NEW YORK — Internal combustion engines may not be the only casualty of the sweeping shift toward electric vehicles that's allegedly coming in the years ahead.
It could be time to say goodbye to hybrids as well.
Production costs and a changing regulatory environment are combining to make hybrids and plug-in hybrids an increasingly unattractive proposition for auto makers, according to a report from Morgan Stanley.
The investment firm issued a research note Feb. 11 that highlights divergent paths for auto makers, some of which have committed to hybrid development, while others are bypassing them in the fast lane toward an all-electric future.
Morgan Stanley published a report called "The Case Against Hybrids" in October 2019. Only four months later, the company said it's "even more bearish on hybrids today."
Growing concerns include the regulatory front, where the United Kingdom said that it plans to prohibit the sale of new gasoline and diesel cars by 2035.
That ban would include hybrids and plug-in hybrids. It's hard to determine at this point whether the U.K.'s plans constitute a footnote or the start of a broader trend.
Perhaps, more notably, Morgan Stanley says the complexity and cost of hybrids remain problematic at a time battery costs associated with EVs are falling.
General Motors Co. President Mark Reuss underscored the complications.
"Carrying an internal combustion engine and an electrification propulsion system and you have to make them work together and you have to certify, you still have to certify, you still have to crash, you still have to pay money to carry two propulsion systems on board," he told Morgan Stanley.
"I just, from a physics and engineering standpoint, can't get my head around making money doing that in the long haul, even as a stopgap."
Toyota Motor Corp. and Ford Motor Co., two prominent purveyors of hybrid vehicles, may beg to differ. But with stubborn costs, fixed complexity and now regulatory changes afoot — not to mention cheap gasoline in the U.S. — it's hard to deny the end of the hybrid era may be on the horizon.