As the automotive industry navigates the lengthy journey toward widespread adoption of electric vehicles (EVs), major carmakers are increasingly turning to hybrid and petrol engine models to bolster profits. This strategic shift comes as the push for EVs continues, but market conditions and the high cost of battery technology still pose significant challenges.
In recent weeks, several global carmakers, including General Motors, Porsche, BMW, and Mercedes-Benz, have committed to investing in new or upgraded internal combustion engine (ICE) and hybrid models, despite ramping up their electric car rollouts. These moves aim to meet tightening emissions regulations in Europe and other markets while navigating the complexities of transitioning to fully electric lineups.
According to the Financial Times, global launches of ICE and hybrid vehicles are forecasted to rise by 9% in 2025, with 205 petrol models expected, marking a slight decline from 2024, while hybrid launches are set to surge by 43%, totaling 116 models. This strategic balance allows manufacturers to maintain profitability while continuing to develop their electric vehicle offerings.
Mercedes-Benz, for instance, plans to introduce 19 petrol-powered vehicles alongside 17 battery-electric models between 2025 and 2027. This shift comes after the automaker experienced a slowdown in electric vehicle demand, leading to lower sales and profit margins. Ola Källenius, the CEO of Mercedes-Benz, emphasized that it would not be economically viable to abandon ICE technology entirely if market conditions are not fully electric by 2030.
Porsche is similarly recalibrating its approach, following a 49% decline in sales of its electric Taycan sedan. The luxury carmaker has announced an €800 million investment in developing new combustion engine and hybrid vehicles, signaling a more cautious outlook on its EV strategy.
The rising investments in hybrid models, which combine traditional engines with battery power, are particularly attractive due to their profitability and growing consumer demand. This trend is also driven by the EU’s stringent 2025 emissions rules, which require carmakers to cut overall emissions by 15% from 2021 levels, as well as an impending ban on the sale of new petrol and diesel cars by 2035. However, carmakers, including BMW, are advocating for more flexibility in these regulations, with BMW calling for the cancellation of the 2035 ban.
Meanwhile, industry giants like Volvo, Mercedes-Benz, and Renault have all projected lower profits in 2025, citing challenges such as a global tariff war and the escalating costs of meeting tough emissions standards. This economic pressure has made it harder to phase out the lucrative sales of petrol and hybrid vehicles too quickly.
Renault CEO Luca de Meo acknowledged the complex path ahead, stating, “We are moving fast on the EV side, but we’re not slowing down on the ICE side either. Getting the EVs to be a dominant technology in Europe is a journey that will last 20 years.”
While EV growth has slowed in Europe, China remains a hotspot for electric and hybrid vehicles, with sales accounting for 47% of all car purchases in 2024—up from just 6% five years ago. This rapid adoption underscores the shifting global dynamics, with markets outside of Europe moving faster toward EV penetration.
Despite the continued rise in EV adoption, car manufacturers are still grappling with the high cost of production, primarily driven by expensive batteries. Mercedes-Benz CFO Harald Wilhelm confirmed the company is working to reduce EV production costs by over 15%, which would help narrow the price gap between electric and combustion engine cars, though he cautioned that no promises would be made if the goal proves unfeasible.
As the automotive industry faces these evolving challenges, even large manufacturers like Volkswagen are reconsidering their previous plans. The company, which once committed to halting petrol car sales in Europe by 2033, has reportedly re-evaluated its stance. A Volkswagen insider suggested that it would be “stupid” to stop selling combustion engine cars if there is still customer demand.
General Motors, which has seen its share of US EV sales grow, is also refreshing its ICE models in response to a potential slowdown in the market. GM CFO Paul Jacobson pointed out that the profitability of internal combustion engines may extend longer than expected, particularly in light of recent changes in US government incentives for EV buyers.
