An anti-EV narrative is emerging around battery electric vehicles in the U.S.: “the market is slowing” and “the EV tipping point is years away and may never arrive.”
Like many narratives, there’s an element of truth. EV sales aren’t increasing as quickly as a few years ago. And there are headwinds with the removal of some federal incentives that were pushing EV sales and charging infrastructure. But this misses a larger point we see in the McKinsey Center for Future Mobility’s annual Consumer Pulse survey. There is a lot of strength in the EV market, especially if you include transition vehicles like plug-in hybrids and extended-range EVs (EREVs).
What do the sales say? In the first quarter of 2025, automakers sold 374,841 electric vehicles in the U.S., including battery-electric vehicles (BEVs), plug-in hybrid (PHEV), and fuel-cell electric vehicles. That was 9.6 percent of the overall light-vehicle market. The two quarters before that, EV sales eclipsed 10 percent of the market. Year over year, EV sales increased by 9 percent, compared with a 5.6 percent for overall car sales.
This was a slower increase than the last few years, to be sure. In 2021, the EV market nearly doubled. In 2022 and 2023, it grew by 62 percent and 35 percent. On the other hand, just five years ago, EV market share was 2 percent. Now it’s 10 percent.
There are headwinds. U.S. automakers continue to struggle with making EVs profitable. Consumer EV subsidies will end Sept. 30. In the short term, we’re seeing a bump in sales as consumers who were on the fence rush to buy before the deadline. Over the longer term, there is going to be far less government support and funding for public infrastructure. That’s a challenge, but it also may make it more straightforward for private investors. Improving availability and reliability of public chargers will be up to them alone.
Yet, even with the US slowdown, the International Energy Agency predicts EVs will account for 40 percent of global auto sales by 2040, versus 20 percent in 2024. As longtime auto journalist Mike Colias says in his new book, “InEVitable: Inside the Messy, Unstoppable Transition to Electric Vehicles,” the forces pushing legacy automakers toward electrification – Tesla and the Chinese – aren’t letting up.
“As messy as the EV story is today, automakers can’t afford to rip up their EV strategies,” Colias says.
Perhaps the biggest determinant if EV momentum will see a resurgence is the availability of much more affordable EVs (like we see e.g., in China). Given the still high battery cost this is difficult, and with the subsidies going away that challenge just got bigger.
An important question is what’s next? Will the electric vehicle market forever be a niche, or is slowing sales growth a mere bump in the road?
According to our models, the U.S. policy changes will slow down rather than stop the shift to electric vehicles. We think the adoption curve could be pushed out by five years or more. Recent regulatory changes also give U.S. automakers more time to get EVs profitable and more powertrain flexibility to focus on hybrids, plug-in hybrids, and extended-range EVs. They will need to be adaptable, and they will need to spread capital investments across multiple electrified powertrains with flexible platforms.
The McKinsey Consumer Pulse survey, which hails from our Center for Future Mobility, has some other important information for the industry trying to adapt to the new landscape. We have been polling consumers going back to 2016 to measure how attitudes are changing each year. This year’s survey included about 26,000 car owners around the world. What we’re seeing should give confidence to those who are rooting for more electrification.
First, there’s not a lot of backsliding among people who actually own BEVs. More than three-fourths of BEV owners say their next car will be battery-electric. Of the 24 percent who say they’ll switch, 5 of 8 say they’ll go with a plug-in hybrid, not gasoline. Only 1 percent say they’ll never go back to electric.
Second, while the growth of the overall EV market is slowing in the U.S., results vary widely by region. In California, Washington and Oregon – states where there have been major investments in infrastructure – EV adoption rates are on par with Europe. Other states on the East and West Coasts are seeing much more rapid EV adoption. For example, 19 percent of Maryland vehicle owners say their next car will be a BEV, even though the electric-vehicle market share is just north of 12 percent today.
By contrast, there are some states with a larger rural population mix where fewer than 4 percent of consumers say their next vehicle will run on batteries alone. This underscores the huge difference between urban, suburban, and rural consumers. Overall in U.S. urban areas, 51 percent say their next vehicle will be BEV or PHEV. In rural areas, it’s 18 percent.
A third differentiator is age. The younger the consumers, the more likely they will shift to electric soon. For Gen Z, 47 percent say they’ll buy a BEV or PHEV next. For Millennials, it’s 45 percent. It drops to 22 percent for Generation X and 21 percent for the Baby Boomers.
The most important finding may be the role that PHEVs are playing in the electric transition. Because of their smaller battery packs, they’re cheaper than BEVs. And since they run on gasoline when their EV-only miles are used up, there’s no range anxiety. But this taste of battery power acts like a gateway drug. Once they realize battery power can meet most of their needs, they keep going. Households that were holding onto a second, gasoline-powered car are ready to give it up for their next vehicle.
Another class of vehicle that may serve as a bridge is known as an extended-range EV, or EREV. These are similar to PHEVs, but instead of having an engine that can put the vehicle in motion, an EREV’s gas engine serves only as a generator to charge the battery pack. EREVs like the Ramcharger are coming to the U.S., with more electric-only range and total driving range than a typical PHEV. In China, where they’re more common, twice as many consumers say their next vehicle will be an EREV than say they’ll buy a conventional gas-powered vehicle.
