Hybrids have become the leading powertrain choice in Europe, capturing over 37% of new registrations, as US consumers increasingly shift from electric vehicles to petrol and hybrid models following the end of federal EV tax incentives. This trend complicates the European Union’s 2035 climate goals, prompting regulatory proposals to keep hybrids legal beyond that deadline.
- Hybrids lead EU new car sales at 37.3% in 2026.
- US EV incentives ended, sales shifting to petrol and hybrids.
- EU may allow hybrids post-2035 with a 90% emissions target.
What happened
American consumers are increasingly moving away from pure electric vehicles, favoring hybrid and petrol cars after the expiration of the $7,500 federal EV tax credit in September 2025. Data shows that in Q2 2026, 42.6% of EV trade-ins in the US resulted in buyers selecting combustion engine vehicles, while only about 34.6% returned to electric models. This shift is influenced by rising EV leasing costs, which currently exceed petrol equivalents by about $100 monthly.
In contrast, Europe is experiencing a surge in hybrid vehicle sales. Hybrids have become the largest-selling powertrain in the EU, making up 37.3% of new registrations in the first half of 2026. Battery-electric vehicles have increased as well but only account for 20.7%, while petrol vehicles have declined. The European Commission recently proposed modifying the 2035 climate target to allow hybrids to remain on sale, shifting from a 100% zero-emission vehicle mandate to a 90% target, accommodating a mix including plug-in and mild hybrids.
Why it matters
The continued popularity of hybrids challenges the EU’s original objective to fully phase out combustion engines by 2035. Allowing hybrids to remain legal post-2035 could delay the complete transition to zero-emission vehicles, affecting climate goals. Transport and Environment estimates that battery-electric car sales may reach 85% by 2035 instead of 100%, with potential impacts on emissions reductions and European industrial policies related to battery manufacturing capacity and job creation.
In the US, the drop in EV uptake following the withdrawal of subsidies signals the importance of pricing and incentives in accelerating electric vehicle adoption. A broader shift back to petrol and hybrids risks stalling electrification progress. Meanwhile, Europe is ramping up EV registrations but balancing ambition with consumer and industry realities by keeping hybrid options viable while expanding charging infrastructure.
What to watch next
Observers should closely monitor the EU Parliament and Council negotiations on the 2035 vehicle emissions targets to see if the proposed allowance for hybrids will be finalized. The outcome will shape the regulatory landscape for powertrain technologies and affect automakers’ investment strategies in Europe’s transition to cleaner mobility.
In the US market, future EV sales will depend heavily on pricing dynamics and potential reinstatement or new forms of incentives. Automakers and policymakers need to address cost barriers to prevent backsliding toward combustion vehicles and ensure the growth of sustainable transportation sectors remains on track.