As battery-electric-vehicle (BEV) sales growth in most markets has slowed, the automotive industry is weighing new methods to accelerate electrification momentum. In addition to plug-in hybrid electric vehicles (PHEV), extended-range electric vehicles (EREVs) have reemerged as one potential solution to assuage range anxiety and cost concerns among current owners of internal combustion engine (ICE), hybrid, and electric vehicles.
Many potential buyers of electric vehicles (EVs) are reluctant to pay a premium to purchase a BEV instead of an ICE vehicle. Alongside price, driving range is a top source of unease among car buyers. For car owners who live in apartments or in other types of homes that lack regular access to overnight charging, as well as for drivers planning long-distance trips, scant public charging can be a concern. And though most drivers have a daily commute of less than 50 miles, others have much longer commutes.1
EREVs and PHEVs: How are they different?
An extended-range electric vehicle (EREV) is a mix of battery-electric-vehicle (BEV) and internal combustion engine (ICE) technology. While the typical plug-in hybrid electric vehicle (PHEV) uses a parallel electric-motor and ICE powertrain configuration, an EREV uses a series configuration that includes a small ICE-powered generator that recharges the battery pack.
Typical PHEVs have smaller battery packs than either BEVs or EREVs. In a typical PHEV, an ICE functions as a mechanical drive after the battery pack’s state of charge becomes low or if the driver needs extra power in electric mode. The average electric driving range for a PHEV is 20 to 40 miles, and once the PHEV’s battery is drained, it functions as an ICE vehicle.
EREVs and PHEVs can both be charged at regular EV charging stations, home chargers, and fast-charging outlets, and their ICE engines can be refueled at traditional gas stations. But as their name suggests, EREVs can offer a longer electric driving range of 100–200 miles (exhibit).1
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A four-column, four-row table shows that the primary difference between an extended-range electric vehicle (EREV) and plug-in hybrid vehicle (PHEV) is that in an EREV, the internal combustion engine is not connected directly to the drivetrain as it is in a PHEV. The various characteristics of battery electric vehicles, EREV, PHEV, and hybrid vehicles and their powertrain configurations are detailed. The fourth row comprises illustrations of each powertrain configuration with directional arrows showing how the components work together to power the vehicle.
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Given their inherent capacity to quell range anxiety and their strong sales momentum in China, EREVs have caught the attention of OEMs in Europe and the United States as one potential way to boost EV sales growth. EREVs were part of the first wave of electrification a decade ago, but they didn’t take off, because innovation-driven early EV adopters were mostly only interested in pure BEVs.2 EV buying has moved from early tech-savvy adopters to mainstream car buyers who are looking for a broader range of options.3 While EREVs are similar to PHEVs, they combine a small ICE-powered generator with an electric powertrain and can offer an electric-only driving range of 100 to 200 miles (versus a comparable PHEV’s range of 20 to 40 miles) and a total range of 400 to 500 miles (see sidebar, “EREVs and PHEVs: How are they different?”).4
Informed by McKinsey analysis and data from an October–November 2024 survey of car buyers in the United States and Europe, this article explores whether EREVs could attract more customers to electric driving than BEVs or PHEVs. It also examines whether it could be worthwhile for OEMs to invest in a different powertrain technology in an environment where budgets are often tight and challenging regulatory deadlines are rapidly approaching.
EREVs appeal to car buyers in the United States and Europe, but consumer education is vital
McKinsey’s late-2024 survey of more than 2,800 new-car buyers in the United States and 2,300 in Germany and the United Kingdom found that a sizable segment would consider an EREV for their next vehicle purchase if the option were available.5 What’s more, two-thirds of these potential buyers noted an intent to purchase an ICE or hybrid vehicle in the absence of an EREV option. This indicates that EREVs could motivate more ICE vehicle owners to transition to electric driving (Exhibit 1).
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Three pairs of stacked horizontal bar charts compare survey data showing how including an extended-range electric vehicle (EREV) option affected car buyers’ preferences for their next vehicle purchase. The paired charts are categorized by the locations where buyers were surveyed: Germany, the United Kingdom, and the United States. In Germany, the United Kingdom, and the United States, respectively, 15%, 13%, and 18% of buyers preferred an EREV when it was included as an option. The portion of buyers that preferred internal combustion engine (ICE) vehicles and plug-in hybrid electric vehicles (PHEVs) decreased by 10, 7, and 12 percentage points for ICE vehicles and by 2, 7, and 1 percentage points for PHEVs in Germany, the United Kingdom, and the United States, respectively, when an EREV option was included.
Source: McKinsey Center for Future Mobility, Mobility Consumer Insights—German and UK data based on German and UK EREV Perception Survey, November 2024, n = 2,312, and US data based on US EREV Perception Survey, October 2024, n = 2,843
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Alongside price, the top reason cited by surveyed consumers for preferring ICE vehicles to EVs is what’s commonly known as “range anxiety.” This describes a general sense of unease related to the following: being unable to drive for as long or as far in an EV as in an ICE vehicle; lacking fast-charging stations with the frequency or convenience of traditional gas stations; needing to recharge too frequently; or running out of electric power before reaching a charging station.
Interest in EREVs was higher among owners of premium-brand vehicles than among mass-market-brand cars. There was also slightly higher interest in EREVs among current owners of larger cars and SUVs than among owners of smaller cars.
