Extended-range electric vehicles, which feature an onboard gasoline or diesel generator, will emerge as the fastest-growing drivetrain category in Western automobile markets, predicts PitchBook, Morningstar's private markets research unit, in a 2025 outlook.

Drivers don't seem ready to embrace battery electric vehicles. Sales have slowed in the US and Europe in 2024 as drivers remain wary of higher costs, limited range, inadequate charging facilities, costly repairs, and shaky performance in cold weather, writes Jonathan Geurkink, PitchBook's senior analyst for emerging technology. In addition, Geurkink notes, "Investors have cheered efforts to scale back [battery electric vehicle] production, sending shares of traditional original equipment manufacturers (OEMs) soaring on management announcements of curtailed production plans."

For the first nine months of 2024, European hybrid electric vehicles and plug-in hybrids combined accounted for 37% of new car registrations, eclipsing sales of gas vehicles, while battery electric vehicles accounted for 13.1%, Geurkink notes.

Unlike battery EVs, an extended-range EV is a plug-in hybrid. In a typical plug-in hybrid, both the engine and the electric motor mechanically connect to and drive the wheels. The range on electricity alone is 15 to 60 miles. In an EREV, only the electric motor drives the wheels. The gas engine simply acts as a generator to top up the battery as needed. Thus, in an EREV, both the battery and internal combustion engine can be smaller, meaning lower costs. An EREV engine is sized similarly to the ones powering medium-to-large motorcycles, Geurkink says.

In China, the analyst adds, EREVs have become the fastest-growing propulsion system for cars. The Li Auto LI L6 SUV EREV is a top-selling car in China, where the typical range exceeds 350 miles. Meanwhile, Chinese automaker BYD BYDDF has a model with a combined gas/electric range of 1,300 miles. The typical EREV is priced $4,220 less than a battery electric vehicle in China.

In the US, Stellantis STLA is launching an EREV Ram 1500 pickup truck that is expected to have a nearly 700-mile range. Volkswagen VWAPY plans to offer an EREV version of its Scout SUV. Indeed, General Motors GM Chevy Volt, born 14 years ago, was the original EREV, Geurkink writes. However, GM reportedly lost money on every vehicle sold and canceled production in 2019.