In a recent motoring forum thread about recommending plug-in hybrids in the UK, poster Craig1192 wrote: "Happy with my BMW 3-series plug-in. Does not have a great range but that is not the point for me as it saves a shedload of BIK tax."
BIK stands for benefit-in-kind, a UK company car tax that partly takes into account the car's CO2 emissions levels when calculating the payment. In the UK and across Europe plug-in hybrids have gained traction mostly because of government tax breaks on cars that have low CO2 emissions.
Users on the Pistonheads thread quoted tax savings of about 150 pounds ($199) a month.
The big advantage of plug-in hybrids has been dealt a huge blow by the Worldwide harmonized Light vehicles Test Procedure (WLTP) regime used to measure vehicle fuel consumption and CO2 emissions, which came into force in Europe Sept. 1.
There was more bad news for plug-in hybrids on Friday when the UK government said it would cut the incentives available for plug-in hybrids as it focuses on pure electric models.
WLTP results are now closer to real-world usage than the figures created by the previous New European Driving Cycle (NEDC) tests. As a result, nine of the top-10 best-selling plug-in hybrids in the first half of the year have either been pulled from sale or are no longer rated as offering less than 50 grams per kilometer of CO2, the figure below which the car is rated as being ultra-low emission and therefore eligible for tax breaks.
"The only advantage PHEVs (plug-in hybrid vehicles) have is their incentive," Felipe Munoz, global analyst for JATO Dynamics said.
The scramble to beat the deadline pushed European sales of plug-in hybrids to 125,500 in the eight months, up 48 percent on the year before. In August, 59 percent of those sales across Europe went to fleets, up from 53 percent the previous August, JATO figures showed. Munoz believes sales will collapse during the remaining months of the year.
Automakers had three choices to make:
- Spend big money on making existing models eligible for incentives again by increasing the battery-only range and therefore ducking under the 50g/km mark.
- Remove the car from the lineup and relaunch it at a later date as part of an wider range overhaul, complete with a bigger battery.
- Certify them for WLTP despite the increased CO2 and hope enough people were buying them for other reasons than tax incentives.
Mitsubishi, which builds Europe's best-selling plug-in hybrid, the Outlander PHEV SUV, scrambled to go with option one to keep the car below 50g/km.
Volkswagen, meanwhile, went for option two. It pulled the Passat GTE, Europe's No. 2-selling plug-in hybrid in the first half, and will not relaunch it again until it overhauls the Passat in July 2019. The Golf GTE, Europe's No. 4-selling plug-in hybrid, also will not be replaced until July 2019.
It is likely that VW calculated the cars will be too expensive without the incentives, which includes a 3,000-euro subsidy in Germany for those emitting less than 50g/km of CO2.
The new VW Group plug-in hybrid powertrain is expected to be the same one previewed by the Skoda Vision RS compact concept, unveiled at the Paris auto show, which mates a 1.5-liter turbo gasoline engine to a bigger 13 kilowatt hour battery that according to Skoda provides 70 km (43 miles) electric-only driving, compared with 50 km for the Golf GTE based on NEDC calculations. That should be enough to reduce CO2 emissions to below 50g/km.
Despite the added range, it could be cheaper too. "When VW first started with plug-on hybrids in 2015, it was simply too expensive," Bjorn Kroll, Skoda's head of product marketing and the brand's commercial leader on electric cars, said at a preview of the Vision RS. "Battery prices have come down a lot."
Plug-in hybrid technology is improving and more models are being launched such as plug-in versions of the Peugeot 508 sedan and station wagon, and 3008 SUV. These will will go on sale in the second quarter of next year with a 50-km electric driving range and less than 49g/km of CO2 under WLTP tests, Peugeot says.
Plug-in hybrids could have a key role in helping automakers reach tougher CO2 targets planned by the EU. The poor margins for plug-ins resulting from falling incentives could be more than offset by the avoidance of fines that will be imposed by EU regulators on companies that miss the goal.
The danger for plug-in hybrids is whether governments reduce or remove incentives for people to buy the models as the UK has just done. The market halved in the Netherlands in 2016 after the government slashed generous company car tax incentives because it determined that the cars were not being plugged in.
On Friday, the UK government said will stop purchase grants for plug-in hybrids unless they can travel more than 70 miles (113 km). Currently few plug-in hybrids have such a range. "With plug-in hybrid models like the Mitsubishi Outlander becoming popular among consumers the government is focusing its attention to zero emission models such as the Nissan Leaf and BMW i3," the government said in a statement.
The move sparking anger from the SMMT industry trade body because automakers already face declining sales in the UK, Europe's second-biggest autos market after Germany. The decision could have a "devastating impact" on demand for plug-ins, said Mike Hawes, SMMT CEO.
Reuters contributed to this report
