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Electric Vehicles

All of a Sudden, Americans Love Hybrids

They seem to be immune from whatever’s ailing EV sales.

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An American flag and hybrid icons.
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The American EV market has seen its fair share of tumult this year — Ford canceled its three-row SUV, Tesla canceled its $25,000 mass-market EV, and EV sales growth dropped sharply in the first quarter. But from all this darkness, a glimmer of hope has emerged: The market for hybrids is surging.

Electric and hybrid vehicle sales made up 18.7% of all new light-duty vehicles sold in the second quarter of this year, according to new data from Wards Intelligence analyzed by the Energy Information Administration. That’s up from 17.8% in the first three months of the year.

This increase was “driven primarily” by hybrid sales, according to Wards and the EIA, which grew almost 31% from 2023 and made up almost 10% of light-duty sales in the second quarter. Sales of plug-in hybrids grew, as well, while the battery electric vehicle share of the market was about flat compared to the second quarter of last year.

The trend appears to be continuing into the back half of the year. In July, hybrid sales were up about 23% in the U.S. compared to July of last year, and the gap between hybrid and electric sales grew, according to data from Morgan Stanley.

“A lot of the EV slowdown we’ve seen has been really pronounced in the first quarter of this year given Tesla’s performance,” Corey Cantor, an EV analyst at BloombergNEF, told me. “A lot of that story at a macro level is Tesla taking a step back.”

To recap: Elon Musk’s company has not refreshed much of its existing model lineup in several years and is now facing increasing competition overseas from Chinese automakers, plus basically every other automaker in the United States market. It also gutted the team behind its Supercharger network — regarded by observers as one of its biggest differentiators — even as its peers have largely adopted Tesla’s own charging standard. While Tesla used to dominate U.S. EV sales, it no longer makes up even half the domestic market; the estimated 53,000 vehicles Tesla sold in July represented 48% of all EV sales that month, according to Morgan Stanley.

But the travails of one very prominent electric car company aren’t the whole story, and exactly why hybrid sales have been so strong is not exactly clear. Gasoline prices are well off their recent 2022 highs as well as their 2008 recent peak when adjusted for wages. One reason may be that the increased prevalence of battery electric vehicles may have normalized hybrid sales, as hybrids are no longer the most “green-coded’ type of vehicle. (To wit: The “Smug Alert!” episode of South Park aired in March 2006.)

The other reason may be far simpler: cost. Cantor cited Edmunds data showing that in April of this year, even when you throw out Tesla and other direct sellers, hybrids’ average transaction price was about $44,000 compared to $59,000 for battery electric.

“EVs still have a long way to go,” Cantor said. “Hybrids are an attractive option not only because of normalization, but also a lot of them are pretty affordable.” This is especially true for the biggest player in hybrid vehicles, Toyota: A 2024 Corolla hybrid will cost between about $23,500 and $28,500, according to Edmunds, while a standard Corolla goes for between $22,000 and $27,000.

This combination of higher prices and slacking demand for BEVs explains why Ford canceled its three-row BEV SUV, according to Morgan Stanley analyst Adam Jonas in a note to clients. “Ford scaled back and delayed its EV strategy to match consumer demand (slower) and costs (still too high).”

But what may be most affordable for drivers may not be ideal for the planet.

While standard hybrids have lower lifetime emissions than internal combustion vehicles, annual greenhouse gas emissions from hybrids are about two-and-a-half times those of battery electric vehicles, according to the Department of Energy. And, Cantor noted, cars bought today will likely be on the road for around 10 years.

“Hybrids can’t be the long-term climate solution. They don’t do enough to mitigate emissions,” Cantor said. “To meet climate targets you’re looking all-electric by the mid 2030s.”

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Q&A

How to Channel Voters’ Anxieties About Data Centers

A conversation with the Guardrails Alliance’s Shaunna Thomas.

The Q&A subject.
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This week’s Q&A is with Shaunna Thomas of the Democrat-allied super PAC Guardrails Alliance, which describes itself as “not anti-technology” but supportive of AI “rules, accountability, and a government that actually represents the public.” Part of that AI accountability they’re calling for is on data centers.

After the midterms, Guardrails Alliance sent a memorandum to all House and Senate Democratic offices arguing for AI and data center accountability to be a key part of their message and plans heading into the new Congress. Described as a “playbook for how to understand and channel anxieties about AI and data centers,” the document laid out “key narratives” that they said voters who care about these issues want to see reflected and echoed by their politics. They said the push against data centers could help Democrats build more lasting political power.

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Hotspots

Consider the Lobstermen Affected by New York’s Empire Wind

Plus more of the week’s biggest development fights.

The United States.
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1. New York City — We have a new must-watch offshore wind lawsuit with potential implications for the entire sector — and this time, it’s from lobstermen seeking damages.

  • In late October, a family of lobstermen sued Equinor in federal court claiming the company’s compensatory mitigation program is failing to adequately make up for alleged negative impacts to lobster fishing grounds in the New York Bight. According to the lawsuit, the wind project irreparably hurt fishing in previously trafficked waters. The suit also claims that Empire Wind construction destroyed lobster fishing pots and seeks at least $75,000 in damages as well as punitive damages and attorneys’ fees.
  • The lawsuit is the first I have seen involving someone in aquaculture suing for damages over negative impacts of an already-constructed wind project, and it carries outsized implications as the Trump administration remands without vacatur the construction and operations plans for other offshore wind farms. This case is far from being decided, but that doesn’t matter: It is precisely the kind of complaint that Trump officials are likely to consider as they mull revisions to operational plans.
  • An Equinor spokesman declined to comment on the case, telling me they don’t speak on pending litigation.

2. Hinds County, Mississippi — The largest proposed solar farm in Mississippi is moving forward after an appeals court rejected arguments from aggrieved local residents that it had been improperly approved.

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Spotlight

Data Center Developers Can’t Pay People Enough to Accept Them

Trump’s “data center dividend” appears to have backfired. Our latest poll results help explain why.

Donald Trump and data center protesters.
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This year’s midterm elections called into question the efficacy of a push to pay local residents directly in exchange for building data centers.

Before the elections, I profiled the campaign for politicians to embrace the data center “dividend,” a policy idea modeled off Alaska’s Permanent Fund, which doles out checks to residents from profits off state oil, gas and mineral royalties. The Bitcoin Policy Institute, a tech policy think tank, was one of the first to trumpet the concept, but it was quickly taken up by President Donald Trump, who started raising it in speeches and on social media. “If companies want to make their Data Centers popular, pay the community, and/or individuals within the community, a ‘dividend,’” Trump posted to Truth Social on October 21.

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