Is The EV Revolution Coming To A Halt?

The Energy Information Agency (EIA) just published a series of charts showing how quarterly sales for battery electric (BEV) and plug-in hybrid electric (PHEV) vehicles in the U.S. have flattened. In contrast, traditional electric hybrid vehicle sales continue to climb. This might be considered a victory for Toyota. It argued for years that hybrids are a better way to decarbonize the personal transportation industry than BEVs. Therefore, Toyota shunned electric vehicle (EVs) sales in favor of hybrids until recently.

Although the EIA focuses on U.S. vehicle sales data, similar trends are observed in Europe. It is only in China where EV sales are rising, but one must consider that its political and economic systems dictate this choice.

Europe is an interesting case. It recently began imposing significant tariffs on Chinese EVs sold on the continent, fearing the negative impact on its domestic automobile manufacturing industry. Chinese EV leader, BYD, has embarked on a strategy of building assembly plants in Europe and focusing on hybrids because BEVs are priced out of the domestic auto market by the European Union tariffs.

Hybrid sales are soaring as electric vehicles are struggling.

The EIA also produced charts showing the sale of these electric and hybrid vehicles by market: luxury versus non-luxury vehicle sales. While these two charts may surprise people, we were not surprised. The BEV, represented for years by Tesla, targeted high-income and virtue-signaling buyers. We always wondered when the population of these early adopters would be exhausted. Tesla was the first EV manufacturer to reach the 200,000 vehicle sales limit; at this point, the tax subsidy was phased out for future vehicle sales, making new sales in the U.S. more challenging.

When the tax subsidies for EVs were revised to apply only to vehicles with significant American content and phased out for high-income and expensive EV buyers, one knew the market would begin shifting. The government conceded that its EV subsidy change allowed the full amount to apply to “commercial” vehicle sales. Then it decreed that all EV leases would be considered “commercial.” Since that change, leasing EVs has soared. If the budget reconciliation bill is passed in its current form, new EV subsidies will be phased out entirely by the end of 2027, putting more pressure on the market.

The luxury EV market is in trouble.

When EVs were the hot topic, auto writers noticed Toyota’s absence from the market. The company had pioneered the hybrid with its Prius. While the vehicle was introduced in Japan in 1997, it wasn’t until 2001 that a model came to the U.S. Many people were intrigued by the Prius. However, because it was a small vehicle, it faced a challenge gaining traction in the family-centric U.S. automobile market. However, it did become a popular car.

For years, as EVs became a focus of automobile analysts, Toyota constantly defended its strategy not to build BEV or PHEV models when questioned by them. The company did introduce a fuel-cell-powered vehicle using hydrogen and suggested this might be the long-term future for emissions-free cars. It only introduced these vehicles in California, and building a refueling system significantly limited their popularity.

In 2023, Toyota produced a document for its dealers explaining why they would get many more hybrids than EVs on their lots. It explained Toyota’s 1:6:90 rule. At the time, there were serious concerns about the adequacy of global lithium resources for the batteries needed for EVs and other green energy devices.

Toyota explained that the amount of lithium used in a single BEV battery could be used to build six PHEVs. Better yet, this lithium volume could build 90 hybrids. According to Toyota, the 90 hybrids could avoid more carbon emissions than six PHEVs or a single BEV. Because Toyota had recently had a bad experience introducing its first BEV, auto writers began asking whether the document was a way to deflect from its BEV failure.

Share Energy Musings

Toyota’s first mainstream BEV, the bZ4X small Sport Utility Vehicle, suffered from an embarrassing early recall when the company revealed improperly tightened wheels could fall off while driving. Oops. The company took months to solve the problem. In some cases, Toyota was forced to buy back some cars rather than fix them because the problem proved so difficult to correct. Certainly, this was a blackeye for Toyota. The document the company provided to its dealers also promised that its Lexus luxury brand would be completely BEV-only by 2035. It made it seem like the company was using its lithium battery material argument to deflect from its prior disastrous EV introduction, while it caught up with its major competitors.

Many auto writers failed to connect Toyota and its BEV with China. The company had said it would not develop a BEV-only vehicle until China mandated that foreign automobile manufacturers, partnered with domestic manufacturers, were required to produce a BEV if they were to continue to have access to the Chinese automobile market. The prospect of having to leave the world’s largest automobile market forced Toyota to begin focusing on BEVs.

