Global Hybrid & Electric Vehicles

Report Overview

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The global market for hybrid and electric vehicles (HEVs) is forecast to increase 22% per year through 2026, almost tripling to 30.5 million units. Sales rose dramatically in 2021 in spite of an overall weak environment for the global automotive industry, and rapid advances are expected to continue as governments worldwide provide expanded regulatory support for the adoption of EVs.

Battery Electric Vehicles (BEVs) Solidifying Market Position

BEVs overtook full hybrids to become the most common type of HEV in 2021. Government regulations supporting HEVs are increasingly attempting to boost sales of BEVs specifically, as these products are preferred due to their status as zero-emissions vehicles. However, supply of batteries will be a critical factor in the growth of the BEV market, and automakers will need to continuously collaborate with battery firms in order to take full advantage of these subsidies.

The market for plug-in hybrid vehicles (PHEVs) is expected to contract quickly after peaking as early as 2022. These products were always intended as a transitional technology, and aggressive targets for BEV adoption will lead to a short window for PHEV sales. In contrast, while full hybrid vehicle sales could peak by the 2030s in high-income markets, the usability of these products in nations lacking EV charging infrastructure is expected to lead to ongoing sales growth globally for the next decade.

ICE Vehicle Phaseouts Approaching in Europe

European nations have been global leaders in adopting target dates for the complete phaseout of sales of new ICE vehicles – including hybrids. Norway has the most ambitious target, aiming to reach 100% electric in new car sales by 2025, while several other European nations have set deadlines of 2030 or 2035. The European Commission has also shown signals of potentially implementing an EU-wide phaseout date of 2035.

Western Europe already had the world’s highest penetration of HEVs in 2021, and the region is expected to account for an increased share of demand by 2026. Eastern Europe is expected to register even faster growth, as EV penetration rates in the region are much lower and EU countries in the area will need to quickly adapt in the event that the organization adopts a blanket phaseout date.

Market Penetration in US Continues to Trail

While the US was the world’s third largest HEV market in 2021, sales as a share of total motor vehicle sales were below the global average and well below levels seen in other high-income nations. US adoption of BEVs in particular has been hindered by cultural and geographic factors that lead to greater concern over EV vehicle range and performance. The US is expected to post strong growth in HEV adoption through 2026, but market penetration will continue to trail that in Europe and high-income Asian nations. However, the US could be a stronger driver of growth in the 2030s, when European HEV markets begin to mature.

Global Motor Vehicle Outlook

Demand by Region

Hybrid/electric vehicles (HEVs) compete with conventional internal combustion engine vehicles for share of the overall motor vehicle market, with growth opportunities depending on the nature of that competition as well as underlying trends in overall motor vehicle sales and production.

China is the world’s largest national market for motor vehicles, followed by the US. These two countries together accounted for 49% of global sales in 2021. No other national markets in the world are nearly as large, although Germany, India, and Japan each have annual sales of over three million units.

Global motor vehicle sales overall are projected to rise 4.9% per year to 106 million units in 2026. Healthy growth is expected in all regions as the global automotive industry recovers from a downturn associated with the COVID-19 pandemic:

• The fastest motor vehicle demand gains will be registered in Central and South America, the Africa/Mideast region, and Eastern Europe, driven by the expanding size of the middle-class population in these areas.
• While motor vehicle markets in Western Europe and North America are mature, strong short-term gains are expected as sales rebound from low 2021 levels.
• Motor vehicle sales in the Asia/Pacific region will advance roughly on par with the global average, fueled by ongoing expansion of the Chinese market and rapid gains in countries like India, Indonesia, the Philippines, and Vietnam.

Historical Trends

Sales of HEVs rose every year from 2011 to 2021. These products represent an emerging technology, and improvements in performance and cost-competitiveness have allowed them to continually gain market share. As a result, HEV demand has been resilient to downturns in the global motor vehicle industry, with sales increasing even during the turbulent period associated with the COVID-19 pandemic.

All HEV types compete directly not only with conventional motor vehicles but also with each other. Upfront cost is the primary competitive factor, but fuel savings, familiarity with the technology involved, and the perceived environmental friendliness of HEVs are also important considerations for potential buyers.