The Case For Plug-In Hybrids Is Changing. Here’s What Happened

A lot of electric-vehicle advocates aren’t big fans of hybrids. Many of them would say the sooner the world can go all-zero emissions, the better off we’ll all be, and that hybrids risk prolonging our collective dependence on fossil fuels.

As for me, I’m generally pro-hybrid: I say don’t let the perfect be the enemy of the good, and if buyers want electrified power, less gas use and fewer emissions, they should go for it. But I’ve never been a huge fan of plug-in hybrids—I’d rather own a car I have to plug in or fill with gas, but doing both feels rather cumbersome. Still, PHEVs make a ton of sense for a certain segment of buyers, even if that segment hasn’t been very large in America.

But as the EV and regulatory landscape shifts, the case for PHEVs might not be as strong as it once was. 

Welcome back to Critical Materials, your go-to source for the biggest news driving the future of transportation. Also on today’s docket: a Rivian R2 status update, and what Tesla investors will be seeking answers about during this week’s annual earnings call. Let’s dig in.

25%: Think The U.S. EV Market Is Weird? Plug-In Hybrids Are Even More Uncertain

PHEV EV Drivetrain

Photo by: InsideEVs

I do get the argument for PHEVs. You get a small amount of electric range for most of your daily driving because you plug in the car while it’s parked, then you use the gas engine for your longer trips. Unfortunately, studies show many drivers just don’t plug them in, negating many of their benefits.

Now, something unexpected is happening in the U.S. market. Not only did EV tax credits go away last year, but they also vanished for PHEVs. And so did stricter fuel economy rules pushing automakers to build more efficient and electrified cars. At the same time, if you’re open to a plug-in car, a modern, 300-plus-mile EV may negate the case for some PHEVs entirely.

This has automakers and analysts asking: Are PHEVs even worth it anymore? That leads to this great Automotive News story today. Some highlights:

Instead, automakers are increasingly turning to traditional hybrids that don’t have a plug and extended-range electric vehicles, which also ease anxiety about needing to recharge but with less cost and complexity.

Long after General Motors introduced Americans to the segment with the 2011 Chevrolet Volt, consumers still haven’t shown much interest. Plug-in hybrids were less than 2% of the new-vehicle market last year, according to S&P Global Mobility registration data through November.

Automakers have used plug-in hybrid vehicles to help comply with emissions regulations set by California and, to a lesser extent, the federal government.

But without regulations and tax incentives pushing the segment toward that level of popularity, some automakers are deciding there isn’t enough demand to keep developing and building plug-in hybrids.

“It’s still confusing for consumers, and they don’t really fully get it,” said Stephanie Brinley, associate director of AutoIntelligence for S&P Global Mobility. “And the changes in regulatory requirements and compliance do mean it’s less necessary, or it’s a solution that you don’t necessarily need to push as hard.”

That story is worth a read in full. It’s like the current “EV slowdown” situation on steroids—except that automakers are probably less under the gun to make PHEVs as a long-term mobility solution, whereas most experts believe electric cars will have a more permanent place in the automotive landscape.

So automakers are now taking different approaches to their PHEV plans. Stellantis? Dead. General Motors? Studying the matter, and plans to release some in 2027. Toyota and Volvo? Much higher hopes, especially since they know PHEVs are a bigger deal in Europe and China.

The industry may soon move on to EREVs, or extended-range electric vehicles—EVs with gas engines as generators. But if automakers couldn’t solve the PHEV user confusion problem, how would they do the same for those cars? I haven’t heard a great answer there yet.

50%: The Rivian R2 Arrives This Spring. Prototypes Are Road-Tripping Right Now

Rivian R2 Manufacturing Validation Build

Photo by: Rivian

The Rivian R2 is getting its kicks on Route 66.

The electric automaker announced in a blog post Friday that “validation build” vehicles—essentially, advanced prototypes—have set off on a cross-country journey across the iconic Chicago-to-California freeway route. (Fun fact: Route 66 is now a historic designation, not an active part of the “official” highway system, as has been the case since the 1980s. I didn’t know that!)

Rivian’s post also gave us a clearer idea of when customers can expect the R2, and it’s coming soon:

These early builds represent an important phase in development where we validate and perfect the quality of vehicles coming off the line at our factory. As we head toward the start of production in spring, this continuous feedback loop of testing, refining and updating ensures we are delivering repeatable quality at scale building vehicles that exceed our customers’ expectations.

The R2 we drove across Route 66 is one of many early builds already out for real-world validation. The information we gather goes directly back to our engineering, software and manufacturing teams for optimizations. Every piece of information brings us a step closer to delivering R2 to customers.

The Rivian R2 is quite possibly the biggest EV debut of 2026. It’s a smaller, more affordable and more profitable electric SUV from Rivian that also boasts a considerably more advanced platform than the original R1S and R1T. Rivian has touted a $45,000 price tag for the EV, although Launch Edition models are expected to be more expensive.

Sales of the R2 are widely seen as crucial to Rivian’s ability to thrive as a mainstream, volume automaker—much as Tesla once achieved with the Model 3 and Model Y. And with Tesla losing interest in the EV field to focus on Robotaxis and robotics, Rivian is hoping the R2 can pick up the slack.

75%: On Tesla’s Earnings Call Wednesday, Investors Want Robotaxi Progress

Tesla Cybercab, LA Auto Show 2024

Photo by: InsideEVs

Speaking of Tesla, its fourth-quarter and full-year-2025 earnings call happens on Wednesday. EV sales—still its core business—were down for the first time in a long time last year as Tesla handed its sales crown to BYD, but CEO Elon Musk is as adamant as ever that the future isn’t in builing cars anyway, but in autonomous driving.

Tesla has removed safety drivers from some of its Robotaxi vehicles in Austin and it hopes to expand that service more throughout the U.S. this year. Is that enough to keep investors happy, and to maintain Tesla’s sky-high stock price? Reuters explains:

But much of Tesla’s $1.49 trillion market value rests on Musk’s vision for self-driving vehicles and humanoid robots.

“Investors are largely looking past the near-term fundamentals. Market sentiment is being driven by Tesla’s broader autonomy ambitions, including progress on the robotaxi platform and anticipation of the Cybercab entering full production in 2026,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown, who personally holds Tesla shares.

With “earnings likely to look soft, keeping the narrative firmly anchored on future growth is crucial in supporting Tesla’s still-lofty valuation,” he said.

Tesla’s profit margins—the fact that it can make a profit on EVs—has long been core to its investor appeal, but this year the focus could turn to sales, after two years of decline. Wall Street broadly expects Tesla to return to deliveries growth in 2026, with about an 8% rise.

“The key signal for 2026 is that Tesla is intentionally trading near-term automotive margin for fleet scale since Elon understands that the value of the platform is not maximizing per-unit vehicle profitability today but maximizing the installed base that can later be monetized through autonomy and software,” said Shay Boloor, chief market strategist at Futurum Equities.

As I’ve written before, there are two distinct companies in play here: Tesla and $TSLA. One is an electric car company that earns its profits selling electric cars while making huge investments into autonomous vehicle technology.

The other is a $1.41 trillion market cap robotics and AI company that just hasn’t delivered on that stuff quite yet, but (hopefully) will someday.

Will we see an explanation of the roadmap to get there on Wednesday, or just more hype?

100%: For Hybrids, Do You Go Plug-In Or No-Plug?

Toyota RAV4 Hybrid

Photo by: Motor1

If you were interested in buying a hybrid, would you opt for one with a plug, or would you prefer the standard, fill-it-with-gas kind? Sound off in the comments.

Contact the author: patrick.george@insideevs.com