What Is The Trend Of Hev Industry Under Fierce Competition Of Ev Globally

Q: Hello, Yesa, as I am wondering how the hybrid car industry will survive under fierce competition from the EV over capacity and low cost, will Hev survive in coming 10 years under Rhodium study of the global lithium battery and EV manufacturing capacity and trend report, considering  several highly uncertain factors, including the pace of overall economic growth, policies driving EV adoption and charging infrastructure, battery costs, and oil prices etc. thanks

A: The Future of Hybrid Electric Vehicles Amidst EV Overcapacity: A 10-Year Outlook

I am glad to answer. The global automotive industry is at a pivotal juncture, with electric vehicles (EVs) surging in production capacity and market penetration, while hybrid electric vehicles (HEVs) face intensifying competition from low-cost, overproduced EVs. Your query references the Rhodium Group's Global Clean Investment Monitor, which highlights dramatic growth in EV and battery manufacturing, as illustrated in the provided charts. The first chart shows global EV manufacturing capacity expanding sevenfold from about 4 million vehicles in 2018 to nearly 32 million in 2024, with China accounting for the lion's share (orange bars), followed by the US (blue), Europe (yellow), and the rest of the world (purple).

This overcapacity, particularly in China, is driving down EV prices, raising questions about HEV survival. The second chart depicts quarterly battery manufacturing investments, where China's early surge (orange line) was overtaken by the US (blue line) in 2023, peaking at around $18 billion before declining, with projections showing US investment at $10.4 billion, China at $5.7 billion, Europe at $4.0 billion, and the rest of the world at $2.2 billion by Q1 2025.

HEVs, which combine internal combustion engines (ICE) with electric propulsion for improved fuel efficiency, have served as a bridge technology. However, with EVs benefiting from economies of scale, falling battery costs, and policy incentives, their long-term viability is uncertain. This analysis, drawing on Rhodium's data and broader market forecasts, evaluates HEV prospects over the next decade (2026-2036), considering key uncertainties like economic growth, EV adoption policies, charging infrastructure, battery costs, and oil prices. While HEVs are likely to persist in niche roles, EVs are poised to dominate, potentially reducing HEVs to a transitional segment unless external factors intervene.

Insights from the Rhodium Study and Market Trends

The Rhodium Group's June 2025 report on the Global Clean Investment Monitor provides a stark view of EV dominance. Global EV manufacturing capacity reached 29 million units in 2024, with China holding two-thirds of historical growth in sales and capacity. Battery capacity stands at 2,438 GWh for cells and 2,153 GWh for modules, already exceeding current demand, with China's output alone sufficient for global needs. Projections indicate that by 2030, planned capacity could meet even low-end demand scenarios, but overbuild risks flooding markets with cheap EVs. The report forecasts China's EV capacity at 54% of the global total by 2030, equaling low-end global demand. This overcapacity is already tamping down prices: in China, intense competition led to price wars in 2025, with EVs undercutting HEVs in total cost of ownership (TCO) for many consumers.

Recent updates from Q3 2025 show battery investments declining 23% quarter-on-quarter to $6 billion, signaling a maturing market with cancellations in EV projects. Yet, the pipeline remains robust: $112 billion in US clean manufacturing investments, mostly in EV supply chains, including $56 billion for batteries. Globally, EV sales hit 17.8 million in 2024 (19.9% market share), projected to reach 23.7 million in 2025 (25.5%) and climb to 90 million by 2040 (83% share). In contrast, HEV sales are growing but at a slower pace: the global hybrid market is expected to expand from 4.3 million units in 2024 to 9.9 million by 2030 (14.9% CAGR), driven by full hybrids (66% share). These trends underscore EV overcapacity's threat to HEVs. In 2025, BEV sales grew 29% to 14.6 million (16.1% share), while hybrids gained traction as a "bridge" amid infrastructure gaps. By 2026, electrified vehicles (BEVs, plug-in hybrids/PHEVs, range-extended EVs) could hit 30% of global sales, with hybrids playing a key role in moderating EV growth. However, long-term forecasts favor EVs: BloombergNEF predicts 24.3 million passenger EV sales in 2026 (12% growth), with hybrids peaking around 2033 at 41% in Europe before declining.

HEV vs. EV: Competitive Landscape

HEVs offer advantages in range anxiety, refueling convenience, and lower upfront costs, making them appealing in regions with limited charging infrastructure. In the US, hybrids captured 9.6% of light-duty sales in Q2 2024, up from 8.6%, while EVs faced a 15% contraction forecast for 2026. Automakers like Ford and GM are pivoting: Ford expects hybrids/EVs to reach 50% of production by 2030 (from 17% in 2025), viewing hybrids as a "practical bridge."

In Europe, hybrids are projected to grow from 15% in 2025 to 28% by 2030.

Globally, HEVs benefit from models like Toyota's Camry and RAV4, phasing out pure ICE variants to nudge consumers toward electrification.

Yet, EVs' strengths—zero tailpipe emissions, lower operating costs (as battery prices drop), and technological maturity—position them for dominance. IDC forecasts BEV sales exceeding 12.1 million in 2025, driven by affordable segments. Lithium-ion batteries, holding 75.4% market share, offer superior energy density and range. In China, NEV sales (including hybrids) grew 27% to 15.6 million in 2025, but pure EVs lead, with consolidation favoring low-cost players like BYD. Overcapacity risks commoditizing EVs, undercutting HEV TCO advantages. Studies show newer BEVs achieving comparable lifespans to ICE/HEVs, closing reliability gaps.

McKinsey projects EV demand growing sixfold to 40 million units by 2030.

In the next decade, HEVs may survive in heavy-duty applications or emerging markets where EV infrastructure lags. Fuel-cell EVs (FCEVs) could complement, growing at 27.3% CAGR in commercial segments. However, as battery demand hits 1 TWh in 2025 and 6 TWh by 2040, EVs will eclipse hybrids.

Uncertain Factors Shaping the Outlook

Several variables introduce volatility. Economic growth: A slowdown could favor cheaper HEVs over pricier EVs, as seen in 2025's US sales dip amid high interest rates. Policies: IRA restrictions and China's subsidy phase-out accelerated EV shifts, but reversals (e.g., US tariff hikes) could boost hybrids. Charging infrastructure: IEA notes robust growth in China (10 million sales projected for 2024), but gaps elsewhere sustain HEVs. Battery costs: Declining to below $100/kWh by 2030 could make EVs unbeatable, per Rhodium projections. Oil prices: Volatility (e.g., spikes from geopolitical tensions) favors electrified vehicles, but low prices could prolong ICE/HEV relevance.Sustainability challenges, like battery recycling and grid strain, add layers. Literature reviews emphasize standardization needs, with hybrids as a balanced transition amid these uncertainties. In high-emissions scenarios, US ZEV sales hit 10 million annually by 2030-2035, but domestic capacity covers only 65%. Optimistic views see hybrids evolving with EV tech, extending their life 10-15 years.

Scenarios and Conclusion

In a base scenario, HEVs survive to 2036 with 20-30% market share in transitional markets, but EVs claim 50-80% globally by 2035. Upside for HEVs: Policy backpedaling or economic downturns delay EV adoption. Downside: Accelerated battery breakthroughs render hybrids obsolete sooner. Ultimately, while Rhodium's data signals EV overcapacity overwhelming HEVs, hybrids will endure as a resilient option amid uncertainties, but their dominance is waning. The next decade will see EVs prevail, with hybrids fading into niche survival.