Open this photo in gallery The 2020 Subaru Crosstrek Hybrid capably handles the off-road course at the automaker's Indiana plant.

Three of the Crosstrek’s wheels scramble for purchase on the gravelly surface of a steep hill while a fourth hangs dramatically mid-air over the crest. The car teeters there for a few moments while Subaru’s all-wheel-drive system figures out what’s going on, then it plunks itself down on the other side of the hill and carries on unperturbed, ready to tackle the mucky quagmire ahead.

This off-road course at Subaru’s assembly plant in Layfayette, Ind., is well suited to demonstrate what people love most about the Japanese brand, namely its ability to tackle rough roads, muddy terrain and – crucially for Canadians – snow. Today’s demonstration is meant prove that the company’s first plug-in hybrid electric vehicle, the 2020 Crosstrek PHEV, is up to the task. It certainly appears to be.

During a drive around Lafayette, the Crosstrek performs smoothly and confidently on pavement too, despite somewhat sluggish acceleration. While the massive lithium-ion battery pack makes for a noticeably small rear storage area, buyers can take solace in Subaru’s claim of 6.7 litres per 100 kilometres – a segment-leading fuel-economy figure among all-wheel-drive, plug-in hybrid SUVs.

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With hybrid technology borrowed from Toyota, with whom Subaru is currently developing an electric small SUV platform, the 2020 Crosstrek PHEV makes a welcome addition to the Subaru lineup. It won’t, however, be a top seller for the brand, nor is it meant to be. This says a lot about the current state of electrified mobility.

The Crosstrek PHEV was introduced in limited numbers to the United States last year and, after its debut at this week’s Montreal International Auto Show, it’s now available in limited numbers in Canada, too. Part of the reason it has taken Subaru so long to release a proper hybrid (and why it has made so few of them) is that EVs are expensive to produce, and Subaru simply doesn’t have deep enough pockets to sell an unprofitable vehicle.

Open this photo in gallery The Crosstrek Hybrid also performs smoothly on pavement, despite limited acceleration. Handout

“The costs are high, and from a manufacturer’s standpoint, the profits are low – and in some cases [there are] even losses – on these vehicles,” says Ted Lalka, vice-president of marketing and product management for Subaru Canada, speaking of EVs in general.

The pricing of EVs reflects the research and development that goes into them. The new Crosstrek PHEV is priced starting at $42,495, compared with $23,795 for the base conventional model, a premium even after federal and provincial rebates.

This price difference accounts for part of the reason EV sales currently make up a small percentage of total vehicle sales. According to Statistics Canada, in 2018 a scant 2.2 per cent of new motor vehicles registered in Canada were zero-emission vehicles (ZEVs) – either plug-in hybrid electric (PHEV) or full battery-powered EVs. While this is an increase of 115 per cent over the previous year, it still poses a serious problem for any company trying to sell such a vehicle.

A pragmatic move for a smaller automaker such as Subaru would be to keep improving their internal combustion engine powered vehicles, since that’s what the vast majority of people are still buying, while waiting for hybrid technology to get better and cheaper. Unfortunately for the manufacturerʼs bottom line, that’s an increasingly costly option.

Following the lead of California, whose aggressive anti-smog laws have been pushing automakers to produce more fuel-efficient, less-polluting vehicles since the 1990s, more governments are adopting similar legislation. Quebec’s Bill 106, which went into effect in 2016, requires automakers to sell a minimum proportion of electrified vehicles (a percentage of total sales that increases substantially every year) or face stiff penalties. British Columbia’s Zero-Emission Vehicles (ZEV) Act, passed in mid-2019, is even more ambitious, with a similar penalty system in place and a goal of 100-per-cent EV sales in the province by 2040.

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“The ZEV standard will require automakers to meet an escalating annual percentage of new light-duty EV sales by 2040 and is in line with a global trend towards zero-emission vehicles,” says Kent Karemaker, a spokesman for the B.C. Ministry of Energy, Mines and Petroleum Resources. “Bill 28 addresses a barrier that consumers in B.C. currently face: They want EVs, but there is limited supply from automakers.”

Open this photo in gallery The hybrid's massive lithium-ion battery pack limits the rear storage capacity.

With millions of dollars in fines mounting each year, these regulations are doing their job; the costs of developing an EV are being weighed against the fines automakers face for not having one ready.

“As standards become increasingly more stringent, manufacturers don’t have much option but to invest in electrification,” says David Adams, president of Global Automakers of Canada, an industry lobby group. While big companies such as Toyota and BMW invest hundreds of millions in electrifying their fleets, smaller brands such as Subaru are in a delicate position.

“Right now, the challenge is no manufacturer wants to put a vehicle in the marketplace that’s compromised. They want to ensure that they can provide the same consumer experience in an electric vehicle that they provide in [a vehicle with] an internal combustion engine. Otherwise, we’re going to potentially shoot ourselves in the foot.” In other words, the consequences of bringing a half-baked EV to market could do serious damage to sales of future models, as well as a brand’s reputation on the whole.

Subaru sold just more than 18,000 vehicles in 2018, a year for which Quebec required at least 3.5 per cent of total fleet sales to be EVs. That amounts to approximately 630 vehicles in this case. With a $5,000 fine for each non-conforming vehicle, Subaru would have owed the Quebec government more than $3-million at the end of the year, although official figures were never released. At the end of 2019, with the quota increased to 6 per cent and sales remaining strong, that fine would nearly double.

There’s no reason to feel too much sympathy for automakers caught between unforgiving legislation and weak demand from consumers who aren’t ready to spend big money to give up gasoline. Car companies, after all, also share in the responsibility of getting us out of the climate crisis that’s currently threatening the future of life on Earth.

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But if you’re wondering why you can’t get a hybrid Outback or Forester yet, now you know: The technology isn’t there yet, the costs are high and demand is (for the moment) low. This is all changing quickly, however, in part thanks to laws such as those in B.C. and Quebec, where EV sales are tracking significantly above the national average. In the meantime, the new Crosstrek PHEV makes a solid, if pricey, choice for the ecoconscious weekend warrior.

Tech specs

Base price/as tested: $42,495

Engine: 2.0-litre Subaru boxer four-cylinder; 148 horsepower, 149 lb.-ft. of torque

Transmission/Drive: CVT/AWD

Fuel economy (litres/100 km): 6.7 combined

Alternatives: Mitsubishi Outlander PHEV, Volvo XC60, Mini E Countryman

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The writer was a guest of the automaker. Content was not subject to approval.

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