Plug-Ins May Be the Next Logical Step After Hybrids

Source: BMW

In the auto world, there are two distinctly different circles: Tree huggers, and petrol heads. Historically, these circles have seldom interacted, but for the last 15 or so years, the two sides have — on paper, at least — met a sort of compromise in the form of hybrid cars championed by the likes of the Toyota Prius and Honda Insight.

But the bridge between hybrids and pure EVs has been made blurry with the arrival of plug-in hybrids. Though the price of conventional hybrids has come down, the increase in fuel economy of non-hybrid cars has come up, and the former is largely still at a disadvantage from a pricing point of view. Their main edge is that they are still cheaper than pure electric vehicles, though that gap is closing — with help from the plug-in variants and decreases in battery costs.

Not helping the hybrid’s case are free-falling oil prices. The cheaper it is to fill your tank, the harder it is to sell hybrids. Sales forecasts for this year have slid with the price of oil, but peculiarly, plug-ins have been able to weather the storm and add meaningful growth throughout the year — despite the higher MSRPs.

Plug-in hybrids function mostly like conventional hybrids, though with a key difference: They allow a pure-electric mode of between 10 and 40 miles, and can charge up via a port that you’d see for an electric car. This is a development that promises to bond the two major factors of EVs that are at odds: Not using gasoline, but knowing that the driving range is there if I need it. Ten to 40 miles doesn’t sound like a whole lot, but studies have shown that the vast majority of drivers commute fewer than 40 miles per day — and many, even less. With regular charging, it’s possible to go on indefinitely without having to use the onboard internal combustion engine.

Source: Toyota

Plug-in hybrids are therefore a natural marriage of internal combustion and battery power, and, as prices deflate, an instinctive bridge between conventional cars and EVs. Cars like the Prius enjoyed monumental success around the world in the first decade of the 2000s, resonating with both consumers and fleets who were able to see their gasoline bills fall as prices crept northward. But, as John Voelcker of Green Car Reports surmises, it might be time to acknowledge that the conventional hybrid empire may be hearing the first few bars of its swan song.

This is not so much to do with the collapse in oil as it is the next logical evolution of the green car market, just as hybrids were a logical answer to rising fuel prices. Outside of a lower price of entry, why buy a hybrid if you can buy a plug-in hybrid that allows gasoline-free travel for most of your transportation needs? For many, plug-in hybrids offer the near-full benefit of an electric car without the range anxiety. The price is certainly a factor, though — the Prius plug-in costs $5,000 more than the conventional Prius, meaning you’d have to save that much on fuel costs in order to break even, let alone pull ahead fiscally. Current Gas Prices (12:18)

Oil at under $60 per barrel means — in theory — that gasoline is falling to about half of what we were paying before. In parts of the country, gallons are going for under $2.00 now, so a tank that required $100 to fill (think trucks and SUVs) now costs somewhere between $50 and $70, depending on where you are. This is allowing for people to save immense amounts of money on their commuting costs instantaneously, and appears to be blinding consumers’ longer-term analysis and investment. The break-even cost of a hybrid is much higher with gas at five-year lows, but people don’t tend to consider that once the boom fades, gas will swing right back up again.

But companies know that there is an interest in a combined EV-hybrid system. Volvo and Audi both have plans in place to offer plug-in hybrid SUVs — the XC90 and Q7 respectively — and Chevrolet is demonstrating its commitment with a newly redesigned Volt which is expected to bow in Detroit at the Auto Show next month. Even Bentley is jumping on that bandwagon.

What’s also great is that this is a mutually beneficial relationship. Consumers get better mileage and lessen their appetite for gasoline, while the companies — in addition to driving their internal technological advancement — are able to boost their standings in regard to the CAFE regulations. Take the aforementioned SUVs — together, they are perhaps the most inefficient vehicles in the companies’ lineups, but by electrifying them with a hybrid system, they can become among the most efficient. The Audi, for instance, is slated to offer 35 miles of electric driving time, more than enough to drop off the kids and hit the grocery store or farmers market on the way to work or home.

“Battery costs historically fall about 7% a year, so within five years, the batteries in high-volume electric cars will cost only half of what they did on launch in late 2010,” Voelcker noted. “Meanwhile, conventional gasoline cars are getting better-than-expected improvements in fuel efficiency via technologies like direct injection, turbocharging, and seven- to 10-speed automatic transmissions,” he added.

He also pointed out that this year, Toyota will be introducing the next generation of the Prius, for the 2016 model year. This redesign could carry a lot of weight — as the hybrid industry juggernaut, Prius owners may be looking to update their now aged-looking vehicles in for the new model, which promises to be more efficient, with bolder styling and better performance.

But as the costs of electrifying vehicles falls, and battery-powered plug-ins improve, gasoline will have an increasingly smaller role in transportation than it has previously. For now, hybrids still offer the sweet spot of fuel savings and range comfortability, and it is likely that they’ll cling to the market for a few more years yet.