Interview CAR Institute: The Hybrid Remains a Bridge Technology

It was once again an exciting event with a view of the future: The Car Symposium in Bochum, to which the directors of the organizing Car Institute, Prof. Dr. Helena Wisbert, Beatrix Keim, and Dirk Wollschläger, invited and which was also attended by the CEOs of Mercedes-Benz and Skoda Auto, Ola Källenius and Klaus Zellmer, as well as the CEO of Volkswagen Financial Services, Christian Dahlheim. They provided an outlook on the future, which was deepened in the following sessions. Despite all the current political uncertainty, the goal seems unwavering: We must reduce CO2 emissions in traffic. This gave us a reason to explore the role of the currently hyped hybrids and plug-in hybrids—not only from a German perspective but also from an international one. 

The Car Symposium 2024 was under the headline "Strategies for Transformation". We wanted to know concretely from two of the directors, Beatrix Keim and Dirk Wollschläger, how they classify hybrid drives and plug-in hybrids here.

The Car Symposium 2024 had the motto "Strategies for Transformation" – what role do hybrid drives play in it?

Beatrix Keim: During the CAR Symposium 2024, the focus was primarily on corporate strategies for general transformation regarding process speed, digitalization, and orientation towards sustainability. We found overall that companies, whether vehicle manufacturers or suppliers, are committed to sustainable topics and rely on sustainable drives. Here, especially 100% electric drives or alternatives like fuel cells and hydrogen-bound solutions are preferred. Nevertheless, companies must adopt a certain degree of flexibility under current demand conditions to avoid losing customers or sales. In this respect, hybrid drives, at least in the European context, are not particularly in focus for medium- to long-term transformation strategies.

The entire industry currently seems to be developing hybrids as "affordable backups" for sales figures. Doesn't this set us dramatically back in achieving CO2 targets? And what is the long-term perspective for this drive technology?

Dirk Wollschläger: Firstly, it's important to distinguish between the three different hybrid drive technologies. All three can indeed be seen as an initial step towards e-mobility but with differentiated impacts on the mobility change. In fact, "plug-in" hybrids can be seen as the closest to pure electric cars (BEV), as they have good range within the overall system and allow for electric driving up to 75 kilometers for short drives. Moreover, this variant also enjoys tax benefits for company cars depending on CO2 emissions (at least in Germany). Fully hybrid models are cheaper to purchase but are not tax-advantaged. However, hybrids are rarely actually used in electric driving mode, even for short distances, negating the sustainability aspect. Nevertheless, they are currently back in focus because they are cheaper to purchase and don't necessarily require charging infrastructure. Especially after the end of the environmental bonus in Germany, an increase in hybrid registrations has been recorded. Another aspect might be that established manufacturers offer such models.

Keim: The previously still inexpensive pure electric models from Chinese manufacturers did not find the expected market, despite the price advantage, which can simply be explained by the lack of brand awareness and, in particular, lack of brand trust. The fundamental problem with plug-in hybrids is that they serve as a sensible bridging technology if used correctly. However, studies show that many plug-in hybrids are hardly driven electrically in practice. Therefore, plug-in hybrids should only be favored, e.g., tax-wise, if they are demonstrably predominantly operated electrically. This could be easily determined during the bi-annual main inspection. Failure to comply should result in a CO2 levy. Without such regulations, we risk a sham solution that hardly helps the climate but wastes resources. Here we also see the responsibility of the drivers – which unfortunately doesn't work today. Feedback from dealers often indicates that many owners hand over the still plastic-wrapped charging cables when selling plug-in hybrids. Manufacturers should take additional measures here; for example, increased communication and education on the "correct" use of plug-in hybrids for short distances. Overall, the various national incentive programs in Europe also show that the focus is on BEV and FCEV (fuel cell). Only PHEV models, which also receive fewer funds or benefits than BEV and FCEV, fall under hybrids.

Wollschläger: Looking at the CO2 targets, it's clear that the current EU measurement methodology is indeed inadequate. It does not take into account the entire CO2 footprint of a vehicle, especially the CO2 emissions generated during the production of batteries for electric cars. A study by the Fraunhofer Institute shows that producing a lithium-ion battery for an electric car generates between 61 and 106 kg of CO2 per kWh of battery capacity. For a Tesla Model 3 with a 75 kWh battery, that's up to 7.9 tons of CO2. A more comprehensive measurement methodology that considers the entire lifecycle of a vehicle is urgently needed. The potential for battery recycling and second-use battery cells plays no role in today's considerations. According to our research, up to 70% of battery materials could be recycled by 2040, significantly reducing the CO2 footprint of battery production. This would not only reduce dependence on new raw materials but also decrease the environmental impact of battery manufacturing. Companies like Umicore and BASF are already working intensively on such recycling technologies. A comprehensive recycling program could, therefore, further strengthen the ecological advantage of electric cars and significantly improve the CO2 balance. Ultimately, it is essential to note that the new CO2 fleet regulation should not be misunderstood as a free pass for old technologies but rather as an incentive to promote the best and most sustainable technologies.

How should the development of hybrid drives be viewed worldwide considering the main regions of America, Asia, and Europe?

Keim: There is a slight increase in hybrid models overall, with PHEV models consistently counted as "NEV" New Energy Vehicles. This increase is happening alongside a global decline in BEV registration numbers. The more significant increase in China is surprising, where pure electric vehicles are politically prioritized. This phenomenon could be explained by an increase in sales in the "smaller" cities (Tier 3 downwards) and rural areas where charging infrastructure is less developed, but the political will towards NEV is supported by the (cheaper) PHEV offerings (Trade-in Policy).

In the USA, there is also a trend towards hybrids, mainly "full hybrids," not PHEV. The share of PHEV in both 2023 and the first half of 2024 is significantly smaller (sales HV 713,000 vs. sales PHEV 160,000 vehicles). This could be due to the modalities of the IRA (US environmental bonus) but also to the distances driven in the USA. In Germany, for example, the usage behavior is different: The sales figures for HV and PHEV are relatively similar in the first half of 2024, with an advantage for PHEV. The same was true for 2023, but with a significant advantage for PHEV (128,000 HV vs. 174,000 PHEV). This indicates a stronger orientation towards electromobility, but there are no statements about the actual use of PHEV in e-mode. Therefore, measurements as described above would be necessary.

By the way, there is also a greater variety of models in the PHEV sector in Germany/Europe compared to the USA. In the USA and worldwide, there are six manufacturers with noteworthy hybrid offerings. These are primarily the Japanese manufacturers with Toyota as the undisputed market leader, as well as the Korean manufacturer HKMC (Hyundai Kia), and minor shares from Ford and the Chinese GAC (Guangzhou Auto).

Wollschläger: Overall, we see very different market situations in the regions and countries. Depending on the orientation of the local industry, and the politics with corresponding regulations, the market impacts vary. In the auto country Japan, the share of NEV (BEV, PHEV, FCV) in the last two years is approximately 3 to 3.5% of the total market, with a slightly rising tendency. Korea shows a better orientation towards sustainability with an NEV share of an average of 9 to 10%. The share of NEV in the USA is growing, currently around 9%. Brazil is also showing increased interest in NEV with a rapid rise to about 3% market share since August 2023.