Global Sector Leader, Automotive
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Taking the Middle Road in Climate-Friendly Cars
New data on electric-vehicle sales shows that consumers are finding it harder and harder to make sustainable purchases—but that doesn’t mean they’re not trying.
According to a report from S&P Global, growth in fully electric vehicles has slowed this year, but sales of hybrid vehicles are soaring. Hybrid vehicles, which are powered by both gas and electricity—and are a lot cheaper than their fully electric counterparts—accounted for nearly 10% of all new US automotive registrations in two of the last three months. Since the pandemic, the report says, the share of the automotive market held by hybrid vehicles has tripled. It isn’t just consumers who are opting for hybrid vehicles over fully electric ones, either. Municipalities, logistics and distribution companies, ride-sharing services, and other transportation-related operations have all increased orders for hybrid vehicles.
Bradford Marion, global sector leader for the Automotive practice at Korn Ferry, says the rising popularity of hybrid vehicles represents a psychological middle ground for consumers between affordability and sustainability that many automakers have overlooked. “Automakers’ conversion to fully electric vehicles is outpacing consumers’ ability to make the transition,” he says.
It’s a scenario that leaders in other industries will likely confront as consumers look for more economical ways to practice sustainability, says Kate Shattuck, co-leader of the Impact Investing practice at Korn Ferry. In a recent study, more than half of Gen Zers and millennials said prioritizing sustainable purchases will be harder if the economic situation worsens, for instance, and four out of five say they want companies to do more to make sustainable products affordable.
Indeed, experts say it isn’t that consumers don’t want to buy fully electric vehicles—in fact, EV sales are still growing, albeit slower than before—but rather that the premium price point for these cars, coupled with inflation and high interest rates, makes them prohibitively expensive. Nearly half of Americans in a recent survey cited high cost as the reason they wouldn’t consider an electric vehicle for their next car purchase, for instance. “Hybrid cars are the ultimate hedge,” says Shattuck, noting that they not only appeal to price-sensitive consumers, but also address their concerns about battery range and charging-station access.
If consumers’ approach to electric-vehicle purchases spills over into other industries, it could impact carbon-emission reduction targets and other sustainability pledges and commitments made by leaders. All of that, in turn, could impact financial performance, talent recruiting and retention, brand reputation, and more. Already, automakers have had to delay electric-vehicle production and slow down investments in factories, charging stations, and other infrastructure. “The reality is that the transition to electric vehicles is going to be slower and more gradual than anticipated,” says Marion.
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