Hybrid compromise: why Europe is postponing a full phase-out of internal combustion engines

According to data from the European Automobile Manufacturers’ Association (ACEA), the structure of the new-car market at the beginning of 2026 shows a complex picture of the technological transition. Cars with gasoline engines accounted for 22.5 %, diesel — 7.7 %. At the same time, hybrid vehicles (HEVs) — their share reached 38.2 % — proved the most popular. Battery electric vehicles (BEVs) held 19.7 % of the market, and plug-in hybrids (PHEVs) — 9.6 %. Thus, the combined share of vehicles whose operation implies the use of petroleum products remains significant — around 80 %. This indicates that, despite the electrification trend, traditional technologies retain strong positions within the structure of the EU vehicle fleet.

The market leaders by sales volume are Volkswagen Group (26.7 %), Stellantis (17.1 %) and Renault Group (10.1 %). Notably, a significant share of demand (almost one third) is provided by foreign manufacturers, among which Chinese companies stand out in particular. Geely, SAIC Motor, Chery Automobile and Leapmotor together sold 8.5 % of all new cars in the EU since the beginning of the year, outpacing even Tesla, whose share was only 1.8 %. This distribution reflects the growing competitiveness of Asian brands, driven not only by price advantages but also by advanced vertical integration of production chains.

An analysis of regional dynamics in the adoption of electric vehicles reveals substantial disparities. According to the research company Transport & Mobility Leuven (TML), Norway leads in the share of electric vehicles in the new-car market (97 %), followed by Denmark (82 %) and Finland (46 %). At the same time, in a number of countries electrification rates remain low: in Greece, Slovakia, Bulgaria and Estonia the share of electric vehicles does not exceed 6 %, in the Czech Republic — 5 %, and in Croatia — 3 %. Particularly illustrative is the decline in Iceland (from 41 % to 13 %), the Netherlands (from 40 % to 28 %) and Malta (from 38 % to 25 %).

These differences are driven not so much by climatic or cultural factors as by the level of development of charging infrastructure and the affordability of electric vehicles. By early 2026, the EU had about 174 thousand public charging stations — 20 % more than a year earlier, and more than the number of traditional gas stations (114 163). However, in 17 of the 27 EU member states, charging stations are still fewer than conventional fuel stations. Such unevenness creates serious barriers to mass adoption of electric vehicles, especially in rural areas and small towns where the availability of charging infrastructure remains critically low.

One of the key factors constraining electrification is the high cost of electric vehicles. In April 2026, only 28 electric models priced under 30 thousand euros were available on the European market — over two years their number increased by 23. The most affordable option remains the Dacia Spring Electric 70 (about 17.5 thousand euros), but even this price remains significant for many consumers. At the same time, Chinese manufacturers offer competitive alternatives: Leapmotor T03 (19.4 thousand euros), BYD Dolphin Surf (23 thousand euros), and others.

A major role is also played by the European battery industry’s dependence on imports of critical raw materials. China controls more than 70 % of global lithium processing capacity, 70–80 % of cobalt, and over 90 % of rare-earth metals needed to produce high-efficiency electric motors. This creates vulnerability for European manufacturers, whose battery production costs are significantly higher due to more expensive energy resources: industrial electricity prices in the EU are almost twice those in China and about 2.5 times — those in the United States.

In addition, the cancellation or reduction of government subsidies for the purchase of electric vehicles has negatively affected demand. Experts note that high upfront costs continue to deter consumers despite potential long-term savings. This problem is especially acute for city residents who do not have the option of installing a private charger: for them, operating an electric vehicle turns out to be economically disadvantageous due to the high cost of public charging.

Under pressure from economic realities and industry demands, the European Commission was forced to soften its plans. Instead of a full ban on the registration of ICE vehicles from 2035, the goal is now to reduce carbon dioxide emissions by 90 % (previously 100 % was envisaged). This decision allowed automakers to adjust their strategies. Companies such as Volkswagen, Mercedes‑Benz, Stellantis and BMW revised their electrification plans: Rolls‑Royce announced it would continue producing gasoline models after 2030, Bentley and Porsche slowed the pace of their transition to electric vehicles, and Lamborghini abandoned the release of the fully electric Lanzador altogether, betting on hybrid technologies.

Interestingly, even the environmental argument in favor of a complete ICE phase-out turned out to be less clear-cut. According to a forecast by the International Energy Agency (IEA), transport CO₂ emissions will continue to grow until 2035, and the potential contribution of electric vehicles to reducing the carbon footprint will amount to only a few percent globally. This is because an electric vehicle’s carbon footprint is largely determined by how electricity is generated and by the battery life cycle. In a context where a significant share of electricity in the EU is still produced from fossil fuels, the advantages of EVs in terms of emissions reduction are less pronounced.

Clearly, the current situation reflects not so much an abandonment of decarbonization as a shift toward a more pragmatic approach. Hybrid vehicles can serve as a “bridge” between traditional and fully electric technologies, enabling a gradual reduction in emissions without dismantling the existing manufacturing base.

Author: PhD (Economics), Associate Professor, Department of World Economy and World Finance, Financial University under the Government of the Russian Federation Natalya Ivanovna Chovgan.