Key Points

• That's the bad news for EV companies. The good news is that the recent declines are narrowing.

• And the No. 1 EV in this country is proving to be comparatively resilient.

The most popular automobiles on the lot these days aren’t electric vehicles (EVs). Rather, it’s hybrid EV/internal combustion engine (ICE) models that American consumers lately most want to own and drive.

According to research from Kelley Blue Book and its parent company, Cox Automotive, car buyers really put the pedal to the metal with hybrids in the first half of the year. Let’s dive in and get a fix on what this means for the auto industry in general.

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The happy medium

In the first six months of 2026, unit sales in the hybrid segment grew by 9% year over year. This is notable given that consumers in this country weren’t particularly eager to buy vehicles; the overall automotive market slumped by more than 2%.

This was reflected in yet another period of decline for EVs, with unit sales in the segment dropping by almost 24%. Pure ICE models also fell, but only by slightly over 3%.

It seems consumers want the fueling convenience of an ICE and the efficiency of an EV in a single vehicle.

Other factors are at work here. This decade, one trend that’s been apparent in Big Auto is the switch to hybrid-only versions of classic auto models. Toyota (NYSE:TM) is a pioneer and still a leader in this. It now sells hybrid-exclusive editions of the storied Camry sedan, the RAV4 crossover SUV, and the Sienna minivan. Stellantis (NYSE:STLA), to name another manufacturer, also went the exclusively hybrid route with one of its classic models, the Jeep Cherokee crossover SUV.

Short-circuited

While this may sound like dire news for EV makers, there’s one key reason for optimism — if we look at quarter-by-quarter sales performance, the situation is actually improving.

In this year’s second quarter, EV unit sales fell by under 21% year over year. Okay, that’s not smile-inducing, but it’s well better than the 27% of the first quarter, and the queasy 36% drop in the final quarter of 2025. Sales actually rose, and briskly, in the third quarter of last year, but much of this was due to the federal government’s cancellation of the $7,500 clean vehicle tax credit for buyers of pure EVs, which took effect late in that year.

Not all EV makers and models are created equal, of course, and some negotiated the curves better than others. Tesla (NASDAQ:TSLA), the reigning king of the segment, might not have had a stellar second quarter, but its top seller (and the most popular EV in America), the Model Y crossover SUV, did relatively well. The company sold 84,863 units, for a relatively light 1.5% drop from the same period of 2025.

The bad news, Tesla investors, is that we can’t say the same for the company’s No. 2, the Model 3. Unit sales of 34,944 for the sedan in the period represented a more than 28% decline.

Niche players did better. Both the high-end EV specialist Lucid (NASDAQ:LCID) and SUV/pickup maker Rivian Automotive (NASDAQ:RIVN) actually saw sales gains in both the quarter and the half-year period. Lucid’s sales notched a 2% increase to 5,103 vehicles in the six-month stretch, while Rivian’s clocked in at almost 14%, to 19,152. By comparison, Tesla’s full lineup posted a nearly 11% decline in the first half.

It was the global incumbents that did the worst, but this is no surprise. Earlier this decade, several pledged to stick to EV development timelines for their lineups. They moved away from this strategy once it was apparent that consumer enthusiasm for such models was waning.

Reflecting that, several incumbents saw deep, double-digit declines in EV unit sales in the first half. Ford Motor Company (NYSE:F), to name but one, experienced a 57% slide to 16,606 EVs.

Niche market

So, for EVs, it seems the niche manufacturers are having the most success. Much of this stems from those strategic shifts by the incumbents, who, in adjusting their strategies, have eased competition for the pure-plays. This especially positions a specialist like Rivian or Lucid for continued growth.

That is, if EVs in general are going to bounce back. Assuming some kind of lasting settlement is reached in the Iran war, oil prices are sure to ease, leading to the same for prices at the gas pump. The great selling point for EVs, then, will be drained of much of its power.

So anyone bullish on a potential EV rebound would probably do best parking capital in a specialized maker. Personally, I feel Tesla isn’t setting effective priorities lately, so I’d give that stock a miss.

I think the hybrid upswing will continue, as the trend seems to be a friend of these best-of-both-worlds models. For anyone wanting to invest in this, the company most enthusiastically embracing hybrids is the well-run and consistently profitable Toyota.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.