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Payne: How different brands are navigating to an EV-mandated future
Posted by Talbot Payne on March 24, 2023
San Diego — From LED light bulbs and water-efficient washing machines to electric vehicles, government regulators are directing manufacturers on the products they must build.
In a U.S. auto market where more than 90% of new car sales are vehicles powered by an internal combustion engine, different legacy brands are taking different routes toward a government-mandated, all-electric future in 2035. Large automakers like General Motors Co. are all in on EVs — shifting its brands to a single, Ultium battery platform and charging Cadillac, for example, with selling only battery-powered models by 2030. Smaller brands like Honda, Subaru and Dodge, however, are taking more cautious, incremental approaches given the soft customer demand for EVs.
The price of not electrifying their fleets is steep as Dodge’s whopping $711 million fine for missing emissions targets in 2022 proved, though consumers are largely unaware of the pressures the industry is under. And in the world’s most diverse auto market, manufacturers must find the electrification strategy that best squares the circle between government demands and their customers’ needs.
“The pressure is on manufacturers as governments force them to electrification, but it’s a three-leg stool: governments, automakers, consumers,” said Matt DeLorenzo, a veteran industry analyst and author of “How to Buy an Affordable EV.” “And if the consumer isn’t there, then the stool isn’t going to stand.”
Honda and other automakers were the beneficiaries of the last of government fuel regulations in the 1970s that penalized Detroit Three automakers in particular for selling big cars. Japanese-made compact imports from Honda and Toyota gave those automakers a foothold in the market that has expanded ever since.
But new government mandates forcing EVs, insiders say, favor the Detroit Three, whose huge pickup truck fleets are often used in short-haul, high-torque situations where EVs excel.
“It’s going to be different because this time everyone is on the same footing. The question is: where is the market going to go next? Are people going to still want trucks? I think they are,” DeLorenzo said. “That favors the domestics.”
EVs make less sense to the single-car households and apartment dwellers that buy, say, Honda Accords and Civics and CR-V SUVs. So Honda sees hybridization as its bridge to electric cars.
The all-new Accord, for example, will offer only a hybrid, battery-gas powertrain option in addition to its base internal combustion engine — shelving a higher-horsepower, 2.0-liter turbo-4. The turbo-4 and hybrid each accounted for about 10% of Accord sales, but to avoid massive EPA fines in 2026, Honda is hoping that 50% of buyers will choose the hybrid option.
“It fits where we’re going to electrification. As great as the turbo-4 engine was — as far as managing restrictions and government regulations, it doesn’t fall in line to where we’re going,” Accord product manager Dan Calhoun said at the 2024 model’s media test here in southern California. “This is a bridge towards electrification. We see that coming, so we (offer) four hybrid trims: Sport, EX-L, Sport-L and Touring.”
Honda’s approach takes a step further as Calhoun and his team have engineered the hybrids to behave like pure EVs. They can run on battery power alone up to 25 mph and then drivers can use regen paddles to brake the car with the electric motor, just like a Tesla.
GM is putting all its electric eggs in the Ultium EV platform, but even the General is hedging its bets by committing to a new generation of V-8-powered vehicles.
“GM says they are going all-EV, but the fact that they are investing $1 billion in a new generation V-8 engine shows that trucks will be a big part of their sales plan,” said analyst DeLorenzo. “They need ICEs to deliver the money they need to stay in business.”
Trucks are key to the automaker’s EV transition as they account for the bulk of the company’s profits. Like crosstown rival Ford Motor Co., GM can also use EV sales credits to balance its popular ICE vehicles.
“GM is trying to appease the government. They need to generate EV credits in order to offset whatever fines they would get for not meeting 2026 (emissions targets),” DeLorenzo said. “I think that’s the thing that is often overlooked. If you generate credits from EVs, that can help you continue to sell trucks and Corvettes.”
Ford was first to benefit from EV versions of popular ICE nameplates. The company says sales of its electric Mustang Mach-E SUV and F-150 Lightning allowed it to introduce a new generation of V-8-powered Mustangs as well as a V8-powered F-150 Raptor that customers have been pining for.
By contrast, Stellantis NV’s Dodge performance brand was late to the EV credits game. Dodge’s V-8-powered Hellcat Challengers and Chargers may have broken the Internet, wowed buyers and displaced the iconic Mustang as America’s best-selling sports car — but they also cost the company millions in government fines.
In their place comes the 2023 Hornet, the brand’s first SUV since 2012 — and the first electrified Dodge.
Dodge threw in the towel on its popular Challenger/Charger line, which will cease production later this year. “It’s time for a transition,” Dodge sales chief Matt MacAleer said at the Hornet’s media debut in Asheville, North Carolina. “Our transition to electrification has begun.”
Dodge predicts the $41K plug-in hybrid R/T will split Hornet sales 50/50 with the standard $31K gas-powered GT model. Together with the brand’s upcoming first EV, the Charger Daytona SRT Banshee, Dodge hopes it will be able to meet government standards.
“Our customers want the flexibility of a battery and gas engine as we transition to electric vehicles,” said Hornet product manager Fernando Fernandez.
Says analyst DeLorenzo: “Dodge is buying time with EVs. They are pursuing technology that might improve fuel economy where they might be able to reintroduce a V-8 at some point. I think that what threw them for a loop is that, during the Trump administration, they got some breathing room on emissions and all that breathing room has been taken away.”
Where Dodge faces an uphill battle convincing its ICE enthusiasts to go electric, Subaru would seem to have the perfect customer base for EVs.
Environmentally conscious and active outdoors, the typical Subaru buyer fits the profile of an EV tree-hugger. Yet the brand has struggled to make sense of costly, range-challenged EVs — contrary to the brand’s reputation for affordable vehicles that can hike anywhere.
“We have a lot of customers who want 500 miles of range, which is why we give them a big (16.6-gallon) fuel tank,” Garrick Goh, car line manager for the subcompact SUV segment’s best-selling Crosstrek, said in Palm Springs. “They go places where there are not just no EV chargers, but no gas stations.”
Goh acknowledged the difficulty of meeting 2026 federal regs, but said Subaru’s larger concern is so-called Section 177 states that have adopted California’s draconian emissions mandates — states like Maine, Massachusetts, New York, Oregon, Vermont and Washington, where Subarus sell well.
The Japanese maker has one battery-powered vehicle in its lineup, the Solterra SUV, which starts at $45K, and one hybrid, the low-volume $38K Crosstrek plug-in, priced well above its $26K gas counterpart. When Crosstrek was remade this year, there were few changes to its four-cylinder ICE drivetrains.
Goh said the company sees the electrification opportunity not in hybrids, but in pure EVs that gain more credits for the brand.
“EVs gain six times more credits in 177 states than plug-in hybrids,” he said. “So we’re focusing on EVs like the Solterra. EV is the end game because eventually we’re all going EV.”
Henry Payne is auto critic for The Detroit News. Find him at hpayne@detroitnews.com or Twitter @HenryEPayne.