Since 1997, the technology and the sources of energy that are used to power hybrid cars have undergone rapid development. There are now two distinct types of hybrid vehicles that are classified according to the way power generated by the motors, is transferred to the wheels to propel the vehicle forward and backwards.

The first type is parallel hybrids where an internal combustion engine and an electric motor are both connected to the mechanical transmission simultaneously to transfer power to drive the wheels. Honda uses this parallel system in its Insight, Civic and Accord models. The Insight was billed the cheapest gas-electric hybrid on the market and was ranked as the top-selling vehicle in Japan in April 2009, the first time a hybrid clinched that spot. During its first twelve months after its release, the second-generation Insight sold 143,015 units around the world. Parallel hybrids are also capable of regenerative braking which is an energy recovery mechanism that stores power for later use, and they are much more efficient than non-hybrid vehicles especially during the stop-start driving conditions experienced in urban areas.

The other main classification is the series hybrid where an electric motor directly drives the car forward and the internal combustion engine works as a generator to power the electric motor or to recharge the batteries. This type of hybrid vehicle usually has a smaller combustion engine, but a larger battery pack compared to parallel hybrids.

The Toyota Prius is the trailblazer of the hybrid car market. Its sales increased from a modest 300 units in 1997, to 19,500 in 2000, and by April 2008, its total sales worldwide reached the 1 million mark. By early 2010, the Prius total sales worldwide were estimated to be around 1.6 million units.

Once large car manufacturers began to realize they could make money from hybrid vehicles, they started to jump on the band wagon. The Ford Escape Hybrid, the first hybrid electric sports utility vehicle (SUV), was released in 2005, and in 2006 General Motors Saturn Division began marketing its own hybrid, the 2007 Saturn Vue Green Line series. Lexus released a hybrid electric version of their GS Sport in late 2008. The most popular hybrid cars are those labelled “full hybrids”. These are cars that run on the engine alone, batteries alone, or a combination of both sources of power.