Why car makers are going back to combustion engines

Carmakers aren’t abandoning electric vehicles; they’re rebalancing. Slower-than-expected EV demand growth, policy flexibility that rewards hybrids, persistent charging gaps, and profit pressure are pushing many brands to extend the life of combustion engines—often paired with hybrid systems—through the 2030s while they keep investing in next-generation EVs. This recalibration reflects market, regulatory, and supply-chain realities rather than a full-scale retreat from electrification.

The market reality has shifted

After several years of rapid EV growth, momentum cooled in key Western markets during 2023–2024. In the United States, battery-electric vehicles settled around the high–single digits of new sales, while conventional and plug-in hybrids surged. Surveys continued to show that charging reliability remains a concern—roughly one in five public charging attempts fail—and high interest rates amplified up-front cost sensitivity. Battery prices fell in 2023–2024 but not uniformly enough to offset those headwinds, especially in popular, heavy segments like pickups and large SUVs. The upshot: demand is strong for electrification, but consumers are gravitating toward hybrids and plug-in hybrids as a lower-risk bridge.

Regulation is enabling a slower pivot

Policy didn’t vanish; it evolved. In the U.S., the Environmental Protection Agency’s 2027–2032 light-duty emissions rule finalized in 2024 offers manufacturers flexibility to meet targets with a mix of BEVs, PHEVs, and efficient hybrids—softening earlier expectations of a near-term two-thirds BEV market. Europe’s 2035 “zero-emission at the tailpipe” rule still stands, but a watered-down Euro 7 keeps near-term tailpipe limits close to Euro 6, easing the cost of keeping modern ICEs on sale. The UK delayed its ICE phaseout from 2030 to 2035 while retaining a rising zero-emission sales mandate, and the EU opened an e-fuels exception after 2035. Meanwhile, China’s NEV credit system and fierce price competition continue to drive electrification—but ICEs still play a role, especially in export markets.

Why the pivot back to combustion is happening now

Several overlapping forces are behind the renewed emphasis on combustion engines—typically as part of hybridized powertrains rather than stand-alone, old-school ICEs. The points below outline the main drivers behind this shift.

• Consumer demand and use cases: Many buyers want lower prices, dependable fueling, and familiar ownership—especially for long commutes, towing, cold climates, and multi-unit housing without home charging. Hybrids meet most daily needs without charging anxiety.
• Profit and capital discipline: ICE trucks and SUVs still fund balance sheets. BEV margins remain thin for many models due to price wars and scale-up costs. Automakers are pacing EV capex to protect cash flow.
• Policy flexibility: The U.S. EPA’s 2024 rule allows a compliance mix heavy on hybrids/PHEVs; Europe’s diluted Euro 7 reduces near-term ICE reengineering costs; the UK’s timeline shift buys time; e-fuels carve-outs and corporate-fleet tax incentives sustain PHEVs in Europe.
• Supply chain and manufacturing: Battery plant ramps, software integration, and sourcing rules (e.g., U.S. domestic-content requirements for incentives) remain complex. Short-term execution risk makes hybrids a safer volume play.
• Global-market asymmetry: In emerging markets, limited charging infrastructure and price sensitivity keep ICE and mild hybrids dominant for longer.
• Technology progress in ICE-hybrids: New engines optimized for hybrid cycles (Atkinson/Miller, high compression, cooled EGR) deliver sizable efficiency gains; PHEVs with 40–60 miles of electric range cover most daily driving while retaining long-trip flexibility.

Taken together, these factors favor a diversified lineup. Hybrids and PHEVs let automakers meet emissions targets, serve mainstream buyers, and bridge to more affordable, higher-volume EVs later in the decade.

What “going back” actually looks like

This isn’t a return to big-displacement stand-alone ICEs. The industry is prioritizing electrified combustion—mild hybrids, full hybrids, and plug-in hybrids—plus selective updates to efficient gasoline and diesel engines. Below are representative moves across major brands; they show a push for flexibility, not a reversal on EVs.

• Toyota, Subaru, Mazda: Announced new compact combustion engines in 2024 designed to pair with electrification; Toyota continues to lean on hybrids while scaling solid-state and next-gen batteries.
• Ford: Trimmed near-term EV spending and is expanding hybrid variants across high-volume pickups and SUVs while continuing its dedicated EV platform work.
• GM: Revived plans for North American plug-in hybrids to complement the Ultium EV rollout and help meet emissions rules in the interim.
• Mercedes-Benz: Reframed its “all-electric by 2030 where market conditions allow” stance, signaling ICE and hybrids will persist into the 2030s as BEV adoption varies by region.
• BMW: Invested to keep next-generation combustion engines viable alongside a growing EV portfolio, targeting different market needs in parallel.
• Stellantis: Scaling efficient “Hurricane” turbo sixes, mild hybrids, and PHEVs (notably Jeep’s 4xe) while developing more EVs across brands.
• Volkswagen Group: Updating core ICE families and PHEV ranges for Europe and emerging markets while pushing lower-cost EVs and software fixes.
• Hyundai–Kia: Accelerating hybrid offerings and PHEVs to complement aggressive EV plans, especially in markets with uneven charging buildout.
• Performance/luxury niches (Porsche, Ferrari, Lamborghini): Keeping ICEs alive longer via hybrids and exploring e-fuels for limited, high-value segments.
• Chinese automakers: Dominant at home in NEVs but still exporting significant ICE volume to price-sensitive regions, sustaining global ICE demand.

