electrified SUVs will hopefully serve as a barometer to the mass adoption of these vehicles by other manufacturers outside of the three prominent German marques.
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