Since the turn of the century, it has become increasingly apparent to the industrial world that fossil fuels are in a state of rapid depletion. The excessive use of these resources has had long-lasting and severe impacts on environmental health.
The automotive industry is one of the biggest contributors to this burgeoning global issue. Estimates from the U.S. Environmental Protection Agency suggest that a typical passenger car is responsible for nearly 4.6 metric tons of CO2 emissions each year.
Climate change, zero-emission requirements
Increasing exploitation of existing resources has undeniably led to severe climate change, which has now emerged as a global issue on account of its disastrous consequences. In many instances, a major chunk of CO2 emissions over the lifetime of vehicles is attributed not just to their manufacturing, but to their operation.
This scenario has urged automakers and authorities to develop and implement strategic initiatives aimed at facilitating more sustainable vehicle operations. So far, most of these initiatives have remained focused on one common prospect: The shift to zero-emission EVs.
Reducing emissions from the transport sector via a foray into ZEVs has become a critical focus for governments in their attempts to tackle climate change. This is evident from joint efforts by nine major governments to convert more than 120,000 vehicles to zero-emission by 2040.
Zero-emission requirements have placed decarbonization on the map; however, this will eventually require a shift to fully electrified means of transport. The present reliance on fossil fuels for electricity generation means that the optimal deployment of low-carbon vehicles is still a concept in the works. Considering this, hybrids, particularly hybrid electric drivetrains, have emerged as an efficient and sought-after transitional technology for the automotive sector. According to estimates from a Global Market Insights Inc. report, the hybrid drivetrain market is set to surpass US$385 billion by 2027.
Hybrid drivetrain technologies offer the best of both worlds; bringing together the fuel efficiency advantages of an EV with the flexibility of conventional fuel-powered cars, achieved by the supplementation of an ICE (internal combustion engine) with a hybrid-battery-powered electric motor.
How PHEVs will impact the market
Despite being an oft-overlooked concept, plug-in hybrid EVs are gradually garnering interest as consumers in prominent regions like the U.S. and Canada work to eliminate their fear of complications around charging cars. Plug-in hybrids are especially beneficial for users seeking the option of fuel-free driving without having to rely completely on public charging stations when away from home. Bringing together the attributes of traditional hybrids and electric vehicles, PHEVs are emerging as a lucrative avenue worldwide, one that governments in prominent regions are taking heed of recently.
In Australia, for instance, the federal government introduced the new Electric Car Discount Bill to parliament in July 2022 to make the purchase of EVs or PHEVs more economical, mainly through the elimination of the Fringe Benefits Tax on green vehicles. This legislation, which would exempt new PHEVs or EVs priced under the threshold of the luxury car tax for fuel-efficient vehicles, was meant to unlock a vast variety of plug-in hybrid cars, including the Mitsubishi Outlander and Eclipse Cross PHEVs.
These tax redemptions, which have resulted in a more favorable environment for PHEV adoption, have also paved the way for more widespread plug-in hybrid drivetrain industry penetration.
This is evident from developments such as Jeep’s introduction of a new hybrid vehicle drivetrain to its Compass and Renegade models in January 2022. Dubbed e-Hybrid, the new solution was equipped with a 20PS electric motor to power the car at low speeds during parking or cruising, paired with a turbocharged 1.5-liter petrol engine.
Building on the standard set by Jeep’s existing 4xe plug-in hybrid range which represents over 25% of the brand’s Europe sales, the introduction of e-Hybrid indicates another step forward not just for the company in its target for full electrification in the region, but also for the hybrid drivetrain market landscape in general.
Semi-conductors, chips and mandates
Since its onset, the COVID-19 pandemic has disrupted virtually every industrial supply chain across the globe. One of the major ways this impact has manifested is the shortage in semiconductor supply, which has been seemingly volatile even before the crisis.
