The segment-leading Ford Kuga PHEV accounts for 44 percent of the model family's overall sales.
European sales of plug-in hybrids have grown in 2023 despite a dramatic fall in Germany, where demand for models with the powertrain tumbled after the country axed purchase incentives.
Through August, the segment was topped by the Ford Kuga, followed by the Volvo XC60 at 26,470 and the Lynk & CO 01 at 19,658, according to figures from market analysts Dataforce (see table, below).
All three PHEVs recorded big sales gain on the year before.
However, while plug-in hybrid sales rose 4.4 percent to 635,487, the overall market share for PHEVs dropped to 7.4 percent after eight months from 8.4 percent during the same period in 2022 this year as they failed to keep pace with growth in the broader car market.
The market share decline illustrates the underlying fragility in demand for the drivetrain, which is led more by incentives than consumer appeal.
"The fate of PHEVs is strongly connected to the taxation system," Benjamin Kibies, senior automotive analyst at Dataforce, said.
PHEVs combine a traditional hybrid drivetrain with a larger battery to increase electric-only range. This extended EV range is richly rewarded in the official emissions test cycle with a very low CO2 figure, making cars with the technology eligible for purchase and tax incentives in some countries while also helping automakers achieve their average CO2 emissions targets.
Despite this, PHEVs are viewed with suspicion by several lawmakers, who have seen evidence from sources such as the International Council on Clean Transportation (ICCT) showing that real-world CO2 emissions from cars with the solution are far higher than their WLTP test results.
An ICCT report last year said that PHEV emissions are three to five times above official figures, with company cars in particular driving on battery-power only 11 to 15 percent of the time compared with the 70 to 85 percent assumed by WLTP emissions tests.
Germany's decision to eliminate purchase incentives of between 5,625 and 6,750 euros for new plug-in hybrids from the start of the year saw the market for PHEVs there fall 42 percent, reducing sales by almost 80,000 in the first eight months compared to the year before, according to Dataforce figures (see table, below).
"Evidence from Germany shows that the organic market demand becomes much lower without incentives," Dataforce's Kibies said.
Germany was an outlier among the big European markets, which generally don't offer purchase incentives for PHEVs any more, but instead make them more attractive than pure combustion engine equivalents by reducing purchase taxes or cutting the burden of company car tax on the basis of the low-CO2 figure.
Markets that saw PHEV growth included second-placed France, which exempts plug-in hybrids along with electric cars from its weight-based purchase tax. Sales gains were also recorded in the U.K. -- the third biggest PHEV market in Europe -- which offers business drivers a substantial discount on benefit-in-kind company car tax.
Also offering company car discounts is Belgium, where PHEV sales rose 79 percent through August to place the country fourth above Italy. Belgium had one of the highest PHEV market shares of any European country at 20 percent. Sweden was top at 21 percent (see table, below).
Businesses are the main driver for PHEV demand, with private sales falling 18 percent in the first eight months to make up a quarter of the total, according to Dataforce.
Fleets, meanwhile, accounted for almost all the growth and half of PHEV sales over the period, with pre-registrations by manufacturers and dealers totaling 15 percent. Sales to daily rental companies reached 6.4 percent.
Despite the challenges, automakers continue to launch new PHEVs as demand shrinks for diesels, which for years was the most popular option for fleet drivers.
Volkswagen Group brands VW and Skoda have recently announced four new models on the revised MQB Evo platform that incorporates a 1.5-liter gasoline engine and large, 19.7-kilowatt-hour battery.
The new PHEV versions of the VW Tiguan compact SUV, VW Passat midsize, Skoda Kodiaq midsize SUV and Skoda Superb midsize can travel up to 100 km (62 miles) on electric power alone, and the cars also fast charge at speeds of up to 50 kW. Traditionally, plug-in hybrids can only slow charge on AC chargers.
Other newly launched plug-in hybrids include the BMW 2-Series Active Tourer minivan as well as eight SUVs: the Alfa Romeo Tonale, Peugeot 408, Lexus RX, Honda CR-V, Mazda CX-60, BMW XM, Range Rover and Jeep Grand Cherokee.
Despite the challenges facing PHEVs, automakers continue to launch new models with the powertrain, including the Mazda CX-60.
Skoda sales and marketing head Martin Jahn estimates the PHEV version of the new Kodiaq will capture between 10 and 30 percent of sales. "It's really being driven by incentives, but government support is being reduced," he told Automotive News Europe at the recent launch of the car.
For other automakers the share is much higher.
The segment-leading Ford Kuga PHEV accounts for 44 percent of Kuga sales, and is a key element of Ford's strategy to meet its fleet average CO2 target as the company awaits the delayed Explorer electric compact SUV, which arrives in summer 2024.
The Volvo XC60 PHEV accounts for 43 percent of total XC60 sales, while the fourth-placed Mercedes-Benz GLC PHEV is 35 percent of the model's total. The Lynk & CO 01 is only available as a plug-in hybrid.
The push among automakers to install larger batteries and fast-charging in PHEVs is partly in response to European Union threats to reappraise the generous emissions test, as well to force automakers to report actual recorded fuel economy figures from cars on the road.
Last year the EU said that starting in 2025 it would reduce the so-called "utility factors" that regulators use to calculate emissions, taking into account how they are driven on the road. No further information has been released.
Automakers right now are prepared to absorb the cost of adding a chunky battery and electric drivetrain alongside a combustion engine if there is a reduction in their CO2 average and a consumer tax benefit to offset the extra cost.
Once the average CO2 of PHEVs climbs above 50 g/km due to proposed changes in the emissions test, the benefit is lost. Dataforce's Kibies said: "If The EU decides to introduce a more realistic CO2 measurement, then PHEV demand will collapse."
The Volvo XC60 was Europe's best-selling premium plug-in hybrid after 8 months and No. 2 overall in the region.
