China's extended-range electric vehicle (EREV) market is seeing a shift in 2026. Wholesale passenger car sales fell 13.1% to about 504,000 units in the first half, while June sales dropped 25.2% to 94,000 units, accounting for 6.4% of the market. Yet larger, premium vehicles continue to find favor with buyers.

EREVs run on electric motors, with an engine generating power for the battery. They can be plugged in or refueled, appealing to families worried about driving range and limited access to chargers.

Visits to new-energy vehicle dealerships in Chongqing revealed weak demand for lower-priced EREVs, while large premium models continued to sell well.

At one dealership, an EREV sedan priced below 150,000 yuan (about $22,228.2) attracted little interest. Despite discounts, one shopper chose a fully electric model instead, citing concerns about engine maintenance, electric range and charging speed.

Several customers specifically visit the dealership to test-drive premium EREVs.

Chongqing resident Chen Maolin often drives with his family to Sichuan and Guizhou. "It is quiet and easy to drive on electricity in the city, and I can refuel and keep going on long trips," Chen said, adding that the extra money buys peace of mind for the whole family.

Zhou Meng, a dealer with more than a decade of experience in Chongqing, said lower-priced EREVs were becoming harder to sell, while large premium models remained stable.

The decline is most evident among models priced between 150,000 and 250,000 yuan. Medium and large family SUVs costing more than 250,000 yuan have held up better.

Leng Bing, head of a market research organization, said EREV penetration tends to increase with vehicle prices, from about 2% for models priced at 100,000-150,000 yuan to 12% for those in the 200,000-300,000 yuan range. The rate rises to 20-30% for vehicles priced above 400,000 yuan.

He said EREVs initially gained buyers by offering cheaper electric driving with fuel as a backup. But as the market changes, that advantage alone is no longer enough to drive purchases.

One reason for weaker demand at the lower end is the shrinking cost advantage.

Lithium carbonate prices have fallen, narrowing the cost gap between lower-priced battery-electric vehicles and EREVs to only several thousand yuan. EREVs also require an engine-generator, fuel tank and related systems, which add weight, take up space and increase maintenance costs.

Charging conditions for battery-electric vehicles have also improved. Fast-charging coverage on China's expressways is now close to 100%, while 800-volt platforms and 4C and 5C ultra-fast charging are becoming more common.

Small battery EREVs face resale challenges in China

Consumers are now less concerned about finding a charging station and more concerned about queues and charging speed.

Falling resale values are adding pressure on lower-priced EREVs. Zhou said some retain less than 40% of their value after three years, and a few less than 35%, putting them below comparable battery-electric models. Some used-car dealers now refuse to take them.

Small-battery EREVs are often driven primarily on electricity, which increases battery wear. Their engine-generators also need regular maintenance, adding costs and mechanical risks. This has weakened demand in the used-car market.

Policy standards are tightening as well. Cui Dongshu, secretary general of the China Passenger Car Association, said rules taking effect in 2026 will require plug-in hybrids, including EREVs, to provide at least 100 kilometers of electric range and meet stricter fuel-consumption limits when the battery is depleted.

The rules are expected to put further pressure on lower-priced EREVs with small batteries and less advanced technology. Premium models remain popular because they serve a wider range of driving needs.

Medium and large SUVs consume more electricity because they often include air suspension, advanced driver-assistance systems, large screens and refrigerators. EREVs can run on electricity in cities while also using fuel and supplying power to external devices during long trips and outdoor activities.

This advantage is more evident in Chongqing and other mountainous parts of western China. Chongqing has steep roads, numerous tunnels and long distances between districts and counties. EREVs combine the smooth response of electric drive with quick refueling, making them better suited to long-distance travel and road trips.

Leng said competition is particularly fierce in the 150,000-250,000 yuan price range. He said automakers should look beyond range and specifications and put more emphasis on larger SUVs with five or six seats, as well as premium multi-purpose vehicles.

Products should be designed for mountain commutes, outdoor travel and long-distance driving, he added.

Tsinghua University academician Ouyang Minggao expects battery-electric vehicles to outsell plug-in hybrids, including EREVs, by a ratio of about seven to three by 2030. Until green electricity is widely available, large-battery hybrids will remain practical for long-distance drivers and people without home charging.