Siege on Japanese Cars: The HEV Lane Filled with Chinese Players

Author | Zhou Zhiyu

In 2025, HEV (hybrid electric vehicles) became a bright spot in the global automotive market. Last year, Toyota sold 4.43 million HEVs globally, netting 15,600 RMB per vehicle. In North America, Ford's HEV sales surged by 21.7% in the same period, while pure electric vehicle sales dropped by 14.1%. A niche segment that Chinese automakers had long overlooked continues to maintain stable and substantial growth overseas.

Outside China, HEVs have never gone "out of fashion."

Over the past decade, Chinese automakers nearly all bet their resources on pure electric and plug-in hybrid vehicles. Driven by policy direction and rapid breakthroughs in the supply chain for batteries and electric drives, plug-in hybrids became the optimal short-term solution. Meanwhile, the conventional hybrid system, due to technical barriers and cost structures, was relegated to a secondary position.

However, this landscape is changing.

Entering 2026, mainstream automakers including Great Wall Motor, Changan Automobile, GAC Group, Geely Auto, and Chery have accelerated the launch or promotion of HEV technology routes, collectively making a major push into this stronghold previously dominated by Japanese automakers. This is no longer just a product choice for individual companies but rather an industry-wide re-evaluation of the global hybrid market.

The explosion of plug-in hybrids over the past five years has allowed Chinese automakers to accumulate a complete electric drive supply chain and production capacity in the millions. By shrinking battery sizes while retaining the electric drive architecture, a lower-cost HEV solution has become practically feasible.

Against the backdrop of over 70 million annual fuel vehicle sales globally, HEVs have become one of the key pathways for Chinese automakers to enter the traditional automotive market.

Plug-in Hybrids Paid the Tuition for HEVs

Wall Street News learned that this round of domestic HEVs has significantly diverged from traditional Japanese hybrids in terms of technical pathways.

Ren Xiangfei, Chief Engineering Scientist at Geely Auto, pointed out to Wall Street News that Geely's new-generation i-HEV is essentially evolved from electric hybrid technology. "It can be imagined as a plug-in hybrid with a dedicated i-HEV battery."

The basic principle of HEVs is not complex: they do not rely on external charging. Instead, they generate power for the battery through the engine and energy recovery. The motor engages during low-speed and startup phases, helping the engine always operate in its high-efficiency zone, thereby reducing fuel consumption. Battery capacity is typically small, offering a driving experience close to that of fuel vehicles, simply with an added electric drive system to save fuel.

Toyota built a near-three-decade system advantage using this technical route. From the first-generation Prius to the latest THS system, it formed a complete supply chain and process standards around the planetary gear structure, making it difficult for newcomers to replicate directly.

Chinese automakers chose to "go around."

Over the past five years, the surge in plug-in hybrids drove large-scale production of DHT (dual-clutch hybrid transmissions), motors, and electronic control units. The relevant supply chain matured rapidly, and costs dropped significantly. Originally serving plug-in hybrids, these capabilities can now be quickly converted into HEV products by shrinking battery packs and adjusting control strategies.

Geely unveiled its i-HEV on April 13, featuring an engine thermal efficiency of 48.41%. The Emgrand i-HEV achieved a real-world fuel consumption of 2.22L per 100km. Ren Xiangfei noted, "This isn't even the lowest yet." The entire system comes from the Thunder Electric Hybrid platform, which has equipped 1.15 million plug-in hybrid vehicles over three years, covering 25.4 billion kilometers. Transitioning from plug-in hybrids to HEVs is almost seamless.

Ren Xiangfei stated, "The safety standards, design philosophy, and intelligence of the i-HEV are all designed based on the same-source logic as plug-in hybrid vehicles."

Every company is rolling out at speed. Geely announced mass production immediately upon launch. The Monjaro L and Preface were put on pre-sale on April 19, with the Boyue L and Emgrand to follow later this year. Fan Junyi, General Manager of Geely Auto Sales, revealed that by 2027, Geely's domestic fuel series will fully adopt i-HEV.

Changan Automobile launched its Blue Whale Super Engine Hybrid on March 30, achieving a real-world urban fuel consumption of 2.98L for sedans. Subsequent HEV versions of the Eado, UNI-V, and CS55PLUS have already been filed with the Ministry of Industry and Information Technology. GAC GMC has iterated its hybrid transmission to the third generation.

