Why are vehicle manufacturers embracing multi-powertrain strategies?

Powertrain strategies are becoming more flexible. As automakers rethink all-EV roadmaps in favor of portfolios that include BEVs, hybrids and ICE vehicles, Mobility Global helps OEMs, suppliers and investors understand how changing regulations, economics and consumer demand are reshaping the global powertrain mix and creating new investment opportunities.

The announcements by Stellantis and JLR at their Investor Days this year shared a common theme: a multi-powertrain strategy, with battery electric vehicles (BEVs), hybrid electric vehicles (HEVs) and internal combustion engine (ICE) vehicles all playing central roles in their future product portfolios.

Economic and policy shifts drive new powertrain strategies

This shift in powertrain strategies is already evident in the actions of major global automakers. Under Stellantis’s newly announced FaSTLAne 2030 strategy, nearly 50% of global annual volumes will be supported by multi-regional powertrain solutions by 2030, with energy flexibility embedded across the portfolio. JLR has also signaled a significant strategic shift in its approach to automotive electrification. The company announced that its new Electrified Modular Architecture, originally conceived as a dedicated BEV platform under the 2021 Reimagine strategy, is being re-engineered to accommodate full-hybrid powertrains alongside BEVs.

Virtually every Western OEM that announced an aggressive all-BEV roadmap from 2021 to 2023 has since pivoted toward a hybrid-led multi-powertrain strategy. Toyota, which never made that bet, looks prescient in hindsight. Its hybrid intellectual property and supply-chain expertise have become assets that Western rivals are increasingly seeking to license or access through partnerships.

More broadly, these moves toward multi-powertrain portfolios are being driven by the same underlying economics and a policy environment that increasingly favors powertrain flexibility across every major market except Greater China.

If the EV push of 2021–2023 was regulation-led, the EV market slowdown and the hybrid resurgence of 2025–2026 are equally policy-driven. Across the US and EU, regulatory frameworks that once pushed OEMs toward all-BEV roadmaps have been dismantled or substantially relaxed. This is arguably the most important driver of the strategic shift, as it removes the compliance imperative that made BEV-only strategies non-negotiable and allows OEMs to prioritize consumer demand and margin economics.

United States: Changing automotive emissions regulations reshape EV adoption trends

The most pronounced policy shift has occurred in the United States. Since returning to office, the Trump administration has substantially reshaped the federal approach to vehicle electrification, rolling back or revising many of the policy mechanisms that had been used to accelerate EV adoption.

For automakers, the implications are clear: the cost of maintaining ICE and hybrid vehicle portfolios has declined relative to previous expectations, while the policy incentives supporting rapid BEV deployment have weakened. This has strengthened the case for multi-powertrain strategies, allowing OEMs to balance electrification goals with evolving consumer demand and profitability considerations.

European Union: Retreat from the 2035 combustion engine ban

The EU's proposed changes to automotive emissions regulations are narrower than the US rollback but arguably more symbolically important, since the 2035 zero-emission mandate was the flagship policy of Europe's climate-and-industrial strategy.

Following sustained pressure from Germany, Italy and the European auto sector—including a direct letter from German Chancellor Friedrich Merz calling for "flexible and realistic regulation open to all technologies"—the European Commission proposed in December 2025 to replace the 100% zero-emission requirement for 2035 with a 90% CO2 reduction target instead. In practical terms:

• Plug-in hybrids, range extenders and mild hybrids can continue to be sold beyond 2035, provided manufacturers offset the remaining emissions using EU-produced low-carbon steel and sustainable e-fuels or biofuels.
• Super credits aimed at addressing Europe's competitiveness gap against mainland Chinese entrants will reward manufacturers producing small, affordable EVs built within the EU.
• A three-year compliance window (2030–2032) was introduced for the interim 2030 target, softened to a 55% reduction from 2021 levels, with vans easing from a 50% to 40% CO2 cut.

China is raising the bar for electrified vehicles

In contrast, Greater China's policy trajectory is moving in the opposite direction to that of the West. Beijing's new-energy vehicle purchase tax incentives—a 50% tax reduction capped at 15,000 renminbi per vehicle for 2026–2027—now come with tightened technical requirements that specifically raise the bar for PHEVs. PHEVs and REEVs must deliver more than 100 km of pure-electric range to qualify (up from 43 km previously), along with stricter energy-consumption thresholds.

For global OEMs, this results in an increasingly fragmented global powertrain landscape. While Western markets are embracing powertrain flexibility, Greater China remains focused on accelerating electrification and raising technology standards. To remain competitive in the world's largest EV market, global OEMs will need to closely track regulatory developments and continue investing in advanced BEV, PHEV and REEV technologies even as they pursue broader multi-powertrain strategies elsewhere.

Suppliers positioned to benefit regardless of powertrain mix

For suppliers, the strategic imperative mirrors that of the OEMs, requiring them to reassess their automotive supply chain strategies. Rather than betting on a single technology pathway, they are expanding their technology portfolios and investing in flexible manufacturing capabilities that can support powertrain strategies that include ICE, hybrid and electric vehicle programs. This approach enables suppliers to remain relevant across a range of demand scenarios while positioning themselves to capture value regardless of how the powertrain mix evolves.

Component categories that are compatible with multiple powertrain types or complementary across multiple propulsion pathways—including thermal management systems, power electronics, 48-volt mild-hybrid systems and modular battery packs suitable for both PHEV and BEV applications—continue to attract investment. These technologies help reduce supplier exposure to any single OEM powertrain strategy while preserving relevance across a wider range of vehicle architectures.

The shift toward multi-powertrain strategies is also reshaping Mobility Global's outlook for automotive electrification components. Electric motors (e-motors) provide a good example. Mobility Global's latest forecasts for e-motor demand across battery electric vehicles (BEVs) and hybrid vehicles reflect changing EV adoption trends, with slower growth than previously anticipated.

In mid-2022, forecasts pointed to significantly stronger growth in e-motor demand in BEVs. However, the growing emphasis on hybrid powertrains in OEM product portfolios has altered this outlook. As of September 2026, Mobility Global expects BEV e-motor demand in 2032 to be 14 percentage points lower than the projection in its June 2022 forecast. By contrast, the 2032 e-motor demand forecast for full-hybrid vehicles has been revised upward by a substantial 36 percentage points relative to the June 2022 baseline.

Looking forward: Hybrid vehicles vs. electric vehicles

Although BEV e-motor demand is expected to continue growing, hybrids are projected to account for the majority of e-motor adoption by 2030. This growth will be driven by a broad range of electrified propulsion systems, including full hybrids, mild hybrids, plug-in hybrids, series hybrids and range-extender architectures.