Plug-in hybrid sales in Europe soared by 145 percent in the first seven months as generous incentives and the threat of emissions fines for automakers helped them to buck the sharply downward trend of the overall market because of the coronavirus pandemic.
The growth, however, is highly dependent on incentives continuing, which isn't guaranteed as plug-in hybrids come under fire from green groups that dispute their fuel economy figures.
Plug-in hybrids set for rapid rise but trouble looms
The plug-in hybrid version of the Kuga is crucial to Ford's bid to cut its fleet CO2 emissions enough to avoid EU fines.
About 230,000 plug-in hybrids were delivered to customers through July, establishing Europe as the leading market for plug-in hybrids globally and underlining their usefulness to automakers that see them as the best way to continue selling SUVs and other models that emit a large amount of CO2.
Europe's largest plug-in hybrid segment was compact SUVs, which accounted for 40 percent of the total sales of the powertrain, according to figures from market researcher JATO Dynamics (see table, below).
The Mitsubishi Outlander PHEV (short for plug-in hybrid electric vehicle) continued to top the European sales chart, but its leadership is being challenged by the new Ford Kuga plug-in hybrid (see table, below).
The low-emissions Kuga variant is Ford's main tool this year to drop its fleet CO2 emissions low enough to avoid EU fines.
Favorable test results
Plug-in hybrids combine a combustion engine with an electric motor and battery ranging in size from around 9 kilowatt hours to 24 kWh to allow the car to be driven on electric power alone for up to 50 km (about 30 miles).
The current WLTP emissions testing cycle is generous to plug-in hybrids, especially those with bigger batteries. As a result, their official CO2 emission figures average about 40 to 50 grams per km, which is well below the 95g/km fleet average automakers need to reach.
Packaging two drivetrains and adding a much larger lithium ion battery than used in so-called full hybrids such as the Toyota Prius increases cost and takes up space, meaning the system works best on bigger, more expensive vehicles.
Premium midsize cars were the second-biggest plug-in hybrid segment in the first seven months of 2020, topped by the BMW 330e followed by the Volvo V60/S60.
Europe's No. 3 segment for plug-in hybrids was the midsize class, led by the Volkswagen Passat GTE, according to JATO.
Substantial shares
Mitsubishi is the manufacturer with the biggest share of plug-in hybrids, with sales of those models accounting for 28.6 percent of its total volume in Western Europe through July (see table, below).
But, as Mitsubishi winds down its operations in Europe, premium automakers are lining up to take its place.
A huge 27 percent of Volvo's Western European sales after seven months were plug-in hybrids, according to data from analyst Matthias Schmidt's European Electric Car Report.
DS Automobiles ranked No. 3 with 18.8 percent. Porsche was next with 17.4 percent, followed by Bentley at 9.8 percent, all of which comes from the plug-in hybrid version of its Bentayga SUV.
The three German premium automakers are rapidly increasing their plug-in hybrid lineups, with BMW posting the greatest share at 9.6 percent of its overall Western European sales.
New plug-in hybrid models from BMW include the X1 and X2 compact SUVs, as well as the X3 midsize SUV and more versions of the 3 Series, including a station wagon variant with the powertrain.
BMW has said it will have "at least 12" plug-in hybrids available globally by the end of the year.
While Audi didn't make the top 10 based on plug-in hybrid share in the first seven months, the VW Group subsidiary is pushing aggressively into the market. Audi models now available with plug-in hybrid drivetrains include the Q5 and Q7 SUVs as well as the A6, A7 and A8 large cars. Coming soon is a replacement for the A3 compact plug-in hybrid. Mercedes-Benz, meanwhile, now offers 15 plug-in hybrids, depending on market, including six compacts.
The drivetrain is a lifeline to otherwise diesel-dependent Jaguar Land Rover, which currently offers plug-in versions of the Range Rover and Range Rover Sport. JLR also recently announced it will add plug-in hybrid variants of the Range Rover Velar midsize SUV, Range Rover Evoque compact SUV, Land Rover Discovery compact SUV, Defender large utility vehicle and the Jaguar F-Pace midsize SUV.
BMW has said it will have "at least 12" plug-in hybrids available globally by the end of the year, including its top-seller in Europe, the 330e sedan.