A 2023 article in The Drive by James Gilboy highlights the Toyota strategy and why it is correct if your goal is to decarbonize the automobile sector rapidly, rather than selling BEVs. The analysis required comparing the on-road carbon emissions of the few vehicle models available in each drive train ‒ ICE, PHEV, and EV ‒ to determine which decarbonization strategy was better. In 2023, only three vehicle models met that requirement: the Ford F-150 pickup truck, the 2022 Hyundai Kona and Kia Niro (which use the same chassis), and the BMW 3 Series and i4 (also sharing the same chassis).

To determine the answer to what vehicle strategy will lead to the largest decarbonization effort, all the emissions for each model, including upstream emissions from electricity generation, must be compared. The ICE models will reflect the emissions from gasoline production and its consumption.

This equation explains the analysis: ICE model carbon dioxide (CO2) emissions minus EV CO2 emissions (including upstream emissions in grams per mile) divided by vehicle battery size in kilowatt-hours (kWh) equals CO2 emissions eliminated per kWh of battery used.

The analysis is helped by the Environmental Protection Agency’s (EPA) FuelEconomy.gov website, which publishes per-mile CO2 emission estimates. Its estimates include the amount of upstream emissions that come from gasoline production.

The problem with relying on the EPA website is that it lists EVs as emitting no CO2. While true from the tailpipe perspective, generating electricity does generate CO2. The Energy Information Administration estimated that in 2023, the U.S. electricity grid would produce, on average, 386 grams of CO2 per kWh.

The analysis becomes: average CO2 generated per kWh for the U.S. energy grid divided by the result of dividing EV range in miles by battery capacity in kWh. This gives the hidden per-mile CO2 emissions of EVs.

The following chart shows the CO2 emissions by model drivetrain in grams per mile. The F-150 did not have a PHEV model, while the BMW did not have a hybrid model. Only the Kia models had all the drivetrains. However, we can still see the amount of emissions by drivetrain. The ICE model generates the most, followed at about two-thirds by the hybrid, and then the PHEV and BEV models with significantly smaller emissions. The average CO2 emissions of the U.S. grid are used to calculate the emissions of the EV models.

No surprise that ICE and hybrids create more CO2 emissions.

To answer the Toyota strategy question, the analysis required calculating the CO2 grams per mile emissions reductions using the capacity of a single EV battery. The results of the Ford F-150 model emissions confirm that Toyota’s analysis and strategy are correct. As Gilboy pointed out, “Operating an F-150 Lightning may generate less than a third of the CO2 emissions of a gas F-150, but each one hoards 98 kWh of battery, most of which will be used only on the rare, prolonged drive. Meanwhile, an F-150 Powerboost hybrid battery is just 1.5 kWh. It doesn’t achieve nearly the emissions reduction the Lightning does, but Ford could make 65 of them with the batteries that go into a single Lightning.”

Gilboy noted, “That adds up, because if Ford sells one Lightning and 64 ICE F-150s, it’s cutting the on-road CO2 emissions of those trucks as a group by 370 g/mi. If it sold 65 hybrids—spreading the one Lightning’s battery supply across them all—it’d reduce aggregate emissions by 4,550 g/mi. Remember, this uses the same amount of batteries; the distribution is different.”

As the chart shows, distributing the battery materials of a single BEV to hybrids cuts substantially more CO2 emissions than that single BEV, not just for Ford F-150s but for the other models, too. This analysis supports Toyota’s 1:6:90 strategy.

Toyota has proven that hybrids are better to decarbonize transportation.

The first EIA chart showed that between 2015 and 2020, the hybrid share of the U.S. auto market was stagnant. It began climbing in 2020, as did BEVs and PHEVs. In the second half of 2023, BEV market share hit 8% and has remained around the number since. However, hybrid market share continued to climb sharply, hitting 12 % now.

Substantiating these trends is shown by the May 2025 sales of Ford vehicles. Overall, its monthly sales increased 16%. That gain was led by hybrid vehicle sales increasing 28.9%, while ICE vehicle sales rose 17.2%. Ford’s EV sales fell by 25%. Such weak EV sales will further add to Ford's massive financial losses from embarking on selling EVs. In 2024, it lost $5.1 billion, and forecast a loss of $5.5 billion in 2025. Without its hybrid and ICE vehicle sales, the company would have failed to post its $5.9 billion in profits for 2024.

With the phase out of EV subsidies, the cheaper hybrid vehicles will continue to gain market share. They will do more to decarbonize the U.S. transportation sector than expensive electric vehicles. Ending mandates for EVs will further encourage the purchase of hybrids for buyers concerned about climate change and CO2 emissions.