The 2025 Munich Motor Show should be the triumph of pure electric cars, according to Brussels’ roadmap. However, behind the talk of transition lies a quiet decline in the industry, of which the plug-in hybrid (PHEV) has become a poignant symbol. Europe has chosen to ignore bridge technology, and offers a path to Chinese manufacturers.
As shown in an International Council on Clean Transportation study published last week, between 2020 and 2024, PHEV sales explode in China, from 238,800 to 4.86 million units, or growth of 1,930%. Europe, after peaking at 910,400 sales in 2021, is now stagnating at 772,500 units. It is a conquest: Beijing has created a market equivalent to six times that of Europe, turning leading companies such as BYD and Li Auto into global giants.
Brussels regulatory options
Europe’s decline is not a market accident, but a direct consequence of Brussels’ political choices. Obsessed with “zero emissions”The European Union has systematically harmed PHEVs and considers them the wrong solution. By giving manufacturers artificial bonuses for theoretically low-emission PHEVs, the EU has created a subsidy-driven market. As soon as this multiplier is halved in 2023, the bubble bursts.
Europe lost confidence when tests showed that PHEVs, which are often poorly charged by drivers, emit 2 to 3 times more emissions in thermal mode than the values announced in the laboratory.
The ZLEV mechanism (2025-2029) complements this strategy. It values pure electricity almost exclusively. Faced with the threat of huge fines (exceeding 95 euros per gram of CO₂), the calculations of manufacturers such as Stellantis or Volkswagen are extremely cynical: it is better to sell small electric cars at low prices than sophisticated hybrid SUVs. Europe no longer believes in this technological bridge.
In the final stage, the EU proposed temporary flexibility in April 2025, offering manufacturers three years to comply with emissions targets. This is an admission of helplessness that comes after battle. Renault, Volkswagen and Stellantis need a breath of fresh air to manage the closure of their thermal plants, but this will not hinder China’s breakthrough, which is already effective.
China creates the PHEV of the future
In 2023, PHEVs receive the same tax treatment as BEVs: 10% tax exemption and access to the same subsidies. This strategic choice is pragmatic: it makes it possible to offer low-emission mobility without the need for expensive infrastructure and giant batteries that are 100% electric. For China’s urban consumers, it’s the end of anxiety about autonomy, with operational costs under control.
But the real breakthrough is technology. While Europe stagnates at an average electric range of 70 kilometers, China surpasses the 100 kilometer threshold. This difference is not a coincidence: it is due to Chinese NEV regulations that highly value long-range PHEVs, thereby creating a zone of maximum profitability.
Most importantly, China has created a new architecture: REEV (Range-Exced Electric Vehicle), which is scaled up by Li Auto. In this format, the gasoline engine only functions as a power generator, never driving the wheels. The traction is 100% electric at all times. It’s simpler, lighter, more efficient and can offer a range of more than 100 kilometers with a compact battery. Li Auto has become the maestro of this luxury category, selling more than 500,000 vehicles by 2024, a volume that exceeds the wildest dreams of European manufacturers in this segment.
This abundance translates into a rich offering: 175 Chinese PHEV models are testing niche markets (electric MPVs, pick-ups) compared to 138 European models, which are too often in one line.
The SUV paradox and strategic stalemate
The paradox is that SUVs dominate the PHEV market everywhere (61% in China, 69% in Europe, 86% in the United States). And the larger and heavier a PHEV, the more pronounced its emissions in thermal mode.
In the United States, the love of large hybrid SUVs has completely eclipsed technological progress, with average emissions increasing by 24% between 2020 and 2024. This is a perfect illustration of the rebound effect: technology improves, but consumers buy larger vehicles, eliminating the environmental benefits. China is an exception, benefiting from the effectiveness of REEVs, reducing its emissions by 22% in the same period.
Currently, the invasion is underway: Chinese PHEV sales growth in Europe reached 1,320% in one year (August 2024 – August 2025). Europe, in seeking regulatory purity, gave up a transitional technology that it could have dominated for a decade. European manufacturers are at a dead end: they are switching to 100% electric with no margins, or closing factories, or trying to compete with Chinese REEVs whose architecture and volumes they cannot control.
The EU believes that by taking PHEVs out of the game, they will force a switch to electric. This is actually giving way to more nimble competitors. The European PHEV market, which was stuck at 770,000 units sold, is now China’s growth reserve. Europe arrives after the battle. Li Auto alone delivers more than the entire EU could ever dream of.