Costly addition
Incorporating an electric drivetrain to a combustion-engine car typically adds about 5,000 euros to the build cost, according to research from German engineering specialist FEV.
That increases the list price, which ought to make plug-in hybrids difficult to sell. However, incentives are making them attainable. In Germany subsidies of up to 6,750 euros were available to plug-in hybrid customers. For example, the VW Passat GTE wagon was available to lease for 79 euros a month before sales tax. A 4,500-euro deposit was then refunded by the government.
The perks being offered in Germany helped make it Europe's top plug-in hybrid market with 66,757 registrations through July, according to the JATO data. Sweden was next at 28,394, driven by sales of Volvo's plug-in hybrids. France was No. 3 followed by the UK.
Short-term fix?
Demand for plug-in hybrids is expected to be limited in the long run, however.
Analyst firm LMC Automotive believes that strong growth will push plug-in hybrid sales to more than half a million this year and to 830,000 next year, compared with 200,937 in 2019.
In 2022, however, demand will weaken resulting in a full-year volume of a little more than 900,000, LMC believes.
Full-electric cars, meanwhile, will continue to boom from a predicted 650,000 this year to 1.7 million by 2022.
"We expect the growth rate for PHEVs to slow down after 2021," LMC analyst Sam Adham said.
The concern is that governments that were quick to incentivize plug-in hybrids could rapidly remove the subsidies, particularly as they see reports showing the vehicles are not as emissions friendly as the WLTP cycle claims.
"There are several stories at the moment about PHEVs not getting anywhere near their WLTP numbers in real-world driving," Adham said. "I'm wondering if the recent scrutiny will cause policymakers to turn against them in the midterm and roll back incentives."
Audi models now available with plug-in hybrid drivetrains include the Q5 SUV and the A6, A7 and A8 large cars.
CO2 results challenged
A recent study by environmental advocacy group Transport & Environment showed that, on average, plug-in hybrids emit 117g/km of CO2, which is much higher than the 44g/km claimed.
The report said that drivers weren't plugging them in often enough and added that even when charged the plug-in hybrids frequently activated the combustion engine despite being in EV mode, for example, if the temperature outside fell below a certain level.
Another recent study, from the International Council of Clean Transportation (ICCT) and Germany's Fraunhofer Institute, said it had global evidence showing the fuel economy of plug-in hybrids was between two and four times worse than official figures claim.
The ICCT recommended changing the WLTP cycle to make it less generous to plug-in hybrids.
The lobby group for automakers in Europe, ACEA, has mounted a strong defense of the technology, pointing out that many of the studies quoted were based on data from fuel cards used by company car drivers, who don't have any incentive to recharge their plug-in hybrids.
ACEA also pointed out that that next year all cars and vans registered across the EU will be equipped with an on-board fuel/energy consumption monitoring device to verify their real-world consumption.
"This will give a true picture of the situation regarding the use and emissions of PHEVs," an ACEA spokeswoman said. "The European Commission will use it to re-assess the real usage of PHEVs and potentially make the adequate legislative adaptations."
The Mitsubishi Outlander PHEV has been Europe’s top-selling plug-in hybrid since 2018.
Canceled subsidies
Not all governments are offering incentives to promote the sale of plug-in hybrids.
The Netherlands hasn't favored them since 2016, which is when policymakers removed them from the list of vehicles offered generous company-car tax subsidies. The decision came after the government discovered via fuel card data that drivers were not recharging their plug-in hybrids. France is planning to cut the subsidy for plug-in hybrids from 2,000 euros to 1,000 euros in 2021.
Plug-in hybrid subsidies for private drivers were also canceled in 2018 by the UK government, which cited the Dutch case. However, the UK is very generous to company car drivers who choose plug-in hybrids, cutting their benefit-in-kind tax bill by thousands compared with a standard gasoline or diesel car.
Plug-in hybrids are either a "con," which is what T&E called them, or an important stepping stone on the path to electrification, depending on a person's vantage point.
Either way, they are poised to help automakers escape fines and offset the sales of their more profitable combustion engine cars, particularly SUVs. Said EV analyst Schmidt: "PHEVs are doing a lot to keep the sectors profitable, allowing manufacturers to continue to bring even more SUVs to market."
