Automotive publication MotorTrend named its 2024 car of the year on Thursday. It’s electric, to a degree. The winner is a hybrid.
The decision is a metaphor for how many Americans seem to feel about battery-electric vehicles or BEVs these days. It also shows what BEV sellers must do to change impressions.
The 2024
Toyota
(ticker: TM) Prius is the winner of MotorTrend’s golden calipers. “
Toyota
has fundamentally redefined the essence of a Prius with its new model,” said MotorTrend Group head of editorial, Ed Loh, in a news release. ‘In an automotive landscape grappling with a scarcity of affordable EV options and inadequate charging infrastructure in the U.S., Toyota made the Prius hybrid the right car for this moment and rightfully earned MotorTrend’s 2024 Car of the Year award in the process.”
Costs, charging infrastructure, and affordability kept MotorTrend from picking other finalists that included the updated
Tesla
(TSLA) Model 3, which
Tesla
calls its “highland” update, as well as the
Lucid
(LCID) Air and
Hyundai Motor
(005380.Korea) Ioniq 6.
The 2024 Prius is more affordable than all of those, starting at just under $28,000. The Tesla Model 3 starts at about $39,000 before the $7,500 federal tax credit. The
Lucid
Air starts at about $75,000. The Ioniq 6 starts at about $39,000.
Comparing cars, of course, is difficult. Performance, branding, and trim levels matter. Tesla vehicles are considered luxury cars by Cox Automotive. The Lucid Air, also a luxury sedan, starts with about 500 horsepower.
BEVs are getting more affordable relative to traditional vehicles, but they still sell at a premium. The average new car cost U.S. buyers about $48,000 in October, according to Kelly Blue Book. The average BEV cost about $52,000. That’s a spread of $4,000. The spread was about $16,000 a year ago.
It isn’t great to be expensive these days. The average monthly payment for a new car in the third quarter was about $733, according to Edmunds. In the third quarter of 2019, before Covid-19, the number was about $570. Payments are up almost 30% while average wages are up about 20% over that span, according to the Federal Reserve. Consumers are feeling squeezed.
That makes the Prius the affordable and environmentally responsible option these days. And Toyota is the leader in hybrids. It has sold 2.5 million hybrids so far in 2023, up about 27% year over year. Hybrids account for roughly 33% of 2023 sales, up from 27% in 2022.
Having the hybrids has helped the stock so far in 2023. Coming into Thursday trading, Toyota shares have risen 38%.
Ford Motor
(F) and
General Motors
(GM) shares have fallen 10% and 16%, respectively, this year.
Some of the declines for Ford and GM are a result of the union negotiating impact on investor sentiment. Toyota shares have risen about 16% since the start of July when labor issues started to weigh on Ford and GM shares. Ford has fallen 28% and GM has declined 25% over the same span. The
S&P 500
has risen about 1%.
The moves have left Toyota stock trading at about 9.7 times estimated 2024 earnings. Ford and GM shares trade for about 6 times and 4.2 times, respectively.
The MotorTrend decision to name the Prius the Car of the Year also shows how Tesla, Ford, GM, and any other auto maker can win market share: Make cheaper BEVs.
It’s worked elsewhere.
BYD
(1211.Hong Kong) has become as large as Tesla by selling lower-priced BEVs and plug-in hybrids in China. Total sales divided by units for BYD, a proxy for vehicle price, was about $26,000 in the third quarter. The number for Tesla’s car business was about $45,000.
Tesla still has some 57% BEV market share in the U.S. The charging network helps. Tesla operates the largest network of fast chargers and Tesla drivers never have to feel they are too far away from an EV fill-up.
Write to Al Root at allen.root@dowjones.com
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