Hybrid Demand Soars as EV Buyers Focus on Price and Range

SPEAKER_1 (0:00)

Happy Friday, welcome back to NextGen Investing. As we welcome in Karl Brauer, the executive analyst for iccars.com, to continue our discussions around sort of energy prices and how those are influencing consumer activities across many of these different industries. Karl, we were just discussing Delta Airlines, clear relationship with oil.

I'm guessing that there's a pretty clear, I guess, impact going on within the used car and the new car markets right now as well in terms of consumer buying activity. But I'll give you the floor. What are the things that are standing out in 2026?

Karl Brauer (0:38)

Yeah, it's interesting because we've obviously seen these sustained high gas prices and everyone's assumption is, well, everyone's going to be running to EVs, right? Well, we have seen an increase in EV prices about 10% year over year on the used market side. So they are going up and most of the used car market is flat or slightly down. So EVs are fighting that. Hybrid prices, used hybrid prices are up around 3% to 5%, depending on which time you're measuring, which specific month. But maybe what's more interesting is the market share, right?

Like hybrid sales are up 33% on the used side. So there's 33% more used hybrid sales today than there was a year ago. And that seems to be kind of the sweet spot really, is that people want better fuel efficiency, but they're still mostly hesitant on going pure EV, with the range anxiety and the charging concerns with infrastructure. They can get that higher fuel efficiency with hybrids, and we're watching their market share and their sales really go up as a result. But, and real quick, Tesla, of course, their prices are really driving that EV increase. There's still the bulk of the used EV market. So when you hear that used EV prices are up, it really means used Tesla prices are up.

SPEAKER_1 (1:51)

Yeah, I was going to ask that not just Tesla and its kind of relationship with EVs, but just generally, I would imagine that hybrids included in this, non-traditional internal combustion engine vehicles, probably are just a lot less of the supply in the used car market, just simply because that technology doesn't have as long of a history.

Now granted, I know it's a little bit more common now. Most of these OEMs are offering some sort of hybrid or some sort of EV and have for the last several years. But if you were to estimate, what percentage of the available supply out there makes up some of these categories?

Karl Brauer (2:35)

Well, I know the RAV4 is a good example. It is one of the best-selling vehicles in the market, right after the full-size trucks, and it's all hybrid now. 2026 redesigned, it's all hybrid.

The supply on that is not good enough. They're going for over MSRP for slightly used ones. Again, it was just redesigned for 26, so there's not a huge amount on the used market. Most people who bought them haven't already gotten rid of them. But the few used RAV4s that are available in 26 are going for more than new. If you bought one new and you sold it a few months later, you probably made money on it. That's just one example of, again, hybrid demand and how there's a lack of supply relative to the growth in interest in these vehicles. I really feel like consumers have after a long time, hybrid's been around for 20 years. I think there was concerns like I don't want to have to plug that thing in, most of them you don't have to plug in. I'm not sure about that technology. I think consumers now understand and do not fear hybrid technology, and they see the increased fuel efficiency without having to go a P-REV.

SPEAKER_1 (3:37)

All right, I got a couple of last ones. I'm going to build on to that real quick, then. For a while, it was almost like the hybrids were almost seen as that technology, kind of like those, the Roku's that take a non-smart TV and make it a smart TV, almost like a transitional technology.

Do you think that's still the case, or do you think that it's just, given the climates, given the long range that many Americans have, that it's just a nice medium that sort of meets the needs based on where technology is today?

Karl Brauer (4:08)

I think it absolutely meets that middle ground of more fuel efficiency without the range anxiety and other frightening elements for a lot of consumers that they see when they think pure EVs. And don't forget that hybrid technology in the 21st century is really fuel injection technology of the 20th century. You didn't have fuel injection on many cars initially. It was too expensive, too complex. Eventually, it had to be on every car to meet emissions and get good fuel economy. Now we've got shrinking costs for motors and batteries and easier integration into traditional drivetrains. So we're going to get to a point like Toyota is already getting to, where you would not build a car without a hybrid drivetrain. It just would make sense to not have that included because the incremental cost isn't that much and the incremental benefit is increasing.