With EV makers in China waging an intense price war to prop up slowing demand, Chinese brands with strong hybrid lineups are emerging as winners. The popularity of extended-range hybrid vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) is growing at twice the rate of pure EV sales this year, according to data from the country’s top car producers. As a result, the segment now accounts for nearly half of all new energy passenger vehicle shipments in mainland China.
The trend may provide a glimmer of hope for global automakers such as Toyota (7203.T) and Honda, who are pursuing “multi-pronged” electrification strategies to meet zero-emission targets and rising consumer demand for cleaner cars. The Japanese automakers are also betting on China as a market to export their hybrid and full-electric models, taking advantage of the country’s lower-cost supply chain for battery production.
During the first quarter of 2023, sales of passenger cars equipped with hybrid powertrains in China surged to their highest level, surpassing 1 million units. The surge was driven by a recovery in the economy and a low base in 2022 when frequent COVID outbreaks hit sales.
As a result, the hybrid segment now accounts for nearly half of all new Energy Passenger Vehicles (EPV) sales in mainland China. The growing popularity of the vehicles is a sign that consumers are increasingly willing to buy them, even without government subsidies.
In a sign of the changing times, the latest figures show that Chinese manufacturers account for seven of China’s top 10 best-selling hybrids. The most successful of them, Li Auto’s hybrid SUV Li-One, sells for a little over 200,000 yuan ($29,200) after state subsidies. It easily outsold three far more expensive fully electric SUVs from the Nio brand, which start at 346,660 yuan after subsidies.
Meanwhile, BYD dominates the PHEV and EREV market with its extensive range of affordable models that address customers’ concerns about range anxiety. During January-August, CPCA data showed that China’s 200 EV makers handed over 4.44 million PHEVs and EREVs to customers, up 36 percent from the previous year.
The new trends starkly contrast the slow growth in pure EV sales, which were sluggish even before the recent slump in oil prices. Last year, the pure EV segment accounted for just over 23% of total passenger car sales in China.
Nevertheless, EVs still need to be the answer for all drivers. Some are unwilling to give up traditional gasoline vehicles’ driving experience and convenience. But they can be an excellent option for many. By embracing hybrid technologies, the world’s biggest automakers can deliver on their ambition to achieve zero-emission transport promptly and help reduce emissions of air pollutants and greenhouse gases. They can also reassure consumers that they are serious about meeting their climate goals. Janis Mackey Frayer is a Beijing-based NBC News correspondent and a Vanity Fair contributor.
