Munich High performance, low consumption: With this equation, the German car industry has been trying to push semi-electric models onto the market for almost a decade. Mercedes-Benz in particular has enormously expanded the range of so-called plug-in hybrids (PHEV), which have both a combustion engine and an electric drive under the hood, and improved the technology in recent years.
The electric range of the plug-in hybrids with the star logo has tripled since 2014 – from 33 to currently more than one hundred kilometers. During the week, users can theoretically buzz to work without emissions and at the weekend, if necessary, drive long distances with the combustion engine to the mountains or to the sea. This flexibility is “the big advantage,” emphasizes Mercedes sales manager Britta Seeger.
The board member praises the technology and will be sending the new GLC – after all, the Swabians’ best-selling car – to dealerships in three plug-in versions from September: two with a petrol engine and one with a diesel engine. It looks as if the part-time electric vehicles still have a great future ahead of them. But the impression is deceptive.
While Mercedes officially emphasizes the advantages of plug-in hybrids, the group is already radically cutting the offer in its internal plans. Apart from the new edition of the GLC, only the E-Class in the coming year and a few coupé derivatives will have dual drive. After that it’s over.
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With the next generation of compact cars, which will be launched in 2024, customers will only be able to choose between fully electric variants and petrol engines with 48-volt technology, the Handelsblatt learned from corporate circles. Neither diesel units nor plug-in versions are planned for models such as the CLA or GLB. The reasons for that are obvious.
On the one hand, the group is selling more and more pure electric cars, so plug-in hybrids will soon no longer be necessary to meet climate targets. On the other hand, the contribution margins of the partially electric models are comparatively low. In addition, growth is flagging noticeably, and state subsidies, an important purchase and leasing factor, are on the verge of disappearing.
The subsidies should go away
Specifically, the Green Federal Minister of Economics, Robert Habeck, wants to stop funding for plug-in hybrids with effect from December 31, 2022. Habeck argues that the technology is “marketable”, meaning that it no longer requires any subsidies.
The industry had adjusted to the fact that the premiums for plug-in hybrids will drop from the current level of up to 6750 euros next year. Hardly anyone expected the environmental bonus to be abolished completely. Experts predict that if Habeck gets his way, the demise of partially electric models is inevitable.
“Without funding, sales will drop massively. That can also mean the end of the plug-in hybrid,” explains Matthias von Alten, car expert at the consulting firm Publicis Sapient. As soon as government subsidies are abolished, partially electric vehicles would become unattractive for many customers.
In a total cost calculation that also takes into account the depreciation of the vehicles, plug-in hybrids are already hardly cheaper than diesel and petrol engines, but they have glaring disadvantages. “They only have a short electric range, consume a lot of fuel due to their high weight and have less storage space than combustion engines due to the battery,” explains von Alten.
If you take all factors into account, the future of plug-in hybrids is “more than questionable”, states the former head of brand and product strategy at VW and BMW. Especially since, according to von Alten, a good part of the demand is artificially stimulated by the state subsidies.
Stefan Bratzel, Director of the Center of Automotive Management (CAM) at the Bergisch Gladbach University of Applied Sciences, also sees the technology close to its peak. “In one to two years we will be approaching a peak situation in the plug-in hybrid business,” says the industry expert. The vehicle manufacturers would now have to think carefully about whether they would still be offering partially electric models at all in the future.
>>read here why Mercedes is recalling a million cars.
The latest sales figures clearly speak against it. “The tailwind is gone,” says a Mercedes manager. In fact, the Stuttgart-based company was only able to increase sales of plug-in hybrids by eight percent in the first quarter. For comparison: the growth rate for purely electric cars at Mercedes was an impressive 210 percent in the same period.
In absolute figures, the Swabians still sell more partially electric models than series powered exclusively by electricity. However, this lead is melting away at a rapid pace.
To put this into perspective: in 2021, Mercedes sold 228,000 units, almost five times as many plug-in hybrids as purely electric vehicles. Recently, of course, there were only twice as many. And by 2023 at the latest, the ratio should be completely reversed. After all, CEO Ola Källenius relies on the motto “Electric only”.
This point has already been reached at the Volkswagen premium subsidiary Audi. In the first quarter, the Ingolstadt company produced more thoroughbred electric vehicles than plug-in hybrids. In the case of the latter, the production volume has even collapsed by almost a fifth. A similar picture emerges for the Bavarian rival BMW.
Sales of plug-in hybrids have recently shrunk slightly in Munich, while those with purely electric cars have increased by almost 150 percent. Even in terms of absolute sales figures, the part-time electric vehicles at BMW are likely to fall behind. This is already the case in the market as a whole.
Around 224,000 electric cars were sold in the European Union from the beginning of January to the end of March. This corresponds to an increase of 53 percent. At the same time, sales of plug-in hybrids fell by a good five percent to 199,000 vehicles. This is remarkable in that the deliveries of partially electric models in the two previous years had developed almost in step with the uncompromising power brands.
Now, for the first time, there is a glaring gap between the drives. If the premium from 2023 falls away in the lead market Germany, this could result in a deep crater. The Association of the Automotive Industry (VDA) is alarmed accordingly. “The considerations of phasing out funding for plug-in hybrids endanger the ramp-up of electromobility,” warns VDA President Hildegard Müller.
As long as the charging infrastructure in the Federal Republic is not sufficiently developed, partially electric models are needed to “build trust” in the power transition. “There is no fear of range on long-distance journeys here,” explains Müller. Statistically, however, Germans rarely cover more than 40 kilometers in their cars per day. Almost three quarters of all cars in this country are not moved more than 100 kilometers within a week.
>>Read herewhy the state subsidy for plug-in hybrids will probably be abolished.
In addition, plug-in hybrids have a glaring image problem because they are often only driven in “unecological combustion mode,” explains Publicis consultant Matthias von Alten. Roughly 80 percent of the vehicles are almost never charged. Consequently, according to Fraunhofer ISI and ICCT, the real consumption values of the partially electric models are up to four times higher than in the test cycles.
Another point of criticism: plug-in hybrids are leased much more often than bought. With a holding period of only two to three years, the larger CO2 backpack that the partially electric models carry with them after production due to the additional battery cannot be completely eliminated even in permanent electricity operation.
“Even used plug-in hybrids will have an extremely difficult time,” states von Alten. The long-standing industry observer assumes that the residual values of part-time electric vehicles will fall disproportionately. Because suppliers like Mercedes are no longer developing the technology and prefer to focus on innovations in purely electric cars. “Therefore, there are major risks slumbering in the balance sheets of some leasing providers.”
A turnaround at ZF Friedrichshafen shows just how bad the future of plug-in hybrids is. The southern German automotive supplier had geared its world’s largest transmission plant in Saarbrücken, with 9,000 employees, to the business with partially electric models. The hoped-for quantities with hybrid transmissions for customers like BMW are now evidently not coming.
The group is reacting and wants to quickly equip the factory with components for purely electric cars. “We are in talks about the production of high-quality electrical components in our transmission plant in Saarland,” announced ZF CEO Wolf-Henning Scheider last week.
CAM Director Stefan Bratzel sums up what follows from this: “The industry is phasing out the plug-in hybrids.” Economics Minister Habeck will undoubtedly pull the plug.
More: No future for combustion engines: ZF is converting its largest transmission plant to electromobility.
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