According to the latest data from the U.S. Department of Energy, a significant trend is emerging in the American car market. Americans are increasingly buying electrified cars, with nearly 20 percent of sales in Q3 being accounted for by these vehicles. However, a closer look reveals that much of this growth is concentrated in lower-priced hybrid models, rather than the luxury BEVs that dominate the full-electric market.

Record Electrified Market Share in Q3

The Q3 electrified market share of 19.6 percent includes HEVs, PHEVs, and BEVs. Hybrid vehicles alone made up 10.8 percent of Q3 sales, setting another record. BEVs claimed a 7.0 percent share, with a 0.4 percent drop. Digging deeper, it's interesting to note that 70 percent of BEV sales were luxury models, while only 10 percent of hybrid sales fell into this category. This clearly shows that buyers are embracing the expanded hybrid options across various automaker lineups.

EV Sales Slowdown and Reasons

The slowdown in EV sales is not unexpected. The initial excitement and novelty of EVs, along with discounts, have worn off. In addition, manufacturing costs, overproduction, and unreliable EV charging have become the new realities. Hybrid cars, on the other hand, are simply more affordable. According to Cox Automotive, the average transaction price for an EV in September was $56,351. Although there was a 0.9 percent year-over-year decrease, the EV ATP is significantly higher than the industry-wide average of $48,397. The 2025 Toyota Corolla Hybrid stands out as the current cheap champion of hybrids, starting at $24,760, which is less than half the EV ATP.

Automakers' Adjustments

Automakers are facing the challenge of adjusting to the EV over-supply and under-demand situation. Ford has halted F-150 Lightning production and shifted its focus to hybrid models. The Volkswagen Group is reallocating its budget from EVs back to gas cars. Both General Motors and Mercedes-Benz have changed their EV strategies, opting to play the long game instead of rushing into all-EV production.

EV vs. Hybrid in Luxury Car Sales

While consumers are generally more hybrid-friendly, they still have an interest in EVs. EV buyers with deep pockets control 35.8 percent of total luxury vehicle sales, accounting for more than a third of all luxury models sold in the U.S. Luxury automakers were among the first to make all-EV promises. Brands like BMW, Jaguar Land Rover, and Benz announced their intentions in the early 2020s. With smaller lineups compared to mass-market manufacturers, they had more flexibility. Consumers with extra cash are often eager to try something new before others. Although EVs' hold on luxury car sales is being challenged by hybrids, the change is not significant or rapid. As EV charging access and infrastructure improve and pricing stabilizes, it is ICE powertrains that may face an inevitable niche status in the new car market.