Consumer Demand Determines Automotive Trends
Lost in the debate about electric versus petrol cars, the New Vehicle Efficiency Standard (NVES), and global regulations is the most crucial factor for the car industry’s survival: consumer demand. While I agree that action was needed to provide more fuel-efficient options, it took far too long. However, as the saying goes, you can lead a horse to water, but you can’t make it drink. A surge of electric vehicles and plug-in hybrids has arrived in Australian showrooms in recent years, yet vehicles with internal combustion engines still represent over 70% of new-car sales in 2025.
The reality for the Australian electric car market is that a single brand, Tesla, drove much of its success. The American company is now experiencing a sales decline. It seemed a tipping point had been reached for electric cars only a few years ago. Many prominent brands pledged to go all-electric by the end of the decade, convinced the market would shift that way. Governments worldwide pushed legislation in that direction. The United Kingdom planned to ban internal combustion engines by 2035, while Norway aimed for 2030, and other countries set similar goals. However, they overlooked consumer demand, and sales figures show that new-car buyers, especially in Australia, are not prepared to switch from petrol to electric. This is how a free market economy operates: customers choose what they prefer, not what they are told they should want.
In some ways, the modern car industry reminds me of breakfast cereal. Those of a certain age will remember the government’s requirement to display health star ratings on cereals. Cereals with high fibre, whole grains, and similar ingredients rank higher than chocolate-loaded cereals. However, people still buy Coco Pops because they enjoy the taste. The same applies to cars. Some people will opt for a Tesla (the All-Bran of cars?), but many still favor their utes (the automotive equivalent of Coco Pops, I suppose). Leaving aside this metaphor, it’s fascinating to watch carmakers quickly try to change course, which is about as quick and easy as turning a container ship.
The challenge for carmakers is that switching back from electric to petrol power isn’t simple. Billions of dollars have been invested, with factories, workforces, and supply chains established to produce electric cars. Overnight, you can’t just switch to making petrol cars again. In the recent past, carmakers took pride in building exclusive EV platforms for more spacious cabins and unique designs. Now, they talk about ‘tactical flexibility’ and other clever names suitable for platforms that can accommodate both electric and internal combustion powertrains. We’ve seen brands like Mercedes-Benz and Porsche slowly retracting their previous claims that ‘EV is the future’ as they realized consumer preference. This week, I attended an Audi presentation where the brand discussed a dual strategy to develop new combustion vehicles for the next decade, along with its previously announced electric expansion.
This isn’t a slight on the brands, but rather a difficult reminder that in any consumer-focused business, the customer is always right. So, even with the government’s best efforts to clear up the industry, it’s the consumer who will decide what cars we’ll drive in 2030 and beyond.
Returning to my cereal metaphor, there’s a compromise solution, and it is likely the short-to-medium-term answer. Kellogg’s realized that by making Coco Pops with multigrains and less sugar and putting them in a different shape, Coco Pops Chocos could earn a four-star health rating. That’s the breakfast equivalent of a plug-in hybrid (PHEV), which we’ve begun to see on the rise. Plug-in hybrid sales are up over 200% in the first two months of 2025, thanks to models like the BYD Shark 6. When the Ford Ranger PHEV arrives, and other models go on sale across various brands, this formerly niche technology could be the solution. I say this with some confidence because even Toyota, the market leader, with a reputation for only selling successful cars, will have PHEVs in showrooms by the end of 2025.
So, whether considering breakfast or choosing a car, making smarter, healthier choices is critical. The decisions we make will shape the future of our vehicles more than any regulatory oversight.
