Hybrid Vehicle Market Trends

Growth Drivers

• Rising fuel prices and cost savings: The fluctuating prices of crude oil significantly impact consumer vehicle choices. HEVs offer better fuel efficiency compared to ICE vehicles, making them an economically viable option. HEVs use regenerative braking which improves fuel economy by capturing energy lost during braking whereas plug-in hybrid vehicle allow users to switch between gasoline and electric power which reduces dependency on fossil fuels. In Australia, hybrid vehicles captured 16.7% of the market share in the third quarter of 2024, outperforming plug-in hybrids and pure electric vehicles. Consumers are turning to hybrids as fuel prices remain volatile making them a cost-effective choice for conscious buyers.  
• Advancements in battery and hybrid technology: The efficiency and performance of HEVs have improved significantly due to advancements in battery technology, electric motors, and energy management systems. Innovations in hybrid powertrains contribute to higher energy efficiency through lightweight battery materials and better thermal management. It leads to longer battery life with lithium-ion and solid-state battery developments reducing replacement costs. For instance, in March 2025, Toyota expanded its European electric vehicle lineup by introducing the electric C-HR Plus and updating the bZ4X model. The C-HR Plus offers two battery options i.e., a 57.7 kWh battery with a 455 km range and a 77-kWh battery providing a 600 km range. These advancements in battery technology enhance the capabilities of hybrid and electric vehicles.
• Expanding charging infrastructure and consumer awareness: The global push for EV charging infrastructure is indirectly benefiting HEVs, especially plug-in hybrid vehicle. According to the IBEF Report 2024, the Ministry of Heavy Industries approved a capital subsidy of USD 96.13 million to establish 7,432 Electric Vehicle Public Charging Stations in India under the FAME India scheme. With more charging stations, stronger policy support, and awareness of HEV benefits, consumers and businesses are embracing hybrid technology. The rising awareness also led to an increase in demand for hybrid vehicle. According to the European Automobile Manufacturer’s Association Report of February 2025, new EU registrations of hybrid-electric cars increased by 18.4% in January. This boost marked about 290,014 units registered in the very first month of 2025, accounting for 34.9% of the total EU market share.

Challenges

•  High manufacturing costs: Hybrid vehicle require advanced technology including dual powertrains which increases production costs. Moreover, battery production is expensive due to the use of rare materials like lithium, cobalt, and nickel. This is expected to hamper overall sales of hybrid EVs to a certain extent during the forecast period.
• Competition from fully electric vehicles: As EV technology improves and charging infrastructure expands, HEVs face competition from all-electric models. Consumers prefer fully electric models over hybrids due to long-term operating costs and environmental benefits. Hence, HEVs are often seen as a transitional technology rather than a long-term solution. Additionally, the decreasing cost of lithium-ion batteries makes EVs more affordable reducing the price gap between HEVs and EVs. These factors may stand as a limitation posing a threat for the market to grow.