Automakers Need to Make Hybrid Standard
- Sam Abuelsamid
- May 30
- 4 min read
By Sam Abuelsamid
Running a large manufacturing company like an automaker is a challenge in the best of times, given the huge capital demands and long lead times. But in an era when you’ve bet tens of billions of dollars to develop battery electric vehicles and a corresponding supply chain for components and materials, the risks of making the wrong bet are even more mind-boggling. Now imagine that you’re facing a growing competitive challenge from Chinese automakers, slowing growth for those EVs, and an administration in Washington whipsawing you on regulatory and trade policies. Trying to determine what to do and how to do it becomes almost impossible.
At the beginning of this decade, almost every major automaker assumed that most of their sales would be electric within ten years and exclusively electric in regions like Europe and China. Many of those automakers funded their EV bets in part by gutting development of internal combustion engines and related powertrain components. Many engineers with expertise in those areas were laid off or took handsome buyout packages. Those companies’ ability to continue developing ICE systems has been significantly compromised as a result.
On top of that, one side of the political spectrum in the U.S. had essentially decided to wage war on EVs and support fossil fuels instead. The Trump administration wants to roll back emissions and fuel economy standards and eliminate any incentives to electrify. What is a product planner to do?
Retreating to ICE Is a Losing Long-Term Strategy
I get asked these questions a lot. There is no simple answer. But there are some important facts to consider. China is not turning its back on new energy vehicles (NEVs), and policies there heavily promote the technology and support automakers. Europe is also way ahead of America in adopting EVs, and while it’s not yet where it hoped to be, the overall strategy remains to go electric.
When most people actually try an EV, they tend to like it better than an ICE equivalent because it’s quiet, smooth, and usually offers better performance, to say nothing of the ease of mostly charging at home. In the long term, most will probably want to adopt EVs over ICE vehicles. If automakers doing business in the U.S. abandon development and deployment of EVs in favor of thirstier and more emissions-heavy ICEs, they may have a short-term gain, but they will lose in the long term, outside of the lucrative pickup market. That segment will likely be served by extended range EVs (EREVs), where electric propulsion is supplemented by a downsized engine acting only as a generator to provide added range. Companies that cling to ICEs will become totally non-competitive in the global marketplace, and those that look to the future rather than the past will win.
So, how is a company to fund the development of ICE and EV and everything in between for the next decade and beyond?
What the Industry Must Do Next
First, ignore the noise coming from Washington. Focus on the long-term goals that need to be accomplished in order to remain even remotely competitive in the global marketplace (assuming current policies haven’t completely poisoned the willingness of people to buy American products). The industry needs to move forward, not back to polluting and burning more fossil fuels.
Second, abandon development of powertrains that are exclusively ICE. This is a dead-end solution that will inevitably decline over time. Turn the focus to hybridization. Everything that has an engine in it should also have electric motors. You can leverage lessons and technologies developed for hybrids, including motor designs, power electronics, and batteries for hybrids, plug-in hybrids, EREVs, and EVs. The technology scales very well.
This will also reduce the total number of variants that need to be developed, reducing engineering costs and simplifying the number of buildable combinations. Toyota is showing the industry the way forward here. The automaker that pioneered modern hybrids with the original Prius now offers hybrids as at least an option on every Toyota and Lexus vehicle sold in North America, and 45% of its sales in 2024 were electrified. The Camry, Sienna, Prius, and Sequoia are already available only as hybrids. For 2026, the redesigned RAV4, the company’s bestseller in North America, will have a standard hybrid powertrain with a plug-in hybrid that goes 50 miles on a charge as an option. That should push the brand’s electrified sales well beyond 50% this year.
Finally, internal combustion engines are becoming increasingly commodified. Almost every automaker has settled on configurations with 500cc per cylinder as the optimum for emissions and efficiency. 1.5-liter three-cylinders, 2.0-liter fours, and 3.0-liter sixes are everywhere. They pretty much all produce similar power levels and have similar characteristics. Automakers don’t insist on every fastener being bespoke. Why waste time and money building so many identical but bespoke engines? If they are all paired with hybrid systems, they become even more of a commodity.
Automakers should consider teaming up to consolidate engine and transmission development. Unlike in the past when powertrains were real product differentiators, with rare exceptions, that’s just not so true anymore, especially for mainstream products. Some automotive groups have already done this internally, such as Geely in China, which combined powertrain development from Volvo and several other brands under its umbrella into a single business unit that supplies all its brands. The next step is to do this between automotive groups. Stellantis, GM, and Ford should seriously consider this. Along with focusing on hybrids, it would save hundreds of millions of dollars.
The Forecast: Fewer ICE, More Hybrids
Telemetry’s 2025 Light Duty Vehicles forecast projects that sales of ICE-only vehicles will decline at -7% CAGR over the next decade to less than 28 million units. At the same time, hybrids and plug-in hybrids are expected to grow to more than 20% of the global market with higher shares in regions like North America. More detail is available in the full report and if automakers follow the path recommended here, hybrid share could be significantly higher by 2035.
By acknowledging the ICE as a commodity and focusing on hybridization and consolidation of development efforts, costs would be slashed, and automakers wouldn’t have to cut as many resources from EV development. It’s a fairly straightforward strategy, and it can work, but egos need to be at least partially set aside if the North American auto industry is to maintain any relevance in the next decade.
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