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Plug-in hybrids give automakers an emissions compliance lifeline

Automakers in Europe fear a lukewarm consumer response to the fleet of electric vehicles they are preparing to launch to comply with tougher emissions regulations, but they do have one lifeline: the plug-in hybrid electric vehicle.

The PHEV is in some respects an almost magical vehicle. Adding a battery and electric motor to a conventionally powered vehicle preserves most of the usability that consumers know while also allowing the automaker to reduce CO2 output by between 50 percent and 80 percent.

Because of the way emissions are calculated, PHEVs are easily capable of recording a CO2 figure of below 50 grams per kilometer. That means their sales will not only help reduce automakers’ average CO2 when the 95g/km average kicks in next year, they also count as so-called “supercredit” sales until 2023, letting automakers offset purchases of their higher-emissions cars.

On top of all that, the PHEV also qualifies for various tax incentives and purchase grants within numerous EU countries. In addition, they qualify for entry into many cities’ ultra-low emissions zones, where conventional vehicles will be banned from entering.

But there are also huge pitfalls for automakers relying on PHEVs. Most worrying is the potential backlash among environmental groups, city mayors and ruling governments if they decide that PHEVs are nowhere near as green as the stated CO2 figure claims.

“The climate credentials of plug-in hybrids are directly proportional to how much they drive on their electric motor,” said Julia Poliscanova, director of clean vehicles and e-mobility for European pressure group Transport & Environment. “If, as the evidence seems to show, most people don’t charge them, then they are worse than previous-generation cars.”

As far as customers reading the label know, these cars are second only to full-electric vehicles in terms of CO2 output.

The EU-mandated WLTP emissions tests, which replaced the outdated NEDC cycle, states that is the case. For example, the range of new PHEVs launched by PSA Group, including the midsize Peugeot 508 and Opel/Vauxhall Grandland X compact SUV, record figures as low as 29g/km, and that is on the WLTP cycle before it has been translated back to NEDC values, a process known as NEDC correlation.

By comparison a Peugeot 108 minicar, weighing half as much as a plug-in hybrid SUV, emits 93g/km.

Do not blame us for the figure, said PSA CEO Carlos Tavares at Frankfurt auto show last month. “We were not the ones that created that cycle. It was created as a consequence of the previous one, which we considered simplistic,” he said.

The PHEV has often been described as a gateway technology to get consumers comfortable with the idea of plugging in their car before taking the more radical step of going full electric.

The EU’s seeming generosity in classifying PHEVs as ultra-low emissions vehicles via the test cycle was a calculated decision to boost availability of electrified vehicles, believes Jeff Schuster, global forecasting director for analyst firm LMC Automotive.

“I suspect it’s the EU giving the automakers a get-out clause. I don’t think anyone wants to go down the scandal road again,” he said, eluding to Volkswagen Group’s cheating on emissions tests.

Even before VW Group admitted to using software that made its engines operate more efficiently during testing than on the road, it was known that automakers were exploiting loopholes in the old NEDC cycle to avoid fitting expensive exhaust cleaning technology to their vehicles.

168% increase in sales

LMC predicts that PHEV sales will more than double in Europe next year to 590,000, up from a full-year estimate of 220,000 in 2019.

That would give them a market share of 3.1 percent and briefly help them overtake full-electric vehicles. LMC believes that by 2025 PHEV sales will top 1 million and take a 5.2 percent share.

The problem that automakers now have to deal with is that PHEVs are unavoidably costly, restricting their rollout.

“The plug-in hybrid is a very expensive technology so it makes sense on heavier, bigger, higher-CO2 vehicles where it does more for CO2 reduction and the premium is not as big as small cars,” Roelant de Waard, general manager for passenger vehicles at Ford of Europe, said at the launch of the new Kuga, which will offer a PHEV variant.

Fitting a battery, electric motor and the power electronics to an existing combustion-engine car adds about 5,000 euros, according to research from German engineering specialists FEV. The expense is such that a plug-in hybrid drivetrain with a battery big enough to reduce CO2 below 50g/km — the threshold automakers need to qualify for both EU supercredits and many local tax incentives –actually costs more than a drivetrain for a small electric car with a 32 kilowatt hour battery, FEV said.

Getting the consumer to shoulder the extra cost will be almost impossible, Bernstein analyst Max Warburton believes. Instead, he expects that automakers will have to absorb about 60 percent of the cost of the PHEV technology themselves to be able to sell the cars at the volume required to achieve the EU’s 2020-21 CO2 targets.

“It’s going to require the industry to force quite a lot of cars into the market. It’s going to require them to do very favorable fleet deals. It might require them to sell these cars to their own employees,” Warburton wrote in an August report.

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