The hybrid market is projected to grow from 12.4 million units in 2024 to 28.5 million units by 2030 at a CAGR of 13.0%. The major drivers of the market are stringent emission norms set by the governments, an increase in the adoption of sustainable vehicles, and superior efficiency without range anxiety or charging or battery discharge. By region, Europe and China are projected to lead the hybrid market during the forecast period. On the other hand, North America and Asia (excluding China) are witnessing significant demand for hybrid vehicles.
Global Hybrid Product Portfolio of OEMs Dynamics
Driver: Stringent emission norms set by governments
The EU introduced several CO2 emission norms to reduce vehicle emissions. The EU established a fleet-wide average CO2 target of 95 g/km for new passenger cars. A 15% reduction from the 2021 levels resulted in approximately 81 g/km for the average fleet. This was implemented in full swing on January 1, 2025. Moreover, regulation by the European Union (EU) 2023/851, which was adopted in 2023, mandates that all new cars and vans (light vehicles) registered in the European Union must be zero-emission. For instance, they should be Battery Electric Vehicles (BEV) or Fuel Hydrogen Cell Vehicles (FHCV) by 2035. This translates to a 100% reduction in CO2 emissions from new passenger cars and light-duty vans compared to 2021. Similarly, the EPA in the US, which will be fully implemented in 2025, will have standard caps, which include combined NMOG+NOx permissible emissions at 0.03 g/mi (grams per mile) for light-duty vehicles, which includes a sulfur limit of 10 ppm in fuel. However, unlike the EU’s CO2 g/km focus, the US emission norms emphasize tailpipe pollutants. In addition, China and India have China 6 and Bharat Stage VI emission norms, which focus on the reduction of emissions of CO2 and other pollutants from vehicles.
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Restraint: High cost compared to traditional ICE vehicles
Hybrid vehicles have an Internal Combustion Engine (ICE) and a stronger battery capable of driving a vehicle. There are two hybrid vehicles, HEV and PHEV. HEVs usually have 48V batteries and are used to idle the start-stop operation of the engine. It also generates an initial torque for the pickup of a vehicle. The system adds torque of up to 50 Nm, which reduces the engine strain. The 48V battery also helps drive cars in heavy traffic up to a certain speed. 48V systems cannot be driven electrically for longer periods or at high speeds. They mildly assist in reducing vehicle emissions, but are not a standalone solution to completely reduce emissions. However, this makes HEVs costlier compared to traditional ICE vehicles, which acts as a restraint to the growth of the hybrid market.
The SUV segment will lead the hybrid market during the forecast period.
SUVs are the preferred body type amongst customers considering all propulsion types. However, the hybrid is the perfect solution for SUVs, providing enhanced power and longer driving range. The electric boost in the hybrid SUVs offers efficiency for their heavier frames with less fuel consumption. Moreover, the batteries in hybrids can fit in the larger underfoot space of SUVs, whereas sedans or hatchbacks have smaller underfoot space. In addition, SUVs have higher emissions than sedans or hatchbacks due to their heavier frame and overall weight. Hybrids offset these emissions and achieve the emission targets set by the regulatory bodies to achieve zero emissions. Considering all these factors, SUVs are a better option for both HEV and PHEV hybrid propulsion types.
Europe is projected to lead the hybrid market during the forecast period.
The emission standards set by the EU are stringent. OEMs must comply with these standards to maintain their European market share. Therefore, OEMs have developed and launched a wide range of models on the market. Moreover, several ICE models already being launched are introduced as HEV and PHEV models in the market. In addition, new models are being launched and are integrated with hybrid technology. The EU’s target to achieve zero net emissions will be achieved by adopting hybrids and then gradually shifting toward BEVs. The shift toward BEVs will gain traction when the EV ecosystem is ready with a wide network of charging stations and other related infrastructure. The business models adopted by OEMs and service providers will play a vital role in adopting BEVs. Additionally, the EU will ban the sales of ICE vehicles in the market post-2030. Only the hybrid and BEV variants will be sold in the market. This makes OEMs keen on providing customers with a wide range of hybrids and acquainting them with the technology.
Key Market Players:
Toyota (Japan), BYD (China), Renault-Nissan-Mitsubishi (France), Hyundai Group (South Korea), Honda (Japan), Stellantis (Netherlands), Suzuki (Japan), Volkswagen (Germany), Geely Group (China), Mercedes-Benz (Germany), Great Wall Motors [GWM] (China), Li Auto (China), BMW Group (Germany), Ford Motors (US).
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