Rapid growth dark horse

After China's annual automobile production and sales exceeded 30 million vehicles, the new energy market continues to grow. In addition to pure electric vehicles, plug-in hybrids have gained momentum in recent years, gradually evolving from transitional products to mainstream options in the new energy vehicle sector. Data shows that the market share of pure electric and plug-in hybrids has shifted from 7:3 in 2023 to 6:4 today, and this trend appears to be continuing.

At the recently concluded Chengdu Auto Show, the plug-in hybrid versions of the Mercedes-Benz GLC, Volvo family, GAC Motor Trumpchi E8+, Hongqi HS7 PHEV, and EXEED Aoxiang were unveiled/launched. In addition, Xiaopeng Motors and Skoda have also revealed plans related to plug-in hybrid technology. The increasing number of automakers investing in plug-in hybrids seems to confirm that this niche market is broader than expected. According to the latest data from the China Passenger Car Association (CPCA), retail sales of passenger vehicles nationwide reached 1.72 million units in July, with 878,000 units being new energy vehicles. The monthly retail penetration rate exceeded 50% for the first time, reaching 51.1%, an increase of 15% year-on-year. Among them, retail sales of pure electric and plug-in hybrid vehicles were 482,000 and 396,000 units, respectively, representing year-on-year growth of 14.3% and 80.4%. Clearly, plug-in hybrids have become the main driver of growth for new energy passenger vehicles. "Sales of plug-in hybrid vehicles in July increased significantly more than those of pure electric vehicles, becoming the primary factor driving growth in new energy vehicle sales," said Chen Shihua, Deputy Secretary-General of the China Association of Automobile Manufacturers. He analyzed that the entry of more plug-in hybrid models into the market has enhanced their market competitiveness and contributed to sales growth. Plug-in hybrids, once questioned and viewed as transitional products from internal combustion engines to new energy vehicles, are now becoming mainstream and showing signs of competing with pure electric vehicles.

Frequent new product launches

Due to changes in market conditions and customer needs, Volvo, one of the first companies to announce a comprehensive electrification goal, has realized that it is unlikely to achieve its target of having a fully electric vehicle lineup by 2030. Therefore, Volvo has decided to adjust its production plan and shift its focus to hybrid models. Volvo's new goal is for 90% to 100% of its global sales by 2030 to consist of electrified vehicles, including a mix of fully electric vehicles, plug-in hybrids, and mild hybrids.

At the Chengdu Auto Show, which opened on August 30, Volvo showcased its luxury plug-in hybrid family consisting of the Volvo XC60, S60, XC90, and S90 plug-in hybrids.

Image source: Volvo

"Currently, the needs of car buyers vary. Some prefer pure electric vehicles, while others value the long range and driving experience of plug-in hybrids. Automakers can only gain a larger market share and development prospects in competition by meeting the needs of more people and adapting to market changes," said Yuan Xiaolin, Senior Vice President of Volvo Cars Global Operations and President & CEO of Volvo Cars Asia Pacific.

Electrification is a core strategy for Mercedes-Benz, and Duan Jianjun, President and CEO of Beijing Mercedes-Benz Sales Service Co., Ltd., emphasized, "Based on customers' current needs, we are pursuing a flexible 'dual-track' strategy of offering both internal combustion and electric vehicles. We provide customers with the models they need."

Prior to the launch of the Mercedes-Benz GLC 350e L 4MATIC, Mercedes-Benz had already introduced plug-in hybrid versions of its E-Class models.

In addition to luxury brands, ultra-luxury brands are also investing in plug-in hybrids. For example, Bentley has launched the fourth-generation Continental GT Speed, equipped with a new ultra-high-performance hybrid system.

"Bentley is steadily advancing its electrification process and plans to launch its first fully electric model in 2026. In this process, plug-in hybrids will continue to play an important transitional role," said Adam Parry, Executive General Manager of Bentley Motors for Mainland China, Hong Kong, and Macau. He added that the transition period for plug-in hybrid systems may be longer than expected, and Bentley will offer customers more hybrid options.

Meanwhile, plug-in hybrid versions of the Hongqi HS7 PHEV and Wuling Starlight S were also unveiled at the Chengdu Auto Show. "The Hongqi HS7 PHEV, equipped with the latest Hongqi hybrid technology, sets a new standard for luxury hybrids in China," said Liu Changqing, Assistant General Manager of China FAW Group Corporation and Vice President of the Hongqi Brand Operation Committee. As a plug-in hybrid SUV, the Hongqi HS7 PHEV is powered by a combination of a 2.0L naturally aspirated engine and an electric motor, with a maximum power output of 120 kW. It also features a CATL ternary lithium battery, enabling a top speed of 180 km/h. The launch of this new model not only enriches Hongqi's product line but also offers consumers more eco-friendly travel options.

Shifting priorities

In addition to Volvo and Bentley shifting their electrification focus from pure electric to plug-in hybrids, many other brands have also adjusted their electrification goals.

Recently, Toyota announced that it had downgraded its forecast for global electric vehicle production in 2026 to 1 million units, down from the previously announced target of 1.5 million units.

In a statement, Toyota explained that its intention to produce 1.5 million electric vehicles annually by 2026 and 3.5 million by 2030 remains unchanged, but these figures are no longer targets but benchmarks.

Ford, General Motors, and other automakers have also delayed or canceled new electric vehicle models due to slower-than-expected consumer adoption of electric vehicles, as they seek to avoid overinvesting in electric vehicle programs.

In the Chinese market, signs of slowing growth for pure electric vehicles are becoming increasingly apparent, while plug-in hybrids are now growing much faster and gaining market share.

Image source: EXEED

According to CPCA analysis, Chinese automakers have innovatively developed plug-in hybrid technology, and the share of plug-in hybrid vehicles in the global market has increased to 78%, which is a key factor in China's new energy penetration rate exceeding 50% for passenger cars.

The Wall Street Journal recently published an observational analysis of China's plug-in hybrid market, suggesting that plug-in hybrids, which can run on both gasoline and electricity, may cannibalize the potential demand for pure electric vehicles. In just over three years, the market share of "plug-in hybrids + extended-range electric vehicles" in China's new energy vehicle market has doubled. "While plug-in hybrids are often seen as a transitional technology, they may continue to exist," the Wall Street Journal noted, citing JPMorgan Chase's analysis that sales of plug-in hybrids and extended-range electric vehicles will account for 60% of China's new energy vehicle sales by 2030, double the previous forecast of 30%.

Cui Dongshu, Secretary-General of CPCA, wrote that China's performance in the global plug-in hybrid market continues to strengthen. In 2017-2018, China accounted for 30% to 50% of the global plug-in hybrid market, but this fell to 25% in 2021. By 2022, China's share had risen to 56%, and in 2023, it increased to 69%. From January to July 2024, China's share reached an ultra-high level of 75%, with a quarterly peak of 77%, demonstrating China's strong performance in the global plug-in hybrid market.

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