Published on October 17th, 2020 | by Maarten Vinkhuyzen0
Carmakers Betray Their Customers With Outdated Plugin Hybrids
October 17th, 2020 by Maarten Vinkhuyzen
After years of hardly any new electric models from most carmakers, we see in Europe a large number of new “electrified” models.
The 100% battery electric vehicles (BEV) are mostly in the lower regions of the car market, in the A-, B-, and lower C-segments. There is a sprinkling of a few expensive top models like the Polestar 2, Audi e-tron, Mercedes EQC, and Jaguar I-Pace in the D- and E-segments.
The bulk of the new “electrified” models are hybrid electric vehicles (HEV) and plugin hybrids (PHEV) in the middle part of the market, the very lucrative section where the volumes are still high and the margin is already that of the luxury models. These are autos like the Volvo 40 and 60 models, the BMW 3 Series, the Ford Kuga, and all those other moneymakers from Mercedes, Audi, Jaguar, Infiniti, Lexus, and others. This might look like a short-term, safe play for carmakers, but it is not good for consumers. In fact, it is even dangerous for carmakers — they could miss the market transition to more profitable BEVs.
In my calculations to determine what is a serious electric automobile, I use 60 kWh as the minimum battery size. Models with the efficiency of a Tesla or the Hyundai Ioniq can get away with just over 50 kWh, while the big travel autos like the big Teslas, Audi e-tron, and Mercedes EQC need 100 kWh, but the bulk of the models need 60+ kWh to be useful as all-around-capable vehicles.
In Europe, a new automobile in a middle class family will often be the single or main vehicle in a household. Therefore, it should be capable of handling all the use cases people expect of such an auto. So, if the car industry is serious about transitioning from fossil fuel cars to fully electric vehicles, then these cars should be capable of the feats that people have come to expect from their only car. That includes going on a three-week camping trip with the family and kids, towing a caravan 1,000 miles to the Mediterranean, and driving to the mountains with a ski box on the roof. With an electric car, these journeys need to have roughly the same travel time as the cars people are currently using.
I do not buy the argument that it is too difficult to build such a BEV, but they cannot use the same platforms as the fossil fuel cousins in their brand. In other words, they have to move on and design dedicated platforms for BEV models.
The Hyundai Kona EV, Kia Niro EV, Nissan Leaf, and Renault Zoe don’t qualify as all-round capable vehicles. They do not have enough range, towing, and charging capacity. The MG ZS EV, Peugeot e-2008, Mazda MX30, Mini electric, and Honda-e are even worse. They don’t even come close.
The Tesla Model Y and perhaps the Volkswagen ID.4 Long Range will be able to deliver what is asked of them. I don’t see many other models meeting this challenge. The Volvo XC40 Recharge and Ford Mustang Mach-E look to have a shot at delivering what is expected. Only, the price is still €20,000 too high.
Instead of designing new vehicles that can fulfill the demand for capable BEVs, another approach was chosen. The carmakers have decided to offer these capabilities in PHEVs and not even try to make BEVs to meet those needs. Why they do this you can read here. Plugin hybrids are sensible in very sparsely populated areas without good electric infrastructure, like Northern Sweden, Finland, and Siberia. For most of Europe, they are the wrong choice. Tailpipe vehicles will be banned from cities (London, Amsterdam, and dozens of city centers) and metropolitan areas first, followed by vulnerable natural and touristic regions. The UK will ban sales of non-BEVs starting in 2030.
It is selling the customers a product that will be outdated in a short time. Customers buy a car in the expectation it will be good for many years, if not for the first owner, for all the next owners. A product that will be outdated in a few years is not what they expect. The PHEV is still a vehicle with an internal combustion engine that runs on fossil fuels when not charged. It will be taxed as a fossil fuel vehicle. It will depreciate nearly as fast as a fossil fuel vehicle. The PHEV used car market will quickly follow the disappearance of the fossil fuel vehicle used car market. Most customers do not realize these coming developments. The industry knows, or should know, what is coming. The tobacco industry and now the oil & gas industry have been prosecuted for not telling their customers and society what the consequences of their products are. The auto industry is facing the same risk.
I can see the logic from the viewpoint of the MBA-trained money managers thinking in quarterly results, ROI, and avoiding accelerated depreciation. Strategically, it is the wrong choice. The strategic view of the board of directors and C-suite executives should be on the health of the company in the next 2–5 years, with the goal being to have a company with a better outlook in 5 years than it has now.
The plugin hybrid is yesterday’s technology, notwithstanding all the marketing hype around newly developed “E-tech.” Trying to sell the public on EV technology that is really just century-old ICE technology with some supporting electronic gadgets will not save the current status quo. In only 5 years, the European market will be overwhelmingly BEV — as is predicted by Tony Seba, by me in my Osborne-effect article, and as indicated by the recent high growth of EV sales in the European market.
When customers find out they did not buy new technology, are not environmentally doing their part, and are not saving money as they expected, many will feel betrayed, and justifiably so. It will be like the Volkswagen diesel scandal in the USA, but on a far broader scale. Volkswagen was a small brand in the USA, and the affected vehicles were less than 1% of the market. Now, it will be a much larger size of the market, and the deception on a far larger scale.
It is in part a chicken & egg problem. When doubting demand for BEV, companies look at the cost of low-volume BEV models. The calculated depreciation and amortization costs are often higher than the direct production costs of making the car. That makes the cars too expensive and the consequently low sales prove the doubters right.
With more trust in the market, and taking a little bit of risk, calculations for expected higher sales would produce lower prices. Higher sales at affordable prices prove the EV advocates right. This will start the disruption the doubters do not believe is coming. As is often the case, fear provides bad counsel.
We will see the EV advocates right at Volkswagen and Tesla. The doubters will make their fears come true at Mercedes, BMW, Renault, and PSA. Those that think it is till too early, like Toyota and Honda, will become footnotes in history.
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