Examples are disclosed that relate to watercraft with retractable drive mechanisms. One example provides a watercraft including a hull having a receiving compartment, and also having a deck. The watercraft also includes a drive unit extending through the deck and the hull of the watercraft and being configured to receive rotational input. The drive unit includes a driveshaft and propeller moveable between an extended position in which the propeller is positioned underneath the hull and a retracted position in which the propeller is positioned at least partially within the receiving compartment.

A hybrid propulsion system for a marine vessel is described. The hybrid propulsion system includes a shaft coupled to a propeller, a planetary gear system configured to operate in a first configuration and a second configuration, and a motor-generator. The motor-generator is configured to selectively rotate with and provide torque to the shaft through the planetary gear system in the first configuration and to rotate independently from the shaft in the second configuration. The shaft extends from the propeller through the planetary gear system and the motor-generator to a torque producing device for the marine vessel.