GM's EV-first bet leaves it on sidelines of US hybrid boom

By Kalea Hall

DETROIT, Sept 16 (Reuters) - Florida car dealer Bill Wallace says the majority of customers lately are asking about hybrid options, eager for relief from high gasoline prices.

Salespeople at his 16 dealerships — including Hyundai 005380.KS, Kia 000270.KS and Mazda 7261.T — have plenty to talk about. But not at his Chevrolet and Cadillac stores. Those General Motors GM.N brands each have a broad selection of fully electric cars, but the automaker has only one hybrid model: the Corvette sports car.

GM is sitting out a hybrid boom. The top-selling automaker in the U.S. bet bigger than most competitors on electric vehicles, sales of which have fallen in the wake of anti-EV policies implemented by the Trump administration.

So far, investors have cheered GM’s focus on gas-engine trucks and SUVs, which has fueled strong profit and a near-record stock price. But its U.S. sales have declined this year, and some dealers say they are losing customers to rivals who offer hybrids.

“There's no question that they're losing market share,” Wallace said.

A GM spokesperson said its “strategy is to build a stronger, more profitable business by delivering vehicles customers love.”

HYBRID SALES SOAR ALONG WITH GAS PRICES

Consumer interest in hybrids — which combine a gas engine with a battery and electric motor to save fuel — has surged since the Iran war, which began in late February, sending gas prices up about 40%.

Hybrids accounted for 19% of total U.S. retail vehicle sales in August, up from around 16% in the months before the war started. In May, they hit 20%, or one in five cars sold. Hybrids sold off dealer lots more than twice as fast as non-hybrid gas cars during the second quarter, according to JD Power.

GM executives long maintained that hybrids add too much cost and complexity, and that they preferred to invest in EVs based on a conviction that the market eventually would go all-electric.

GM CEO Mary Barra at a 2019 Barclays conference called hybrids an “interim solution.”

“Customers generally aren't interested in hybrids,” she said, adding that GM wanted to move straight to EVs to help the environment.

By late 2024, when it was clear that EV sales were not taking off as expected, Barra said the automaker would have plug-in hybrids for the North American market by 2027. This month, she told Fortune that the automaker would have hybrids in important segments, but did not provide a time frame.

Supplier sources and forecasting firms project that GM will not have a hybrid on sale in the U.S. until near the end of the decade. A GM spokesman declined to comment.

Other automakers have struggled with their EV sales, but most have some hybrids to fall back on, and some are looking to add more.

Toyota Motor 7203.T, which pioneered hybrid technology with its Prius in the late 1990s, credited hybrid sales for its strong U.S. sales performance this year. Through the first half of this year, sales of “electrified” vehicles — mostly hybrids, along with EVs — accounted for more than half of Toyota’s sales for the first time.

Industrywide, there has been a proliferation of hybrid entries into the popular compact SUV category, including Toyota’s RAV4 and Honda’s CR-V. GM offers gas-only versions of compact SUVs, including the Chevrolet Trax and Buick Envista.

Nissan 7201.T is fast-tracking a new hybrid Rogue compact SUV by several months with a planned rollout this autumn “in response to growing consumer demand for hybrid SUVs,” a spokesperson said.

“Everybody's coming up with a hybrid in that space,” said Srini Rajagopalan, vice president of customer success for OEM solutions at JD Power. “This is becoming a little bit more than just a phase or a fad.”

GM COUNTING ON EVs FOR THE LONG HAUL

GM’s U.S. market share dropped to 16.8% in the first half of the year, from 17.6% a year prior, while hybrid leaders Toyota and Honda 7267.T gained.

Automotive analyst John Murphy of Murphy Automotive Partners expects hybrid sales to hit 34% of U.S. sales in 2031. Still, he said it makes sense for GM to emphasize its highly profitable gas-only trucks and SUVs, while its EV lineup could position the company well if regulations tighten in coming years.

GM’s strategy “is not as clear a major mistake as I think some people believe,” Murphy said.

New Jersey GM dealer David Ferraez said dealers would be hesitant to add more EVs to their lots, because they have been a tough sell.

“I'm hoping that GM can adapt and come up with a way to build hybrids,” he said.