Plug-in hybrids hit the "emergency brake". Is the new energy market returning to the pure-electric era?

After years of rapid growth, the plug-in hybrid (PHEV) segment has started to "slow down significantly". Data recently released by the China Association of Automobile Manufacturers (hereinafter referred to as "CAAM") shows that from January to June this year, a total of 2.521 million PHEV models were sold in China, a year-on-year increase of 31.1%. From 2021 to 2024, the growth rates of PHEV models in China were 140%, 151.6%, 84.7%, and 84.5% respectively.

During the same period, the growth rate of pure electric (BEV) models began to increase. From January to June this year, a total of 4.415 million BEV models were sold in China, a year-on-year increase of 46.2%. In the previous two years, the growth rates of BEV models in China were 24.9% and 15.5% respectively.

Chen Shihua, the deputy secretary-general of CAAM, told Economic Observer: "This change is related to the 'Two New' policies. Mainly, the sales of low - cost pure electric vehicles have increased significantly. In the low - cost vehicle market, it is not cost - effective for automakers to produce PHEV models. Low - cost pure electric vehicles receive the same subsidy of 20,000 yuan as vehicles priced at over 200,000 or 300,000 yuan, which has led to a rapid growth in the sales of relatively low - priced BEV models."

However, some industry insiders pointed out that the core reason for the change in the PHEV market is that market growth has returned to rationality, and PHEV has returned to its position as a "transitional technology".

The PHEV Market's Continuous Speed Changes

The PHEV becoming one of the mainstream power types in the new energy vehicle market is a situation that has emerged in recent years. Before that, more than 80% of the market share in the new energy vehicle industry was occupied by BEV models.

In 2021, 603,000 PHEV models were sold in the domestic market, a year-on-year increase of 140%. During the same period, 2.916 million BEV models were sold, a year-on-year increase of 161.5%. Therefore, despite the significant increase in PHEV sales, its market share decreased from 18.4% to 17.1%.

The reversal occurred in 2022. As the technical bottlenecks such as range and charging, as well as cost pressures of BEV models were exposed after the subsidy reduction, PHEV models took over the consumer demand. In that year, PHEV models achieved sales of 1.518 million units, with a year-on-year growth rate remaining at a high level of 151.6%, while the growth rate of BEV models dropped to 83.5%.

In the following two years, supported by advantages such as continuous technological iteration, cost reduction, and charging convenience, PHEV models maintained a high - speed growth of about 85%. By 2024, the sales of PHEV models had reached 5.146 million, and the market share increased to 40%. In contrast, the growth rate of BEV models dropped to 15.5%, and the market share also decreased to 60%.

However, in the first half of this year, the sales growth rate of PHEV models declined sharply. According to CAAM data, from February to June, the year-on-year growth rate of PHEV sales dropped from 90.3% to 7.8%.

Bai Wenxi, the deputy chairman of the China Enterprise Capital Alliance, pointed out that the "relative competitiveness" of PHEV models has declined. The price of BEV models with a range of over 600 km has dropped to the range of 150,000 - 200,000 yuan, the density of fast - charging networks has increased rapidly, and range anxiety has been significantly alleviated; on the policy side, subsidies and purchase tax incentives are more favorable to BEV, and the green license plate quotas in some cities are tilted towards BEV; the pure - electric range of PHEV models is generally less than 150 km, requiring frequent daily charging; the dual - power system brings higher maintenance complexity. Therefore, the decline in the growth rate of PHEV models is the result of the combined effects of "base + demand structure + technological substitution".

Return to Rationality at Home, New Opportunities Abroad

Although the growth rate of PHEV models dropped to 31% in the first half of this year, this absolute figure is still not low.

In the view of Huo Hongyi, a well - known business consultant and corporate strategy expert, PHEV was once a compromise solution when the technology was immature. Today, BEV has started to compete for the market directly, and the "bridge value" of PHEV is being compressed.

Shi Shuai, a global partner at Roland Berger, also believes that PHEV (including extended - range electric vehicles) is a transitional technical solution, and its rationality lies in the fact that the technology of BEV models is not yet mature enough. As power battery technology matures, the charging network becomes more complete, and consumers gradually return to rationality, BEV will become the mainstream product in the future market.

However, Shi Shuai also emphasized: "Although we believe that PHEV is a transitional technology, it is still too early to say that the momentum of PHEV has passed. At least in the next 3 to 5 years, PHEV models still have very large growth potential, and their proportion in new energy vehicles can still reach 30% to 40%, or even a higher level."

It is worth noting that although the growth rate of PHEV models has slowed down in the domestic market at present, they have encountered new growth opportunities in the overseas market. In 2024, China exported 297,000 PHEV models, a year-on-year increase of 1.9 times. In the first half of this year, China exported 1.06 million new energy vehicles, a year-on-year increase of 75.2%, among which 390,000 were PHEV, a year-on-year increase of 2.1 times, and the export growth rate continued to expand. PHEV models have become a new engine for China's new energy vehicle exports.

Cui Dongshu, the secretary - general of the Passenger Car Market Information Joint Conference of the China Automobile Dealers Association, pointed out in an article titled "China's PHEV Will Surely Go Global" published on July 8 that the overseas market provides a "second growth curve" for China's PHEV. He believes that the global automobile market is undergoing an "electrification reshuffle", and China's PHEV is rapidly seizing multiple overseas markets with its "technological leadership + cost advantage". For example, some European countries (such as Germany) have adjusted their policies to include PHEV in the subsidy scope for "environment - friendly vehicles", opening a window for China's PHEV to enter the high - end market.

Regarding the explosion of PHEV sales overseas, Shi Shuai said: "Consumers in different countries around the world have different levels of acceptance of BEV. Consumers in Southeast Asian countries have a relatively high acceptance of BEV, but in Africa and South America, consumers do not accept BEV. In Europe, the acceptance of BEV by consumers in Western Europe is completely different from that in Eastern Europe. So, it is a long and difficult road for BEV to go global, but PHEV going global is more in line with the needs of more consumers around the world."

This article is from the WeChat public account "Economic Observer". Author: Wang Shuaiguo. Republished by 36Kr with permission.