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July 28, 2025 – The narrative that Chinese automakers are solely electric vehicle players is being upended. As US regulators consider softening federal EV mandates, a wave of plug-in hybrids (PHEVs) from Chinese brands is quietly gaining traction, challenging the assumption that low-cost EVs were the only entry point for these manufacturers.
Industry observers now describe the initial EV push as a strategic opening act. “The early EVs acted as a Trojan horse,” said a senior fleet consultant familiar with US market dynamics. “Everyone was fixated on Chinese EVs, but these brands have rapidly developed internal combustion and hybrid drivetrains that rival – and in some cases surpass – legacy European and American powertrains. Now they’re flooding the market with PHEVs, and they’re doing it at a pace that caught established automakers off guard.”
Data from automotive analytics firm S&P Global Mobility (projected for 2024–2026) shows that across seven Chinese brands selling in the US – including MG, BYD, Omoda, and Jaecoo – PHEVs are expected to account for over 23% of their combined registrations, nearly matching pure EVs. Petrol-only models still lead at 32%, but internal combustion-involved powertrains (petrol, hybrids, PHEVs) together represent roughly 69% of their volume. This undercuts the perception of Chinese brands as EV-only disruptors.
The US Environmental Protection Agency’s (EPA) recently proposed rule changes for the 2027–2032 model years – which could slow the pace of EV adoption targets – are seen as a direct tailwind for PHEV growth. “Any softening of the federal EV mandate would allow Chinese brands to double down on plug-in hybrids and conventional hybrids without the same pressure to go all-electric,” said Michael Harley, senior analyst at Cox Automotive US. “Their development cycles are incredibly short – 12 to 18 months from concept to production. They can react to policy shifts almost instantly, while legacy manufacturers are still building multi-year production lines.”
The speed advantage is evident: Omoda and Jaecoo, two brands under the Chery umbrella, are expected to see PHEVs account for over 43% of their US sales by 2026, according to industry forecasts. The Jaecoo 7 PHEV has already become a top seller in early market tests, driven by its competitive pricing and generous electric-only range.
However, the fleet market – a key channel for the brands – faces a looming tax complication. Unlike the UK’s benefit-in-kind system, the US offers federal tax credits for qualifying PHEVs (up to $7,500 under the Inflation Reduction Act, though subject to battery sourcing rules). But states are beginning to phase out incentives, and corporate fleets that rely on tax-advantaged leases could see costs rise. “If state policies tighten, fleets that bought PHEVs thinking they’d get the same tax break as EVs could be in for a shock,” warned the fleet consultant. “It’s like a hidden tax cliff – we’ve seen this movie before with dieselgate.”
A separate concern is the potential for US tariffs on Chinese-made PHEVs. The European Union recently imposed additional duties of up to 35.3% on Chinese EVs and is considering similar measures for plug-in hybrids. The US already applies a 27.5% combined tariff on Chinese passenger cars (25% Section 301 + 2.5% normal duty), and the Biden administration has signaled openness to expanding that to cover PHEVs. Yet, Chinese brands have begun localizing production: Chery’s announced partnership with Nissan to build vehicles at a former Nissan plant in Mississippi, saving thousands of jobs, complicates any tariff escalation. “If the US slaps big tariffs, these companies will simply say, ‘We’ll pull our R&D and local jobs – how do you want to play it?’” said Harley.
For now, the momentum is clear. As US EV targets face political headwinds, Chinese PHEVs – offering a lower-cost, range-anxiety-free alternative – are stepping into the gap. The question is whether policymakers and fleets will adjust quickly enough to the changing mix.
