Let's not sugarcoat the situation: EVs were supposed to make up a much larger percentage of annual sales than they are currently. And with Trump's Big, Beautiful Bill now a law that's killing EV incentives, automakers are having to backtrack. In the U.S. particularly, this has created a weird scenario in which internal-combustion has gained a new lease on life, hybrid powertrains are suddenly hip again, and EVs have slipped into a sort of limbo, priced as luxury options for a small group of purchasers but pitched as taking over the entire market at some point in the future.
The Germans are now in a pickle. As Automotive News reports, Mercedes-Benz has checked its ambitions to shed the tailpipe entirely, moving instead to roll out vehicles that can utilize all three propulsion options. Depending on how you look at it, this is either a nightmare or nirvana. On one hand, going electric meant leveraging brand advantages, of which Mercedes has many, to remake the marketplace and gobble up share. On the other, however, keeping combustion in the mix allows for additional years of predictable profits from technologies that aren't hungry for new R&D investment.
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Driving Auto Executives Crazy
I've talked to plenty of people in the industry about this issue, and the consensus is that you want to satisfy the customer above all else. If the customer is meh on EVs, then you can't try to force them into acceptance, lacking serious government support. Meanwhile, if the customer wants to save money, keeping hybrids in the picture enables the carmaker to maintain an in-between position. The added benefit is that you aren't giving up on batteries, which will be critical should the mood swing back in favor of more rapid EV adoption.
The bigger problem is that Mercedes isn't alone: BMW and the Volkswagen Group are also grappling with the challenge, and their U.S. business is so important that they have to come up with a viable solution on powertrains. Logically, they would seek to collaborate, spreading the risk around. We're already seeing a decent amount of this on EVs. I just tested a Chevy Equinox EV that shares a platform with the Honda Prologue.
Weakness in the startup EV space also isn't helping. Tesla is struggling, as are Lucid and Rivian. The major automakers can't rely on them to absorb all the risk of creating new EV customers so that Big Auto can then, in the parlance of the industry, sweep in and "conquest" them later. Mercedes and everybody else that's well established are on their own.
Why Is This Process Taking So Long?
Five years ago, most analysts assumed that EVs were heading toward critical mass and that once they consumed around 20-25 percent of the market, they would swiftly take over. That hasn't happened outside of smaller countries and China, and certainly not in the U.S., because going from a gas-powered car to an EV isn't an easy leap – it's more like a series of steps. You have to deal with charging, software issues, and variable battery performance in extremes of weather. You also have to spend thousands if not tens of thousands more dollars to buy an EV than you would on a traditional gas car.
It's not like electricity is a new thing. But for decades, the electrified aspect of our lives has involved plugging stuff into a steady flow of power. With EVs, that doesn't exist: you need to drag the power around with you. Not a big deal with your iPhone. Another matter altogether if you're dealing with a 5,000-lb. machine that takes an hour to be replenished at even the fastest chargers. You can see why less passionate car owners might want to stick with the tried and true.
Automakers want to make money all the time, so they aren't going to sustain a romantic attachment to EVs if the sales and profits aren't materializing. They are worried about China's progress on electrification, but reliable margins on combustion powertrains offer some short-term solace. And they'd be fools if they didn't act on it.
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