Hybrid Vehicle Market Outlook:
Hybrid Vehicle Market size was over USD 324.48 billion in 2025 and is anticipated to cross USD 857.05 billion by 2035, witnessing more than 10.2% CAGR during the forecast period i.e., between 2026-2035. In the year 2026, the industry size of hybrid vehicle is assessed at USD 354.27 billion.
The hybrid vehicle market is primarily driven by the strict emission regulations and environmental policies by regulatory authorities and pollution control boards. Governments worldwide are implementing strict emission norms to combat climate change and minimize air pollution. Regulatory bodies such as the U.S. Environmental Protection Agency (EPA), EU’s Euro 7 standards, China’s New Energy Vehicle (NEV) policy, and U.S. Corporate Average Fuel Economy (CAFÉ) standards have set aggressive carbon emission reduction targets, requiring automakers to develop cleaner alternatives. For instance, new pollution rules issued by the EPA in March 2024 are expected to reduce 7.2 billion tons of CO2 emissions by 2055 and save around USD 62 billion on fuel prices. Thus, the adoption of hybrid electric cars is seen as a practical bridge between traditional ICE cars and fully electric vehicles.
Government incentives such as tax rebates, subsidies, and lower registration fees encourage manufacturers and consumers to adopt hybrid vehicle. For instance, the Federal tax credits and state incentives offered to hybrid vehicle buyers in the U.S. play a key role in the adoption of hybrid vehicle. Additionally, the government of India has invested USD 1.43 billion as a part of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME II) scheme to encourage electric vehicle sales and support manufacturing. Under this scheme, EV manufacturers in India received a subsidy of USD 637 million for selling over 11,79,669 electric vehicles in December 2023.