Great Wall Motor's approach is slightly different. The Guiyuan platform does not create a separate system solely for HEVs; instead, HEV is merely one power form derived from this architecture.

While paths vary slightly among different enterprises, the underlying logic remains consistent: using electric drive capabilities accumulated during the plug-in hybrid era to "downgrade" and enter the HEV market.

To some extent, the investments made in plug-in hybrids over the past five years have already prepaid the costs for HEVs.

Conventional Hybrids Are No Longer "Feature Phones"

If it were only about saving fuel, HEVs would not be a novelty.

The real change lies in shedding the past positioning of "low-end technology."

Although China's new energy penetration rate has exceeded 50%, nearly half of users have not yet switched. This group is not simply conservative but constrained by practical conditions: over 60% of households lack fixed charging facilities, pure electric range drops significantly in northern winters, and charging infrastructure remains scarce in county and township markets.

In recent years, industry resources were heavily concentrated on pure electric and plug-in hybrids, leaving these user needs unmet.

HEVs fill this gap perfectly: they require no charging, offer usage habits close to fuel vehicles, and reduce fuel consumption by 30% to 40%. At current oil prices, the long-term cost advantage is becoming apparent. Changan Automobile calculated a scenario: the fourth-generation Eado Blue Whale Super Engine achieved a real-world urban fuel consumption of 2.98L, compared to 6L for comparable fuel vehicles. Assuming 15,000 km driven annually and 92-octane gasoline priced at 8.57 RMB, owners save 3,882 RMB per year, totaling 23,300 RMB over a six-year replacement cycle.

More critically, price thresholds are falling. Wall Street News learned from industry sources that under the pressure of millions in plug-in hybrid production capacity, manufacturing costs for hybrid transmissions, motors, and electronic controls have dropped significantly. For Chinese automakers with self-developed and self-produced core components, costs are 15% to 20% lower than those of Japanese counterparts. Without large battery packs, the BOM cost of HEVs is 10,000 to 20,000 RMB lower than comparable plug-in hybrids.

BYD's DM-i slogan "same price for oil and electricity" broke down the price wall between plug-in hybrids and fuel vehicles; now HEVs have reached this inflection point. Relying on the production capacity of its Galaxy series plug-in hybrids, Geely directly deployed the same hybrid powertrain to HEVs, achieving pricing roughly equivalent to fuel vehicles with similar configurations.

When HEVs can achieve a price range close to or even equal to fuel vehicles, their market foundation is reopened.

The domestic HEV market is already gaining momentum. Sales surpassed 1.2 million units in 2025, with industry forecasts predicting 1.8 to 2 million units in 2026, pushing the penetration rate from around 5% toward 8%.

However, if it were only about saving fuel and being cheap, Japanese HEVs achieved this twenty years ago. Professor Shuai Shijin from Tsinghua University pointed out at a recent high-level forum on intelligent electric vehicle development that Toyota's power-split configuration, once a "mountain of hybrid technology," is now marginalized.

The underlying logic is that Japanese conventional hybrids cannot run air conditioning while parked, struggle with OTA updates, and lack advanced driver assistance systems, primarily because their batteries are too small to sustain the continuous power required by intelligent systems. Over the past decade, intelligence became the exclusive domain of pure electric and plug-in hybrids, causing HEVs to gradually be viewed as "feature phones": reliable and fuel-efficient but lacking smart experiences.

Domestic new-generation HEVs are breaking this binding.

GAC Star Source Super Twin-Electric is equipped with a 5.4kWh high-rate battery, three times the capacity of Japanese conventional hybrids, with peak power exceeding 150kW. It is not designed for pure electric range but serves as a power base for overall vehicle intelligence, enabling features like parking air conditioning, external discharge, sentinel mode, and full-time cabin connectivity, all running without starting the engine. Geely's i-HEV directly incorporates the GEEA 3.0 electronic electrical architecture, identical to that of plug-in hybrids. Great Wall's HEV solution utilizes Coffee EEA 4.0 and the VLA large model.