The common thread: keep multiple powertrains in play, meet diverse regulatory and consumer needs, and time big EV bets for when costs and infrastructure align.

The regional picture isn’t uniform

Adoption curves and policies differ widely, shaping the mix of EVs, hybrids, and ICEs by market. The following snapshots highlight why strategies diverge.

• United States: BEV share hovered around the high–single digits through 2024, while hybrids surged. EPA rules allow hybrid-heavy compliance; public charging reliability and interest rates remain swing factors. Pickup/SUV preferences favor electrified combustion as a bridge.
• European Union and UK: BEV share is higher than in the U.S., but growth has been choppy. Euro 7’s lighter touch lowers the cost of keeping ICEs competitive. The UK’s 2035 delay and strong company-car perks support PHEVs/hybrids. EU tariffs on Chinese EVs raise pricing questions.
• China: NEV share surpassed a third of new sales, but ICE volumes remain large and crucial to export growth. Intense price competition pressures margins across all powertrains.
• Global South (India, Southeast Asia, Latin America, Africa): Limited charging, fuel-price dynamics, and policy frameworks keep ICE and hybrids in the lead; Brazil’s ethanol-hybrid pathway is a notable alternative.

These regional differences make a single global transition timeline unrealistic. Automakers are tailoring portfolios to the local policy, infrastructure, and customer math.

Technology is enabling the “middle path”

Modern combustion isn’t standing still. Engine families optimized for electrification—using Atkinson/Miller cycles, high compression, variable valve timing, cooled EGR, turbo downsizing, and gasoline particulate filters—pair with 48‑volt systems to deliver double-digit efficiency gains. PHEVs with larger batteries now cover most daily driving on electricity while retaining quick refueling for long trips. Parallel explorations of synthetic e-fuels and hydrogen ICEs remain niche and costly today but give regulators and specialty brands an additional compliance lever.

Will this slow climate progress?

It could, if BEV scale-up stalls. But replacing older, inefficient ICEs with high-efficiency hybrids reduces fleet emissions now, especially where charging is scarce. Longer-term decarbonization still hinges on grid buildout, reliable fast charging, cheaper batteries, and strong policy follow-through. Fleet, ride-hail, and delivery segments—where duty cycles favor electrification—continue to electrify quickly.

What to watch next

The transition’s speed will hinge on a few measurable signals. Watch these indicators to gauge whether the pendulum swings back toward faster BEV adoption or stays balanced with hybrids longer.

• Battery costs and chemistry shifts (LFP, LMFP, sodium-ion) and their impact on entry-level EV pricing.
• Public charging uptime, coverage along corridors, and multifamily/home-charging solutions.
• Regulatory durability: implementation of U.S. rules, EU 2035 details, UK ZEV mandate, and state-level policies (e.g., California).
• Trade dynamics: tariffs and incentives affecting Chinese EVs and global pricing.
• Residual values and financing costs, which shape monthly payments and fleet economics.
• Automaker execution on next-gen EV platforms designed for cost parity and easier manufacturing.

If costs fall and charging reliability rises, BEV adoption is likely to reaccelerate; if not, hybrids and PHEVs will carry more of the decarbonization load through the decade.

Bottom line

Carmakers are not renouncing EVs; they’re hedging. By extending modern combustion—mostly in hybrid form—they can meet rules, protect profits, and serve customers while they wait for cheaper batteries and better charging. Expect mixed lineups well into the 2030s, with the balance shifting as economics and infrastructure improve.

Summary

Automakers are “going back” to combustion engines because buyers want affordable, convenient options; policies allow hybrid-heavy compliance; profits from ICE trucks and SUVs fund future EVs; and charging gaps persist. The shift is toward electrified combustion—hybrids and PHEVs—rather than a wholesale retreat from EVs. Regional differences, trade policy, and technology costs will determine how long this middle path dominates before EVs regain momentum.

Are combustion engines coming back?

Can internal-combustion engines stay relevant in an EV world? (Hint: the answer is yes). The internal-combustion engine is far from dead, and motorsports and aftermarket performance companies will play a key role in making ICE vehicles environmentally sound for decades to come.

Why are car manufacturers going back to combustion engines?

Instead of focusing on a purely electric future, it is looking to produce more combustion and hybrid models again. Customers in both the US and Europe have been slower to switch to electric cars than many manufacturers had hoped, due to problems with the charging infrastructure and high purchase prices.

Do all cars have to be electric by 2026?

Under California’s mandate, 35% of new 2026 model cars sold in the state must be zero-emissions, ramping up to 68% in 2030 and 100% in 2035.

Are manufacturers returning to combustion engines?

The internal combustion engine is not dead yet. Despite automakers’ growing efforts to electrify their lineup, adding hybrids and EVs and removing gas-only options every year, there are still plenty of brands that see value in developing new combustion engines.