A Missed Market No More: Why Automakers Should Bet on EREVs

By Fred Surr, EREVNow 

August 27th, 2025

Automakers around the world have spent the past decade promising an all-electric future. But in 2024, the limits of that future became painfully clear. Battery electric vehicle (EV) sales in the U.S. fell short of forecasts, supply chains were strained, and profit margins thinned. One quiet winner, not currently available in the US, emerged from the chaos: the extended-range electric vehicle (EREV).

Once dismissed as a technical footnote, EREVs are now gaining momentum — but so far only in China, where they’ve gone mainstream. In North America, where consumers and companies alike are seeking a more flexible bridge to electrification, “EREVs could represent a significant opportunity to revitalize EV sales growth,” McKinsey wrote in a February 2024 analysis, “if OEMs are able to achieve lower production costs and provide EREV price points attractive to ICE-inclined and BEV-resistant car buyers.” (McKinsey & Company, Feb 2024 report)

The market signals are there. The question is whether automakers are paying attention.

A Global Case Study: China’s EREV Boom

China’s experience with EREVs is a blueprint — and a warning.

In 2024, EREV sales in China jumped 79% to 1.2 million units, far outpacing plug-in hybrids and about even with Battery-only EVs. (Reuters, April 2025). Automakers like Li Auto and AITO offer models that combine 130+ miles of electric range with total ranges exceeding 400 miles — a sweet spot that covers most driving on battery alone and handles range anxiety on longer trips.

“Chinese automakers have developed a thriving business in so-called extended-range electric vehicles,” Reuters reported. “Both EREVs and plug-in hybrids grew faster than pure EVs in the China market last year.” (Reuters, April 2025)

Volkswagen, for one, appears to have taken notice. Its Scout Motors division is launching EREVs in the U.S. by 2027, combining retro branding with pragmatic range-extender tech. “Scout’s EREV seems to be stoking interest,” WIRED noted. “The company is ‘seeing that enthusiasm reflected in reservation counts’”. (Wired 2024-11-03)

Cost, Complexity — and Opportunity

You might think that an EV with batteries and a generator would be more expensive.  But McKinsey’s cost modeling suggests just the opposite: a well-designed EREV could actually be cheaper than an EV. An EREV with 150 miles of electric range could use a 68 kWh battery — while a comparable EV would need a 228 kWh pack, meaning “An EREV powertrain could cost 30 to 40 percent less to produce than a BEV powertrain”. (McKinsey & Company, Feb 2024 report)

EREVs also offer a faster path to market. Many EREVs coming to market, like Stellantis’ Ramcharger, build on existing parts and platforms. (Wired 2024-11-03.). Remove batteries (and weight), put the engine and generator where the “frunk” is (under the hood), and existing EV designs can be modified quickly without massive re-engineering.

Manufacturers struggling with EV profitability now face a compelling option: build EREVs in existing plants, using familiar technology, and appeal to the massive segment of consumers still anxious of relying on charging infrastructure when they can’t charge at home.

The Consumer Gap EREVs Can Fill

Automakers already know the pain of missing the early EV wave. Tesla capitalized on others’ hesitation and now dominates the U.S. EV market. But a second wave of market opportunity could be emerging — one defined not by early adopters, but by pragmatic consumers.

A 2024 McKinsey survey found that two-thirds of prospective EV buyers would choose an ICE or hybrid vehicle if there wasn’t an EREV option. That’s a rescue market hiding in plain sight. (McKinsey & Company, Feb 2024 report)

And they’re a way to keep current EV owners when it’s time for them to get a new car. McKinsey reports that 46% of U.S. EV owners are thinking about switching back to gas because of charging problems.

What’s Holding The Car Industry Back?

So why haven’t more automakers jumped in?

Mostly, it seems, it’s a simple lack of clarity. As WIRED put it, “The hot new acronym in the automotive world is EREV... but that collection of letters doesn’t quite describe it.” Too many buyers — and automotive professionals — confuse EREVs with plug-in hybrids. (Wired 2024-11-03). They’re not – they’re Electric Vehicles with a backup generator. Automakers that position EREVs as EVs with built-in peace of mind may just find themselves first in line for the mainstream buyer.

Government regulation isn’t helping either. In the U.S., many EV incentives are tied to battery size or “zero-emission” classifications, and EREVs can fall through the cracks unless policymakers modernize standards. In order to qualify as an EV, the BMW i3 EREV, available in the US 2016-21, was restricted to a 2-1/2 gallon gas tank (that’s not a typo). Fortunately, “California and the EPA have taken steps to reward electric-only range — a boon for EREVs with 100+ mile batteries.” (McKinsey & Company, Feb 2024 report)

Betting on Both Sides of the Bridge

EREVs don’t replace EVs. They complement them. That’s why some US automakers are starting to build product families that include both. Hyundai, for example, is preparing a 560-mile EREV for 2027. “The vehicle will serve as a key bridge to full electrification,” the company said. (Wired 2024-11-03)

For OEMs caught between missed EV targets and skeptical ICE buyers, the message is simple: EREVs are a chance to win back momentum, margin, and market share.

This isn’t a waiting game anymore. It’s a race — and the first movers will have an advantage.