Compared to Japanese solutions with 1-2 kWh batteries, Chinese HEVs now have "large batteries," providing reliable support for intelligence that was previously difficult to achieve.

Through increased battery capacity and more advanced electronic electrical architectures, HEVs are beginning to possess stable power supply capabilities, with some models even directly adopting plug-in hybrid-level architectures.

This means consumers no longer need to choose between no-charging convenience and intelligent experiences.

Once this is validated by the market, the product logic of HEVs will undergo a fundamental shift: they will no longer be a transitional solution but a long-standing power form.

Professor Xu Xiangyang from Beihang University predicted at the high-level forum on intelligent electric vehicle development that by 2035, traditional energy passenger vehicles will fully achieve hybridization.

Going to Toyota's Home Court

The domestic market is just the starting point; true competition lies overseas.

In the first three quarters of 2025, China's HEV export volume grew by 94.1% year-on-year. However, within the overall structure of China's automotive exports, HEVs still account for a relatively low proportion, with incremental growth mainly concentrated in fuel vehicles, plug-in hybrids, and pure electric vehicles.

Demand for HEVs overseas is strong, yet the supply from Chinese automakers is just getting started, creating a clear mismatch.

In Southeast Asia, the Middle East, South America, and Africa, charging pile penetration rates are extremely low. With few charging piles, scaling up pure electric vehicles is not easy. Local consumers lack home-charging habits, which also limits the development of plug-in hybrids. HEVs do not rely on charging infrastructure; you simply refuel and go, offering a step-up in experience over traditional fuel vehicles. Great Wall's Haval H6 HEV has already faced off against Toyota head-to-head in Southeast Asia, Latin America, and the Middle East.

Data from Europe and the US further illustrate the issue. In 2025, European HEV sales reached 4.567 million units for the full year, a nearly 20% year-on-year increase, capturing a 35% market share and surpassing pure electric vehicles to become the largest electrification category. In the US, HEV sales reached 2 million units in the same year, growing by 26.6%, making it the only power type to achieve share growth. Insufficient charging infrastructure and high electricity prices forced consumers in developed markets to face a realistic arithmetic problem.

The EU imposed additional tariffs of up to 45.3% on Chinese pure electric vehicles, whereas HEVs face only a 10% basic tariff. Shipping the same vehicle from China to Europe results in lower costs for HEVs.

But the market is not determined by products alone.

Toyota's advantage in the global HEV market stems not only from technology but also from decades of accumulation in dealer networks, after-sales systems, and brand trust. While Chinese automakers now have products with lower costs and stronger intelligence, building channels and brand trust takes more than a year or two.

Chinese automakers are accelerating their catch-up efforts. Chery has the earliest layout in Southeast Asia and the Middle East; Geely has a foothold in Malaysia through Proton; Great Wall has a factory in Thailand. Yet, compared to Toyota's density, Chinese automakers still lag by an order of magnitude.

Great Wall's global logic for the Guiyuan platform is already laid out: promoting HEVs and fuel vehicles in Southeast Asia and the Middle East, with 49 core modules reusable across power routes, allowing one architecture to switch according to the market. On the day of the i-HEV launch, Geely initiated the "Ten Thousand Miles Journey, Breaking Through Globally" plan. Li Chuanhai, Dean of Geely Auto Research Institute, stated that development follows global car standards, with domestic and international progress advancing simultaneously. When launching the Blue Whale Super Engine, Zhao Fei, General Manager of Changan Automobile, described it as a "Global Hybrid Chinese Solution."

Behind these moves lies a redefinition of the HEV role. It will be a key tool for automakers to participate in global competition.

In terms of path, Chinese automakers took a detour for ten years: from plug-in hybrids and extended-range vehicles back to HEVs. But precisely this "detour" allowed the supply chain, electric drive technology, and scale capabilities to mature early. When these capabilities are recombined, HEVs become a product that can be redefined.

Toyota's hybrid system, built over thirty-plus years, remains solid. However, Chinese automakers are entering this market from the flanks with lower costs and stronger intelligence.

For Chinese automakers, product capabilities are gradually being filled in, but channels, brands, and service systems still require time to accumulate.

HEVs will not be the endpoint, but they may become the most realistic entry ticket for the next stage of global competition. As products gradually arrive, the true competition is just beginning.

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