The biggest determinant of EV sales over the long term will depend on the availability of much more affordable electric vehicles, the kind that are available in China today. For now, U.S. automakers will breathe a sigh of relief, gaining several years, and at least one product cycle more, to make EVs more profitable. They also know there is increasing risk of falling further behind Chinese OEMs who now sell more than 50 percent ‘new energy vehicles’ domestically and are building massive capacity for global EV exports with high tech content per vehicle at affordable prices.
What’s the bottom line? The full picture isn’t one of a stagnant U.S. market. It’s one of a market that is changing in significant ways. Key states and regions are already at the tipping point for EVs while others will continue to be slow to adopt. Important demographics like urban and young consumers are going electric. If PHEVs and EREVs become more common, that taste of electrification may accelerate changing attitudes and expectations.
Beyond the market slowdown and the removal of incentives, we can see signs of continued movement toward hybridization and electrification. It confirms what we have long known: consumers still have plenty of voice in the market’s actions.
Philipp Kampshoff is a senior partner and global co-leader of McKinsey’s Automotive & Assembly practice, based in Houston, and Patrick Hertzke is a partner and co-leader of McKinsey’s Center for Future Mobility, based in Boston.
It’s pretty amazing that it has taken over 20 years for hybrid electric vehicles to generate truly significant interest. Yet, that’s the story today as many who are interested in electrification have decided to try a gas-electric hybrid first to sate their appetite for an electrified vehicle. It’s an easy choice since there is no real downside to a hybrid – great fuel efficiency, no range anxiety, and a more affordable price of entry compared to a fully electric vehicle. But how do they work? This article, which ran in Green Car Journal a dozen years ago, explained hybridization in an easy-to-understand way that still resonates today. We’re sharing it here just as it originally ran in Green Car Journal’s Summer 2012 issue.
Excerpted from Summer 2012 Issue: The term ‘hybrid vehicle’ covers a lot of territory. Motivated by two or more different power sources, a hybrid electric vehicle (HEV) uses an internal combustion engine (ICE) and one or more electric motors with batteries that store electrical energy. The ICE is usually a gasoline engine, but diesel engines can be used.
In the future, we will see hydrogen fuel cell hybrids where a fuel cell replaces the ICE. Then, there are hydraulic hybrids, now found in large trucks and buses. Here, energy in the form of high pressure hydraulic fluid is stored in accumulators and reservoirs rather than batteries, and hydraulic pressure rather electric motors drive the wheels.
There are both series hybrids and parallel hybrids, with the latter configuration currently far more popular in automotive applications. Cars like the Chevrolet Volt and Fisker Karma are series hybrids. Here, the ICE’s sole or primary job is to drive a generator that supplies electric energy to the battery or directly to an electric motor, or motors, that power the wheels. The engine in a series hybrid can operate at an optimum speed for best fuel economy since its focus is generating electricity rather than providing mechanical power to the wheels.
In a parallel hybrid, both the ICE and electric motor(s) can power the wheels together or individually. The ICE can also keep the battery charged. The ICE in parallel hybrids can be smaller and more fuel efficient since their electric motors can supply supplemental power for peak loads.
Then there are mild hybrids and full hybrids. In a mild hybrid, the ICE and motor/generator operate in parallel, with the motor/generator used for regenerative braking, stop-start capability, and battery charging. While the ICE provides most of the propulsion power, the electric motor can supply additional power, such as during acceleration and hill climbing. A mild hybrid cannot travel solely on its electric motor. The Chevrolet Malibu Eco, Buick eAssist, and BMW ActiveHybrids are examples of mild hybrids.
A full hybrid adds the ability to operate on electric power alone, at least for short distances. Sometimes a full hybrid is called a series-parallel hybrid since, like a series hybrid, its ICE and motor/generator can charge the battery that in turn powers the wheels. Examples include Toyota, Lexus, and Nissan hybrids, including the Prius with its Hybrid Synergy Drive (HSD) and Ford’s Fusion and C-Max hybrids.
Microhybrids are not really hybrids according to the above definition since they save fuel simply by shutting off the engine when a vehicles stops, such as at traffic lights. Their advantage is that microhybrids can deliver a 5 to 10 percent improvement in fuel economy with only minor modifications to a powertrain, while adding only a small amount to a vehicle’s cost. They do require more robust and powerful starters to handle the greater number of starts, plus more capable batteries to keep the air conditioning, radio, and other electronics running during the stop-and-start process when the engine is shut down. . As expected, maximum fuel economy comes in stop-and-go urban driving with no savings achieved during long-distance highway drives.
Often, stop-start is combined with regenerative braking for further fuel savings. This adds complexity since the braking system must have the ability to recoup braking energy and convert it to electricity that’s used to keep batteries charged. Virtually every mild and full hybrid features stop-start and regenerative braking. In fact, these two systems are what help hybrids achieve greater EPA estimated fuel economy in city driving compared to driving on the highway, where steady speeds have traditionally resulted in much better mpg than when driving in stop-and-go traffic.
