California Hybrids Near First EV Sales Lead Since 2020 as EV Share Hits 17.8%

Hybrid demand is rapidly reshaping California's auto market as buyers increasingly prioritize affordability, fuel efficiency and practical driving needs. Newly released data from the California New Car Dealers Association showed that hybrids represented almost one in every four vehicles registered in the state during the second quarter, rising from the previous year and comfortably exceeding the 17.8% share recorded by electric vehicles. The strong momentum puts hybrids on pace to overtake annual EV sales in California for the first time since 2020. California is widely viewed as an important indicator for the broader US electric-vehicle market because it is the country's largest plug-in vehicle market and has an extensive charging network.

The changing sales mix could favor automakers with popular hybrid lineups. Toyota Motor Corp. NYSE:TM, whose Camry and RAV4 hybrids ranked among California's top-selling vehicles during the quarter, and Honda Motor Co., whose CR-V also appeared among the state's best sellers, may benefit as more buyers move toward vehicles combining gasoline engines with electric motors. Higher gasoline prices may also be supporting demand, with the war in Iran pushing the national average to $4.02 per gallon as of Tuesday and California's average to $5.52. Jessie Dosanjh, chairman of the California New Car Dealers Association and owner of Stevens Creek Chevrolet, said buyers are currently responding to budget pressures and their individual driving requirements, which is leading many toward hybrids.

Electric vehicles remain under pressure, although the latest figures suggest demand may be beginning to stabilize after a particularly weak first quarter. Zero-emission vehicle registrations in California declined 8.2% from the previous year during the latest quarter, but EV market share improved modestly from the first quarter. Tesla Inc. NASDAQ:TSLA, whose Model Y is an electric vehicle, retained the top-selling vehicle position in the state despite the broader shift toward hybrids. California Governor Gavin Newsom also announced a program with 13 automakers offering first-time zero-emission vehicle buyers or lessees instant rebates of $3,500 for new EVs and $1,750 for used vehicles, potentially providing additional support after President Donald Trump ended the federal tax credit.