- China's EV companies are turning to hybrids, which are becoming increasingly popular with drivers.
- Tesla rivals such as Zeekr plan to launch their first hybrid models.
- Hybrids could help them avoid European tariffs on Chinese EVs.
China's Tesla rivals have a new trick up their sleeve: hybrids.
China is the world's largest electric vehicle market in terms of sales. But many of its battery-powered pioneers are now turning to hybrids and extended-range vehicles as they vie for a slice of a highly competitive market and expand overseas.
Xpeng, which rivals Tesla in EVs and humanoid robots, recently unveiled its Kunpeng Super Electric System, a new powertrain system that Xpeng says will allow future vehicles to travel 1,400 kilometers (870 miles) without stopping to charge or refuel. It's unclear when it will launch new models with this technology, though its first hybrid model could arrive early next year.
Rival Zeekr also plans to release its first hybrid, an SUV, in the second half of 2025.
There's a reason these companies are abandoning their all-electric strategy: hybrids and extended-range vehicles are becoming increasingly popular in China — and could make it easier for Chinese EV makers to dodge tariffs overseas.
Hybrids are having a moment
BYD, China's largest EV maker, has reported booming growth in recent months, largely due to its hybrid lineup.
Its hybrid sales jumped were almost 70% higher in November compared with the same month last year. BYD says its latest hybrids can go up to 1,250 miles without stopping for gas or charging.
Tu Le, managing director of consultancy Sino Auto Insights, told Business Insider that China was now "well past the first movers" when it comes to battery electric vehicles.
That has led EV companies to increasingly target customers with limited access to charging infrastructure who may be more skeptical of pure battery-powered vehicles. "There's a huge market for those people," Le said.
He added that diversifying into hybrids made financial sense for EV startups still searching for profits, as hybrids and extended-range vehicles are generally cheaper to produce than battery electric equivalents due to their smaller batteries.
Despite delivering record numbers of cars in recent months, Xpeng, Zeekr, and Nio continue to rack up heavy losses amid a bruising price war in China's cut-throat EV market.
Above all, Le said the likes of Xpeng and Zeekr did not want to miss out on the booming popularity of hybrids.
"They've seen the success BYD has had. BYD basically gives you a full menu — they have offerings at $10,000, $15,000, $30,000 on battery electric or hybrid. That's a compelling reason to buy a BYD," he said.
Overseas ambitions
There are other advantages to selling hybrids, especially for Chinese manufacturers with one eye on overseas expansion.
BYD, Xpeng, Nio, and Zeekr are all seeking to grow beyond the pressure cooker of China's brutally competitive EV market by selling new models and setting up factories in foreign markets.
This expansion push has increasingly encountered hurdles as Western nations have imposed trade protections to protect their auto industries from a wave of cheap Chinese EVs.
The European Union followed in the footsteps of the US by finalizing steep tariffs on imported Chinese electric vehicles in October, with some manufacturers facing a maximum tariff of 35.3% on top of an existing 10% levy.
The new EU tariffs, however, do not apply to hybrids, giving China's EV upstarts a crucial opening.
BYD is already looking to take advantage, with president Stella Li telling Autocar the company was planning to launch three hybrid models in Europe next year alongside three battery EVs.
Fellow EV maker Nio, meanwhile, is reportedly developing its first hybrid model exclusively for the overseas market.
Auto experts have said that European tariffs could ultimately boost imports of plug-in hybrids. S&P Global Mobility analyst Ian Fletcher recently wrote that Chinese automakers are likely to replace some pure EVs in Europe with more hybrids and petrol vehicles.
"I think BYD is going to go to town on the lack of a higher tariff on plug-in hybrids in Europe," said Le. "And the Europeans are going to eat up plug-in hybrids, full stop."
BYD, Zeekr, and Nio did not respond to requests for comment from Business Insider.