As the name implies, the plug-in hybrid electric vehicle (PHEV) operates as a conventional hybrid but can also be plugged into the electric grid to recharge its batteries. This is in contrast to conventional hybrids that recharge only by their onboard generator and regenerative braking. PHEVs, which have a larger battery pack than standard hybrids so they can be driven longer on battery power alone, may never need a drop of gasoline if driven relatively short distances. Longer drives use a combination of battery and internal combustion engine power. Examples include the Toyota Prius Plug-In, Ford Fusion Energi, and C-Max Energi hybrids.
An Extended Range Electric Vehicle (EREV), sometimes called a Range-Extended Electric Vehicle (REEV), is designed for battery electric driving. It creates its own on-board electricity when batteries are depleted to extend all-electric driving range. EREVs can have either series or parallel hybrid configurations. The series hybrid Chevrolet Volt and Fisker Karma are high-profile examples that travel 25 to 50 miles on battery power and then hundreds of miles more with on-board generated electricity. Other similarly-powered extended range electric vehicles are on their way. The upcoming BMW i3, for example, will have a REx option with a small ICE that extends its nominal 100 mile all-electric range.
Karma’s new GS-6 is offered in Standard, Luxury, and Sport models, all sharing the sleek exterior design of the company’s upmarket Revero GT. The three GS-6 variants are powered by a transversely mounted, 400 kW twin-motor rear drive module (RDM) energized by a 28 kWh lithium-ion battery pack that delivers 61 miles of battery-electric range. The combination, which produces 536 horsepower and 550 lb-ft of peak torque, comes with an EPA rating of 70 combined city/highway MPGe. Range increases to 330 miles with additional electricity from a 1.5-liter, turbocharged three-cylinder gas engine spinning a 170 kW generator.
The driver can select one of three modes that control how the motor is powered: Stealth mode uses the battery pack only; Sustain mode accesses the generator to create electricity to power the car; Sport mode uses both the batteries and the generator to supply power directly to the motors.
The drive system’s Sport mode is available in all GS-6 versions, not just the Sport model. The line-topping Sport model is differentiated from the other GS-6 versions by its 22-inch wheels (21s are standard on the others), red Brembo brake calipers, and torque vectoring from the RDM.
The GS-6’s leather interior is available in a choice of five colors and accent trim that range from carbon fiber to reclaimed wood from forests burned by California wildfires. The car’s Human-Machine Interface enables driver control of features including steering feel, accelerator pedal aggressiveness, and its Advanced Driver Assistance System (ADAS). Controls in the haptic steering wheel give the driver command of the sound system and phone, driving modes, adaptive cruise control, and a three-mode regenerative brake system. The center touchscreen contains controls for the HVAC system, heated and ventilated seats, audio, and lighting. Also controlled through the center screen is the GS-6’s Track Mode, which provides data ranging from lap times and g-forces to energy use and even tire pressure and temperature.
The ADAS aboard the GS-6 has a long list of assistance and safety features including adaptive cruise control with stop and go, lane-keep assist, automatic emergency braking, blind-spot monitoring/rear cross-traffic alert, forward collision warning, and parking distance monitoring. Onboard cameras provide a 360-degree view around the Karma. Apple Car Play and Android Auto capability are built into the GS-6, and it can receive over-the-air updates for remote diagnostics and software upgrades.
While it sells vehicles globally, Karma's operations are in Southern California with headquarters in Irvine and a production facility in Moreno Valley.
It’s interesting to chart the growing sales of hybrids and other clean vehicles today. What’s really enlightening, though, is to understand how these vehicles are being used and what their implications are for our driving future.
That’s where cutting-edge demonstration projects like Austin’s Pecan Street bring great value to urban and transportation planners, by providing a real-life example of how far we can take sustainable, low-, or no-carbon transportation and daily living with currently available technology.
Austin’s Pecan Street, Inc, the country's first non-profit research and development consortia focused on energy, wireless, and consumer electronics technology, recently joined with GM subsidiary OnStar to collect and analyze real-world energy consumption through driving and charging data patterns. Thanks to the GM/OnStar partnership, the Pecan Street project now includes the Chevy Volt for gaining critical real-life usage data for the use and charging of extended-range electric vehicles. Chevrolet made 100 Volts available for priority purchase to residents participating in the project last September.
Among the grid-relieving solutions developed by OnStar are charging with renewable energy, energy demand response, time-of-use-rates, and home energy management. The partnership with Pecan Street is enabling OnStar to test these smart grid services in realistic, everyday scenarios. Additional partner companies like Sony, Whirlpool, Oncor, and Intel are also providing residents with smart grid and clean energy products and services, such as photovoltaic panels for generating power, batteries to store energy, and smart grid tools to help make everything work in unison.
The final goal of the project is to help consumers make the best possible use of energy for daily life, and specifically for charging their plug-in hybrids and other electric vehicles. The hope is that research resulting from the project will help speed up the innovation cycle around smart grid and consumer electronics technology. This is important since electric vehicles add significantly to a home’s energy profile. Understanding how, and when, consumers use their electric vehicles and keep them charged is critical information.