The Rise of Electric Hybrids: Navigating the Decline of Range-Extended Vehicles in 2025

As the data from the first quarter of 2025 emerges, the once-promising range-extended electric vehicle (REEV) market is facing significant challenges. Sales in this segment have declined while the market for hybrid electric vehicles (HEVs) has rapidly ascended.

1. According to the automotive market data for the first quarter of 2025, sales of range-extended vehicles have decreased, and their reputation has suffered. In contrast, HEVs are experiencing a strong surge due to their long range and advanced architecture.

2. The sales of range-extended vehicles have notably dropped, attributed to high fuel consumption and issues like engine vibrations at startup, leading to a decline in consumer satisfaction.

3. Meanwhile, HEV products from companies like Xpeng and Zeekr are gaining traction, ushering in a new era for hybrid electric vehicles.

4. It is expected that hybrid vehicle sales will exceed 8 million units in 2025, achieving a growth rate of 60%, and comprising nearly 50% of the total new energy vehicle sales.

5. Industry experts believe that HEV products are poised to capture significant market share in the competitive new energy vehicle sector, prompting manufacturers to accelerate their strategic positioning.

With the release of automotive market data for the first quarter of 2025, the REEV market, once celebrated, is now a mixed bag. The top 20 range-extended models combined sold around 200,000 units. However, the appeal of these vehicles is diminishing, particularly for certain manufacturers where the glow of range extension is fading.

The diminishing allure of REEVs is evident not only in sales figures but also in consumer perception, which is far more concerning than mere sales declines. As HEV products rise, various manufacturers are entering this space, leveraging advantages such as extended range and advanced technology.

The underlying shift is driven by technological advancements. As battery technology and power structures evolve, the shortcomings of range-extended vehicles are becoming increasingly apparent. HEVs, backed by cutting-edge technology, are aligning more closely with market demands.

Additionally, consumers are raising their expectations regarding range, energy costs, and smart features, which is prompting manufacturers to adapt. The competitive landscape for new energy vehicles is clearly being redefined.

<h2>01 Declining Sales and Eroding Reputation: The Fall of Range-Extended Vehicles</h2>

Analyzing the overall market performance, the top 20 range-extended models sold about 200,000 units, which may seem respectable at first glance, but numerous issues lurk beneath the surface. Compared to previous years, there has been a noticeable decline in REEV sales, particularly in the premium market.

For instance, Seres, a significant player in the range-extended vehicle sector, reported sales of 54,600 units in the first quarter of 2025, marking a 42.47% drop year-on-year. Specifically, Seres vehicles, including the AITO brand, saw cumulative sales of 45,200 units, which is a 46.31% decline.

To understand the reasons behind the falling sales, data from platforms like Jingzheng Estimate reveal that in March, the average resale value of hybrid models (including range-extended vehicles) was only 45.4%, a low figure that decreased by 1.6 percentage points month-on-month. Furthermore, quality control issues in range-extended vehicles are significant.

Data indicates that in 2024, complaints regarding range-extended vehicles surged by 280% compared to the previous year, with over 70% of these complaints relating to range, fuel consumption, and battery issues. Although manufacturers often emphasize convenience, energy savings, and long range, consumers are finding shortcomings in real-world usage, particularly low battery capacity and high fuel consumption.

For example, some range-extended vehicles claim a fuel consumption of 5L/100km, but factors like road conditions and driving habits make this difficult to achieve. Under city conditions with low battery, some models can actually consume 8-10L/100km, offering no advantage over comparable gasoline vehicles. Additionally, many range-extended cars exhibit startup vibrations, severely impacting the driving experience and deterring potential buyers.

Insurance costs also pose a challenge, with the average annual premium for new energy vehicles being 21% higher than that of gasoline vehicles. Range-extended vehicles, due to their structure and maintenance costs, remain expensive. For instance, a range-extended vehicle priced around 250,000 yuan has an annual premium of 6,000 to 7,000 yuan, adding to the overall ownership costs.

From a market competition and consumer demand perspective, some manufacturers previously experienced rapid growth through range extension, especially in the high-end SUV sector. However, after over three years of actual market performance, this model has not gained broad acceptance from consumers. With the rapid advancement of technology, features such as large displays, spacious interiors, and advanced amenities are no longer unique selling points; consumers are becoming desensitized to them.

Today's consumers prioritize core vehicle performance, technological sophistication, and actual ownership costs. In the new energy vehicle market, pure electric vehicles, with their growing range, fast-charging capabilities, and lower ownership costs, are gradually attracting more attention from consumers. Plug-in hybrids are also optimizing their technology to achieve a better balance between fuel consumption and performance, further squeezing the market share of range-extended vehicles.

It can be said that range-extended vehicles have entered a late-stage market decline. If manufacturers wish to maintain a presence in the future new energy vehicle market, they must innovate technologically, enhance product quality, reduce costs, and reassess consumer needs to develop more competitive offerings. In this context, hybrid electric vehicles represent the better option.

<h2>02 The Year 2025 Marks the Dawn of Hybrid Electric Vehicles</h2>

Starting in the second half of 2024, numerous manufacturers have announced their plans to launch hybrid electric products in 2025. The hallmark of these HEVs is a significant increase in pure electric range, moving from the typical 200 kilometers offered by range-extended vehicles to 400 kilometers or more. For example, CATL has unveiled the Xiaoyao Super Hybrid Battery, which is the world's first hybrid battery that achieves a pure electric range of over 400 kilometers while also supporting 4C ultra-fast charging.