A key market segment that might embrace EREVs is EV owners who are considering switching back to an ICE because of frustration with inadequate charging availability and driving range in their current vehicles. In the 2024 McKinsey Mobility Consumer Pulse Survey, for example, 46 percent of US EV owners and 19 percent of European EV owners reported they were considering switching back to an ICE vehicle.6
Despite EREVs’ apparent appeal to a variety of car buyers, consumer education that clearly conveys the benefits of EREVs and generally demystifies the distinctions between all EV and hybrid-vehicle options is vital. Consumers have difficulty understanding how EREVs differ from PHEVs, BEVs, or other hybrid vehicles. Consumers in the United States appear to find the distinctions between different EV and hybrid powertrains especially perplexing. Among US car buyers included in McKinsey’s survey sample, nearly half (48 percent) agreed with the statement “I’m overwhelmed by the number of powertrains (currently available) to choose from.”7
EREV offerings in the global market are scant but growing
Currently, there are few EREVs in the global market. In the United States, EREVs in the SUV and truck segment have been announced, including the 2025 Ram 1500 Ramcharger, which reports a 145-mile pure electric and a 690-mile total driving range.8 In China, Li Auto has introduced several EREVs, including its L9, which reports a 134-mile electric range and an 817-mile total range.9 And AITO’s M9 reports a 140- to 170-mile electric and 840- to 871-mile total range.10 VW-backed Scout Motors has also announced several EREV models that, according to the company, have received considerably more deposits than their Terra and Traveler BEVs.11
An electric range of 100–200 miles would meet most drivers’ daily commuting needs, while a total range of 350–600 miles could eliminate range anxiety. This may indicate a sweet spot for the EREV market (Exhibit 2).
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A scatterplot chart graphs the total and electric-only driving ranges of electric-vehicle models that have been produced or announced by various global manufacturers. The x-axis represents an electric-only driving range between 0 and 1,000 miles and the y-axis represents a total driving range of 0 to 1,000 miles. A label on the chart indicates that given what is available in the market and the length of the average commute, a “sweet spot” for future extended-range electric vehicle (EREV) models may exist in the 100- to 350-mile electric-only and 300- to 700-mile total driving range. EREV models are plotted within a 30- to 150-mile electric-only and a 400- to 800-mile total driving range, plug-in hybrid electric vehicles models within a 25- to 60-mile electric-only and 450- to 600-mile total range, and battery electric vehicle models within a 200- to 500-mile electric-only driving range.
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The United States’ regulatory environment may make it the most favorable market for EREVs
Going forward, there may be significant opportunities for EREV sales in the United States—and in the European Union, despite quickly approaching deadlines for zero-emission vehicles to account for all new-vehicle sales there by 2035.
The zero-emissions vehicle deadline under current EU regulations means EREVs could be sold in the region through 2034. OEMs will need to consider their narrow window of opportunity in the EU and potential development timelines to determine whether consumer demand will generate enough profit to warrant investment in EREV powertrains. Notably, EREV powertrains may be a more future-proof option for OEMs than PHEV powertrains because they combine a BEV platform with a small ICE-powered generator that is not connected to the drivetrain.
Unlike the European Union, the United States has no zero-emissions requirement in place for new-car sales. At the federal level, Environmental Protection Agency standards tie compliance bonuses to electric driving ranges, which indicates a potential advantage for EREVs over PHEVs.12 For example, an EREV with a range of at least 70 miles could receive a 65 percent bonus in compliance standards, while a PHEV with a 25-mile range could receive a 30 percent bonus.13 The California Air Resources Board’s Advanced Clean Cars II rule does mandate 100 percent electrification in new cars sold by 2035, but one-fifth of those vehicles could be PHEVs or EREVs, and manufacturers could receive full credit for each vehicle with an electric range of at least 70 miles.14
Thus, in terms of regulatory requirements, new opportunities for EREVs may be greatest in the United States market.
EREVs might provide a cost-competitive alternative to BEVs and ICE vehicles
If focused on providing an electric range of 150 miles, EREV combined powertrain costs could be as much as $6,000 lower than BEV powertrain costs.15 However, the gap between BEV and EREV production costs will likely narrow as battery costs decrease. The production costs for EREVs are expected to fall between those for similar-sized BEVs and ICE vehicles. In a McKinsey modeled scenario, an EREV pickup truck with a 150-mile electric range and a total range of 500 miles or more could be designed using a 68 kilowatt-hour (kWh) lithium nickel manganese cobalt oxide (NMC) battery pack; a comparable BEV would need a 228 kWh battery pack to deliver a 500-mile range. In this scenario, an EREV powertrain could cost 30 to 40 percent less to produce than a BEV powertrain (Exhibit 3).
If OEMs are able to achieve lower production costs and provide EREV price points attractive to ICE-inclined and BEV-resistant car buyers, EREVs could represent a significant opportunity to revitalize EV sales growth. But OEMs should carefully consider the decision to invest in an EREV platform in light of increased portfolio complexity. If an EREV yields an average cost savings of $3,000 over time, two-thirds of which is passed on to the consumer, then an OEM would need to sell at least one million units, provided an EREV platform would cost around $1 billion to develop.
EREVs could help smooth the transition from ICE vehicles to BEVs by serving as a bridge technology for consumers while charging infrastructure is improved and expanded and BEVs become more mainstream and cost-competitive in the global marketplace. Car buyers hesitant to purchase EVs could welcome EREVs as an option, provided manufacturers can make the technology accessible and clearly distinguish EREVs from PHEVs, other hybrid vehicles, and BEVs, particularly in the US market. For OEMs to benefit from adding EREV powertrain technology, achieving an expeditious time to market is critical, alongside careful planning and oversight for additional development costs and more-complex supply chains and production.