Fueled by unprecedented demand for chips for the production of electrical devices like gaming consoles and phones, which became a solace of sorts for people during the lockdown, alongside a growing trade war between China and the U.S, the global shortage has hampered production in many sectors, most notably in the automotive domain.
Automotive production took a major hit in 2021 when the semiconductor shortage was at its peak. Even now, automakers are scrambling to procure the chips essential to meet the growing automotive demand in the post-COVID world. Delays from this shortage have also impacted EV manufacturing, creating barriers for targeted initiatives like U.S. President Joe Biden’s administration’s new target for the adoption of EVs including plug-in hybrid models with conventional ICEs.
These instances have highlighted the need for robust investments in the recovery of chip production and the development of innovative, future-ready hybrid drivetrain technologies. For instance, Infineon Technologies AG set an industrial policy milestone for chip supply security in the European and global market, through the inauguration of its new Villach, Austria-based chip factory in September 2021. Involving a USD 1.62 billion investment, the project was hailed as the largest of its kind in the European microelectronics domain, producing chips designed to accommodate the demand for power semiconductor chips in electric cars and other applications.
Another approach being examined by governments worldwide to mitigate the impact of the semiconductor shortage on hybrid vehicle drivetrain development is the implementation of ZEV mandate policies. To illustrate, in October 2021, the Climate Group, in collaboration with UK Electric Fleet Coalition businesses and EV100 members, introduced the U.K. government’s new ZEV mandate, as part of its Net Zero Review. By addressing key barriers to EV uptake among fleet operators, the ZEV mandate was hailed as a crucial measure for the acceleration of the development and release of new EVs, and by extension, hybrid drivetrains.
While the concept has been gaining rapid momentum across several regions across the globe, North America is emerging as a lucrative hub for the hybrid drivetrain industry, having registered a valuation of US$14.5 million in 2020, as per research from Global Market Insights Inc. Canada in particular is becoming a front-runner in this evolution, given its keen focus on the development of ZEVs as well as the components needed to power them such as hybrid drivetrains, through various initiatives.
In August 2020, Toronto announced the conversion of over 100 ambulances from conventional diesel to hybrid electric drivetrain systems, as part of a $2.8 million investment provided jointly by the city’s environment and energy division and the Environment and Climate Change Canada.
With $1.1 million drawn from the federal government’s Low Carbon Economy Fund and the remaining $1.7 million coming from Toronto’s Sustainable Energy Financing Plan, the objective behind the hybrid conversion project was to eliminate GHG emissions equivalent to the removal of nearly 2,900 cars from the road for a year and align with the city’s TransformTO net-zero pledge.
In December 2021, Ontario introduced a flagship program to facilitate more investment activity in the region’s connected, autonomous and EV sector.
With an investment of $56.4 million, the Ontario Vehicle Innovation Network, part of the government’s “Driving Prosperity-The Future of Ontario’s Automotive Sector” plan, was a way for the region to establish secure production mandates for EVs and hybrid vehicles, boost domestic battery production, and reinforce its stance as an innovation hub for the EV industry in North America.
In 2022, the federal government introduced a new emission reduction plan, 2030 Emissions Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy, which outlined the government’s dedication to combating climate change and positioning Canada as a global leader in the transition to zero-emission.
To achieve this target, the plan involves a mandate for all new passenger trucks and light-duty cars to be ZEVs by 2035, bolstered by initiatives like the Zero Emission Vehicles Awareness Initiative. This program was introduced as a means to facilitate funding for numerous innovative projects designed to bridge knowledge and awareness gaps among the Canadian population regarding ZEV technologies such as plug-in hybrids and more.
Dedicated moves like these are implemented worldwide, with burgeoning emission control and sustainability commitments urging public and private entities alike to adopt advanced technologies. The hybrid drivetrain market, in the years to come, is expected to remain at the forefront of the sustainability transition taking hold in the modern automotive ecosystem.
Saloni Walimbe is content team lead at Global Market Insights and covers global industry trends, business news and market research.