On the development front, these HEVs have abandoned the traditional internal combustion-to-electric transformation approach of range-extended manufacturers. Instead, they adopt an electric-to-fuel strategy, minimizing overall battery usage on a pure electric platform to reduce costs and vehicle weight, thereby establishing a primarily electric-driven hybrid structure. Essentially, this new HEV system is more advanced than the range-extended approach.

Manufacturers are keen to develop HEVs for two primary reasons. From the consumer perspective, there is a growing expectation for electric vehicles to deliver longer pure electric ranges, with consumers no longer satisfied with 200 kilometers. They also demand higher fuel efficiency and a more sophisticated electric architecture that aligns with the trends of intelligent integration in the electric age, rather than mere modifications of older systems.

For companies that are leading the charge in HEV development, reducing costs, enhancing profitability, and improving market competitiveness are crucial considerations. Take Xpeng, for example: in its pursuit of high-end development, the company was previously overly reliant on CATL for battery supply, resulting in high costs. Without cost reduction, it becomes challenging to lower vehicle prices, hindering scalable growth. To balance scale and profit, Xpeng is developing HEV products based on the electric-to-fuel model.

By utilizing the same battery from a pure electric product across two hybrid models, Xpeng not only reduces costs and minimizes dependence on a single supplier but also enhances the price competitiveness of its end products, thereby catering to a broader consumer base.

Xpeng has continuously sought cost reductions. The 5C ultra-fast charging AI battery currently in use has improved from 3C to 5C, reducing the time taken to charge from 10% to 80%, thereby increasing battery efficiency and reducing the required capacity, which indirectly lowers costs. Similarly, Zeekr is also making strides in the high-end segment, with its upcoming 9X HEV product generating considerable interest.

The Zeekr 9X is set to begin production by the end of 2025, boasting intelligent configurations that surpass the Li Auto L9 and AITO M9. In terms of computing power alone, the Zeekr 9X is equipped with a self-developed dual Thor chip controller, offering a processing capability of 1400 TOPS, enabling zero-latency communication and centimeter-level satellite positioning for enhanced safety. In contrast, the Li Auto L9's AD Max intelligent driving system utilizes dual Nvidia Orin-X chips, totaling 508 TOPS of processing power. Moreover, leveraging forward development advantages, the Zeekr 9X is expected to outperform existing range-extended models in various aspects, presenting a strong competitive edge.

Industry insiders generally agree that 2025 will mark a pivotal turning point for the transition from range-extended vehicles to HEVs. With advantages such as long range, advanced architecture, and optimized costs, HEVs are set to reshape the market landscape, and their market share in the new energy vehicle sector is anticipated to grow further, while traditional range-extended vehicles will face dual challenges of technological upgrading and market competition.

<h2>03 HEVs Represent the Optimal Solution for Supply Chain, Scaling, and Cost Reduction</h2>

For automotive companies venturing into the HEV or range-extended sectors in 2025, meeting consumer demands is crucial, but building core competitiveness is fundamental to establishing a market presence. The adage "everything centers around the consumer" may seem like industry wisdom, yet it has its limitations. As durable consumer goods, automobiles have longer product life cycles compared to fast-moving consumer goods.

In the battery sector, CATL dominates the ternary battery market, while BYD leads in lithium iron phosphate battery technology. Except for companies like Geely that possess the capacity for systematic and scaled independent research and development of iron batteries, most automotive companies find it challenging to escape the constraints of CATL when selecting first-tier suppliers for ternary batteries.

Furthermore, CATL's supply model imposes invisible constraints. Its chairman, Zeng Yuqun, has stated, "If you want me to supply, you need to invest in production lines. Or sign a long-term cooperation agreement, ensuring production fluctuations within ±15%. Otherwise, you are not serious." In other words, to secure supply from CATL, automotive companies must invest heavily in production line acquisitions and commit to contracts lasting at least five to ten years.

This production line contracting model from CATL can restrict the cash flow of automotive companies, limiting their ability to adapt to rapid market changes and foster innovation. As a result, we see the pure electric vehicle market share gradually being squeezed.

In this context, automotive companies are increasingly focusing on HEV products. HEVs are significantly different from range-extended vehicles, typically offering higher pure electric ranges and built on electric platforms. These characteristics position HEVs to capture market share from range-extended vehicles and establish a new market landscape.

Thus, 2025 can be dubbed the "Year of HEVs," with early movers in this space poised to gain a competitive edge, akin to the benefits reaped by companies that previously invested in range-extended technologies. Currently, Xpeng and Zeekr exemplify proactive engagement in the HEV arena.

Previously, Xpeng concentrated on the pure electric segment, but in late 2024, it launched its "Kunpeng Super Electric System," officially entering the HEV market. The range-extended powertrain in Xpeng’s vehicles can achieve a pure electric range of 430 kilometers and a total range exceeding 1400 kilometers. Zeekr is also making waves in the HEV sector, with the upcoming Zeekr 9X generating significant attention, offering a plug-in hybrid version with a pure electric range of 430 kilometers and a total range surpassing 1400 kilometers.

Data indicates that in 2024, sales of new energy vehicles in China reached 12.866 million units, with projections for 2025 to exceed 16 million units. Hybrid vehicles (including plug-in hybrids and range-extended vehicles) are set to become the new growth drivers, with anticipated sales surpassing 8 million units and a growth rate of 60%, comprising nearly 50% of total new energy vehicle sales.

In light of these market trends, HEV products, with their inherent advantages, are well-positioned to carve out a share in the fiercely competitive new energy vehicle market. For manufacturers to excel in the 2025 market and beyond, expediting their HEV product strategies is critical. The trajectories of Xpeng and Zeekr in the hybrid market are certainly worth watching.