[KH Explains] Is Hyundai’s bet on extended-range EVs a future-proof strategy?

In the race toward electrification, the auto industry has seen a dizzying array of electric vehicle types, from battery electric vehicles to hybrids, plug-in hybrids, and fuel-cell electric vehicles.

Now, Hyundai Motor is adding another contender to the crowded mix -- extended-range electric vehicles, or EREVs.

Announced on Aug. 28 during the company's CEO Investor Day, Hyundai plans to introduce these new vehicles to the North American and Chinese markets by 2027.

What exactly are EREVs?

EREVs are primarily powered by electricity but come with a gas-powered twist -- an internal combustion engine to extend the range.

Unlike traditional hybrids, where an engine can directly drive the wheels, EREVs use their engine purely as a generator. This engine recharges the battery, extending the driving range without relying on gasoline to power the wheels -- essentially an EV with a back-up generator.

Hyundai is positioning EREVs as a solution for regions with expansive geographies such as China and the US, where long-distance travel on a single charge is a significant concern.

“EREVs, which do not rely on direct engine power, could be classified as eco-friendly vehicles under North American standards, offering us a strategic advantage in meeting stringent greenhouse gas regulations,” said Hyundai Motor Company CEO Jang Jae-hoon during the announcement.

Hyundai plans to begin mass production of EREVs in North America and China by late 2026, with sales kicking off in 2027. The company initially targets the North American market with mid-size SUVs, including models like the Hyundai Santa Fe and Genesis brand vehicles, and aims for annual sales of over 80,000 units. In China, Hyundai plans to introduce EREV versions of smaller SUVs like the Hyundai Tucson, with a target of 30,000 units per year.

Can EREVs bridge the gap to full electrification?

The big question is whether EREVs will attract a broad enough customer base to serve as a meaningful bridge to full electrification or if they will cater only to a niche market that prioritizes long-range driving. Hyundai seems to be positioning EREVs as a transitional technology, particularly for consumers in regions with vast landscapes where charging infrastructure may be sparse.

While EREVs offer a compelling solution for range anxiety -- a common issue with battery EVs -- they are not intended to replace full EVs in the long run. The technology is complex, and its success will depend on whether Hyundai can make EREVs appealing and cost-competitive enough to carve out a significant market share.

The promises of EREVs

Hyundai is aiming for a range of over 900 kilometers on a full charge with its EREVs.

“EREVs have been around for over a decade, with GM’s Chevrolet Volt making an early debut in the 2010s. However, sales were limited due to a lack of demand for electrified vehicles at the time. But more recently, Chinese automakers like Li Auto have found success with EREVs, selling 380,000 units in 2023 alone,” said automotive analyst Kim Sung-rae from Hanwha Investment & Securities.

Li Auto, a pioneer in the EREV market, launched its first EREV sport utility vehicle, the Li One, in 2019, followed by models like the L9, L8, and L7. The success of these models indicates a growing interest in EREVs, particularly in China, where large distances make range extension particularly valuable.

The large batteries required make extending the range of conventional electric vehicles very expensive. EREVs offer a more economical solution by using smaller batteries that can be charged on the go by the internal combustion engine. For instance, Stellantis' 2025 Ram 1500 Ramcharger, a large pickup truck, achieves a range of over 1,000 kilometers with a 92-kilowatt-hour battery, compared to the pure EV model Ram 1500 Rev, which requires a much larger 229 kWh battery to achieve a slightly shorter range.

The pricing challenge

Hyundai is focusing on reducing the battery capacity of its EREVs by approximately 30 percent compared to battery only vehicles, aiming to price them competitively with plug-in hybrids. By maximizing the use of existing engine technologies rather than developing new ones, Hyundai hopes to keep production costs low.

“Even with a reduced battery capacity, Hyundai must still navigate the complexities and costs associated with a dual powertrain system, which is inherently more complex and costly to produce than either a BEV or a traditional hybrid,” said professor Kim Chul-soo from the Department of Future Automotive Engineering at Honam University, who spent 27 years working on eco-friendly vehicle development at Hyundai Motor Group’s R&D Center until 2015.

“To succeed, Hyundai could leverage economies of scale, streamline production processes, and possibly innovate in battery chemistry or sourcing to keep overall costs competitive,” he added.

Overcoming consumer hesitation and market timing

Another hurdle will be educating consumers about EREVs. Many potential buyers may not fully understand how EREVs differ from traditional hybrids or pure EVs. Hyundai will need to invest in clear, targeted marketing and possibly dealer training programs to communicate the benefits of EREVs.

The timing of Hyundai’s EREV launch also raises questions. With a proposed release date of 2027, Hyundai risks entering a market that might already be moving beyond EREVs. Chinese automakers, who have been quick to iterate and innovate, could make Hyundai’s offerings seem outdated before they even hit the market.

“By launching EREVs in 2027, Hyundai risks the perception that it is investing in a technology that is already being phased out by other EREV makers or more advanced BEVs,” warned analyst Kim.