Hybrid Vehicles Face Transformation Challenges Amid Rise of Smart Driving

Starting in 2026, Toyota will cease offering pure internal combustion engine (ICE) vehicles in the Chinese market, fully transitioning to a portfolio combining hybrid and battery-electric models, all equipped as standard with intelligent driving assistance systems. FAW-Volkswagen has recently launched several ICE models featuring advanced intelligent driving capabilities, emphasizing that fuel-powered vehicles can also achieve high levels of intelligence. Geely, meanwhile, unveiled its i-HEV Smart Engine hybrid technology, integrating large AI models into the hybrid engine control unit. With China’s new energy vehicle (NEV) penetration rate surpassing 50% for the first time in 2025, intelligence has become the central battleground for new vehicle competition in 2026. According to data from the China Passenger Car Association (CPCA), 64% of passenger cars sold in the first three quarters of 2025 were equipped with Level 2 (L2) advanced driver-assistance systems (ADAS), marking a shift where intelligent driving has evolved from a desirable feature to a necessity. Consumer priorities are also changing: younger buyers now place greater emphasis on urban NOA (Navigate on Autopilot) and intelligent driving systems rather than traditional hybrid metrics like fuel consumption under low-battery conditions or pure electric range. Although hybrid vehicles generally feature more advanced electronic and electrical architectures compared to conventional ICE cars, their advantage in intelligence is diminishing. The hybrid segment is currently diverging: conventional hybrids offer limited intelligent driving capabilities and slow iteration cycles, while next-generation hybrids—though actively embracing intelligence—face significant pressure from high R&D costs and technical complexity. Meanwhile, extended-range electric vehicles (EREVs), such as Leapmotor’s D19, are narrowing the user experience gap with pure EVs by enhancing range, fast-charging capability, and intelligent driving features. Industry observers note that if hybrid models focus solely on fuel efficiency while neglecting intelligent development, they risk being perceived as “next-generation ICE vehicles” and marginalized in the market. Only by moving beyond “ICE-centric thinking” and positioning themselves as standalone intelligent mobility solutions can hybrids remain competitive in the next phase of the intelligent driving era.