US hybrid EV market accelerates while battery-electric sales cool

While US battery electric vehicle (BEV) sales growth was stagnant in Q1 2024 year on year, a market shake up and better flexibility for consumers drove strong growth in plug-in hybrid electric vehicles (PHEV), according to S&P Global Commodity Insights.

In the US, BEV sales are the highest among passenger light duty electric vehicle technology, making up 7.1% of LDVs sold in Q1 2024 and plug-in hybrids accounted for 2.3% of cars sold in the same period, up from 1.6% a year before.

The increase in hybrids pushed PHEV sales up 50% year on year in the quarter, while BEVs saw only a 5% increase in Q1.

PHEVs flexibility can enable an easier transition for many consumers looking to move off of internal combustion engine vehicles. Fuel type flexibility addresses range anxiety and concerns around charging infrastructure, said Suzanna Massingue, Low Carbon Transportation Analyst at Commodity Insights.

"As people in the US gain more awareness of EVs, PHEVs can be a viable first option for the journey away from ICE vehicles," Massingue said.

In the US, Q1 total EV sales totaled 350,572 units, a 22% increase year on year, according to Commodity Insights data.

The share of electric and hybrid electric vehicle sales declined in first quarter total US light-duty vehicle sales, according to a May 14 US Energy Information Administration report. The decline was driven by a decrease in BEV sales, which fell from 8.1% to a 7% share of total LDV sales quarter on quarter, the first BEV market share decline since the second quarter of 2020, the EIA said.

LDV sales are "highly seasonal" and tend to level off in the first quarter, the EIA stated.

Vehicle pricing is a "huge factor" in consumer decision making, particularly as EVs in the US market continue to be more expensive against ICE vehicles, Massingue said. The EV industry is currently facing high rates of inflation, supply chain tensions and a potentially consequential election, she said.

"In more mature EV markets, government subsidies have helped to bridge the gap and bring price parity between ICEs and EVs," Massingue said. "The tax credits brought by the IRA have been criticized for their lack of clarity and limited applicability to vehicles on the market currently, i.e. too few PEVs available today are eligible for the tax rebates."

Manufacturers announced adjustments to EV production and sales strategies to meet the current market circumstances and buyers' affordability, she said.

Tesla sped up the rollout of its new line of cheaper EVs, the company said during its earnings report. The company posted its weakest quarterly financial results in years in Q1 amid slowed sales growth.

Mercedes-Benz executives said they are expecting plug-in hybrid electrics to "play an important role" in current market conditions. The company overall saw a decline in EV sales by about 2% year on year, driven by a drop of approximately 4,000 BEV sales, or an 8% drop, according to the company's Q1 results. Meanwhile, PHEV sales increased by about 3,000, or 6%.

North American lithium supply

The bullish PHEV trend in the US could lend further support to North America's burgeoning upstream battery metal supply chain, which saw positive updates to project developments announced at the end of Q1 and into the second quarter.

For instance, Sayona Mining said in April it would continue the operational ramp-up of lithium-bearing spodumene concentrate production at its North American Lithium asset in Quebec after completing a strategic review that initially put the project's near-term future in doubt due to declining lithium prices. NAL is the continent's only operating spodumene mine.

In the US, Ioneer said April 15 that construction activities could begin at its Rhyolite Ridge lithium mining project in Nevada by the end of the year, with potential production start up in 2027, if it receives approval through the US Bureau of Land Management's Environmental Impact Statement.

Lithium Americas also received a conditional commitment from the US Department of Energy in March for a $2.26 billion loan that, if successfully closed, would cover most of the remaining capital needed to start major construction of the Thacker Pass lithium project in Nevada by the end of the year.

Regarding North American EV production capacity, Honda now plans to build multiple facilities in Ontario by 2028 that will include the production of EVs, batteries and certain battery materials, thus establishing ownership of its own midstream and downstream EV battery supply chain in the Canadian province, the Japanese automaker said April 25.