Sales of hybrid cars in Australia have charged ahead of demand for electric vehicles (EVs), reflecting a global trend that has seen major car makers scale back their EV production targets.

After years of exponential growth, sales of electric vehicles in Australia are faltering, achieving only 7.6 per cent of total car sales from January to August this year, according to data from the Federal Chamber of Automotive Industries (FCAI) and the Electric Vehicle Council (EVC).

New hybrid vehicles sales, including plug-ins, are almost double that, making up 15.5 per cent of national car sales during the same period.

The growing demand for hybrid cars initially caught the sector by surprise, which for years had aimed to phase out the cars in favour of fully electric vehicles.

Customer anxiety about EVs’ driving ranges and the cost of the cars have seen buyers pivot towards more affordable options like hybrids in recent years.

This has sparked a strategic shift across the sector with car makers such as Volvo, Mercedes-Benz and Ford easing their EV ambitions in the short-term.

At the same time, many manufacturers are ramping up their hybrid offerings to meet demand in the battle for dominance of the globe’s green revolution.

But it has raised questions about the future of the EV market.

What’s going on with EVs in Australia?

Car makers have observed slowing demand for EVs around the world, particularly in the United States, which saw sales of hybrids grow five times faster than EV sales in February this year.

The trend is also evident in Australia, with buyer concerns about a lack of affordable models and the slow roll-out of charging points among some of the factors impacting sales growth.

One of the biggest questions still plaguing the industry is around “range anxiety”, which describes buyers’ fears about how far EVs can go and where to charge them.

“The recharging infrastructure needs to be put in place so that consumers have the confidence that they can drive their EV and be supported with recharging,” Tony Weber, the chief executive of the FCAI, told The Business.

The other issue is the cost of the vehicles, which remains high while many Australians tighten their belts due to the impact of high inflation and high interest rates.

“There is the total cost of ownership of an EV,” Mr Weber said.

“It’s a consideration for many purchases.”

This is also being driven by the phasing out of state government subsidies in NSW, VIC and South Australia, which had previously helped to partially offset the cost for buyers.

Eligible buyers in Queensland can still get a rebate of $3,000 while those purchasing an EV in Western Australia can get a rebate of $3,500.

Car model availability is one of the other problems cited in the slower uptake of EVs, with Australia’s love of larger cars, such as utes and SUVs, not reflected in the vehicles on offer in the market.

Why targets won’t be met ‘unless consumers want to buy EVs’

State governments, including NSW, Victoria and Queensland, had set ambitious targets for 50 per cent of new vehicle sales to be EVs by 2030.

However, with EV sales now stalling, industry figures are worried they might miss their targets.

“The government can have a target, the industry can do all they can to actually supply products that will meet those targets,” Mr Weber said.

“But the targets won’t be met unless consumers want to buy EVs, and have the confidence that they can own that EV and have the recharging and all the other needs that go with having an electric vehicle.”

Tesla is far and away the biggest seller in the EV market, but its Australian sales have fallen more than 14 per cent so far this year to 28,101, data from the EVC shows.

Others are bucking the trend, with Chinese car-maker BYD recording EV sales growth of 41 per cent so far this year.

It said it expected to double next year, with ambitions to overtake Tesla as the number one seller of EVs in Australia.

But even it recognises some Australians aren’t ready to make the transition.

“We’ve introduced plug-in hybrids, which, of course, have both a battery and an engine to be able to just make [it] that more easier for consumers around those issues with range anxiety,” David Smitherman, CEO of EVDirect which is BYD’s Australian distributor, told The Business.

“[Customers can] jump from their traditional [internal combustion] engine, then they’ll go into a plug-in hybrid, and then the next logical step, we see, is into that EV.”

The federal government is yet to set a target for electric vehicle sales, but it has introduced a national vehicle efficiency standard, which aims to prevent Australia from becoming a dumping ground for polluting cars.

The standard will be effective from next year.

Automakers revise their electric ambitions

Amid the drop in sales, some legacy automakers have already scaled back their EV production targets.

Swedish car maker Volvo, which is backed by Chinese private car group Geely, previously told The Business they would stop selling petrol cars by 2026.

While they claim they are still committed to that target, the company recently announced a big caveat.

“As a local arm of Volvo car, we are fully committed to 2026, but we have to wait and see, if product changes over the next couple of years, if consumer demand changes over the next couple of years, then we may have to push that timeline out,” Stephen Connor, the managing director of Volvo Australia, told The Business.

“What’s actually happened is that huge rise has actually tailed off. And now what we’re all saying in the industry, ‘oh my god, battery electric is doom and gloom’. 

The car maker recently eased its global target from going all electric by 2030 to aiming for at least 90 per cent of cars sold by the end of the decade to be fully electric or plug-in hybrid models.

That followed an announcement from Mercedes-Benz, which said its goal of 50 per cent of its cars having electric motors by 2025 would be delayed by five years, while Ford Motor Co has delayed  electric models and cut back on investments in electric production and technology.

Toyota first introduced hybrid technology in Australia in 2001 and has since gone on to dominate the market.

But the Japanese car maker told The Business while EVs may eventually lead the market, it will take years for the industry to overcome certain challenges, such as sourcing battery minerals.

What does this mean for EVs and hybrids?

The industry hopes the national new vehicle efficiency standard, which will require car makers to ensure their total sales each year get below a certain carbon emissions limit, will boost uptake of EVs.

The scheme incentivises car makers to get under the limit by selling more of their most efficient cars or electric vehicles, or by selling fewer high-polluting cars.

“It will mean that the average Australian has access to many more types of EVs in both the range and the volume,” Aman Gaur, the head of legal, policy and advocacy from the Electric Vehicle Council, told The Business.

But a potential roadblock is that tariffs will soon be added to Chinese EVs in the US and potentially Europe, which will drive up the price of those vehicles.

Earlier this year, the White House introduced a steep tax on Chinese goods, including a 100 per cent duty on EVs, which came into effect on Friday.

Meanwhile, the EU is reportedly considering tariffs of up to 35 per cent on Chinese-made EVs.

More than 80 per cent of the EVs on Australian roads are now Chinese made and often feature Tesla-inspired gadgets like tablet screens, entertainment, AI and autonomous driving capabilities.

While tariffs aren’t being considered here, there are concerns over how those manufacturers handle personal information.

Earlier this week, the Biden administration announced it would move to ban Chinese-made software and hardware from cars driven in the United States.

It cited national security concerns, including fears over data collection, and even risks to infrastructure like the power grid.

The Albanese government said it was “closely monitoring” the moves in the US, and was in talks with the Biden administration about any local implications.

Polestar Australia managing director Scott Maynard said for the most part, the data is kept locally.

“Most of the data is actually held in the car and retained there, so it’s not transmitted,” he said.

“But there is some data that is held in Sweden, and that’s represented in their agreement to be signed with customers.”

When BYD and MG were also approached by The Business for comment about the security concerns raised in the US, the companies said they comply with Australian laws.