Smoke screen: the growing PHEV emissions scandal

Executive summary

In 2026, the European Commission (EC) will review the car CO₂ emission standards - EU’s flagship automotive climate and industrial policy. While the EC prepares for the review, the automotive industry is calling to weaken the regulation, notably by calling to prolong the sales of plug-in hybrid electric vehicles (PHEVs) beyond 2035 and to reverse the correction of the official PHEV emissions (based on utility factors). A specific variant of PHEV, extended-range electric vehicles (EREVs), which are becoming increasingly popular in China, have also entered the debate.

This report sheds light on the risks posed by PHEVs, highlighting the crucial importance of upholding the planned utility factor corrections and shows that PHEVs are not future-proof options for European drivers and the European automotive industry.

EREVs are not exempt from the PHEV shortfalls and offer limited potential for Europe:

Weakening the EU car CO₂ rules would significantly increase emissions and undermine the EU’s path to climate neutrality. The proposal from the German car industry lobby (VDA) to roll back the 2035 target and utility factor corrections could result in an additional 2.8 GtCO₂e being emitted by 2050 — a 64% increase compared to cars emissions under the current EU regulations.

Promoting outdated PHEV transition technologies is a distraction that risks derailing Europe’s growing EV value chain by deterring investment. Weakening the regulatory framework would widen the competitiveness gap with China, which is racing ahead with EV innovation. Prolonging the life of combustion technology would push the industry into a dead end. To build a future for Europe’s car industry, the EU must stay the course, confirm the EU car CO₂ targets and confidently enter the EV age.

Because of this multi-mode functionality, the actual fuel consumption and resulting CO₂ emissions of PHEVs can vary significantly in real-world use. This variability is related to multiple factors, including how frequently the vehicle is charged and driving behaviour, particularly the share of kilometres driven in CD mode compared to CS mode. As a result of these real-world variabilities, estimating PHEV emissions using standardised test cycles such as the WLTP is often inaccurate. To address this, Article 12 of Regulation (EU) 2019/631 requires the European Commission (EC) to evaluate how well WLTP values reflect real-world driving, based on data collected from OBFCM devices.

The WLTP relies on fixed assumptions about user behaviour, including how often the battery is charged and how much driving is done in electric mode. Central to the WLTP calculations is the so-called utility factor (UF), which aims to represent the proportion of vehicle operation that is powered by electricity. After research showed that the WLTP included overly optimistic assumptions resulting in large gaps between real-world and official emissions, the European Commission corrected the UF in a two-step approach. The first correction will take effect in 2025 for newly registered PHEVs and in 2026 for existing models. A second correction is scheduled for 2027/28. This is an important correction as it aims to better align official figures with the actual use of PHEVs on the road.

This analysis uses OBFCM data reported in 2023 (referred to throughout as “real-world data”) to calculate emissions based on actual fuel consumption in different driving modes. The dataset covers over 800,000 PHEVs registered between 2021 and 2023 (127,000 PHEVs registered in 2023 alone). Further details on the dataset and the data cleaning process are provided in the Annex, including the impact of possible weighting of the data. When considering the average real-world gap per model and recalculating the average based on official 2023 sales figures, we estimate that the average PHEV market would have emissions four times as high as those reported officially in 2023 on the official EEA dataset.

Real-world CO₂ emissions from PHEVs remain significantly higher than official WLTP values, even with the corrected 2027/28 utility factor (UF). Based on emissions data for all PHEVs reported in 2023, we estimate that average real-world emissions would still be 18% above the WLTP figures under the revised 2027/8 UF. This is a significant improvement, as the gap is even larger under the UF applicable before 2025: on average, real-world emissions are nearly four times as high as those assumed in the regulation. Even with the UF applicable in 2025/26, real-world emissions would still be almost twice the WLTP figures. This confirms that the planned correction in 2027/28 is essential to better reflect actual emissions and prevent underestimation.

For comparison, WLTP emissions were calculated based on estimated CD and CS mode values, applying the different UFs introduced in the previous section. This approach makes it possible to assess how well the current and upcoming UFs reflect real-world PHEV emissions (see Annex for full methodology). It should be noted that this is not a forecast: we simply recalculate emissions for the reported 2023 data using different UF curves and applying them to the existing data. For projections of emissions beyond 2025, see section 3.1.

The mismatch between official WLTP figures and real-world PHEV performance is mostly explained by an over-ambitious WLTP UF. Real-world driving data shows that only about 41% of distance is driven in CD mode, and this includes some use of the internal combustion engine in a combined mode. The share of pure electric driving is 27%. An energy-based UF, which the European Commission considers more accurate for reflecting real-world emissions (see info box in Section 1.1), puts the average UF at 31%. This is in stark contrast to the current WLTP UF of 84%. Even the planned correction of WLTP UF due in 2027/28 will still significantly overstate real-world electric use with a UF of 36%, which in turn leads to the actual PHEV emissions being underestimated.

The largest gap between WLTP and real-world PHEV emissions occurs in CD mode, often referred to as an “electric” mode where real-world CD emissions are even higher than the WLTP average. According to T&E analysis, real-world CO₂ emissions in CD mode average around 68 gCO₂/km, which is nearly nine times higher than the estimated 8 gCO₂/km in CD mode under the WLTP methodology, and almost twice the WLTP average overall emissions (including both electric and combustion modes). In practice, the combustion engine frequently assists the electric motor in CD mode, especially during acceleration, at higher speeds or uphill driving. On average, the ICE supplies power during almost one third of the distance driven in CD mode. This is largely due to insufficient e-motor power, as most PHEVs are not designed to operate fully electrically under typical real-world conditions.
This relationship is illustrated by the correlation between e-motor-to-combustion-engine power ratio and emissions in CD mode: vehicles with an average power ratio between electric motor and combustion engine of 0.9, emit approximately 45 gCO₂/km in CD mode. An average PHEV with a ratio of 0.7 has emissions of around 68 gCO₂/km. Vehicles in the lower decile in terms of their ratio of electric motor to combustion engine power, where it drops to around 0.5, have average CD mode emissions of 105 gCO₂/km.

In real-world conditions, petrol PHEVs consume around 3 L/100km in electric mode. Considering an annual mileage of around 5,000 km in charge-depleting mode, the additional cost to refuel would be €250, whereas the driver would expect no fuel cost in electric mode.

Frequent reliance on the combustion engine means many PHEVs emissions are no better than many conventional hybrids or petrol cars. Unlike conventional internal combustion engine vehicles (ICEs), which run entirely on fuel, or hybrid electric vehicles (HEVs), which use a small battery to support the engine under specific conditions, PHEVs are assumed to be cleaner because of their larger battery and ability to drive in electric mode. In practice, however, many PHEVs exhibit emissions similar to or even higher than some conventional ICE vehicles. A visual illustration of this is provided in Annex A.4.

Real-world PHEV emissions are far higher than regulatory assumptions, making them much closer to ICE vehicles than expected. While the WLTP estimates PHEVs emit 75% less CO₂ than ICEs, real-world data show PHEVs averaging at 135 gCO₂/km. This means the actual emissions gap is just 19%, not the large difference envisioned in current regulations.

The 2027/28 UF correction marks an important step toward aligning WLTP values with real-world PHEV emissions and must be maintained. However, looking ahead, this gap may widen further as more long-range PHEVs enter the market: while longer electric ranges lead to higher UFs and therefore lower official emissions, they do not necessarily translate into lower real-world emissions, as the following section will demonstrate. To ensure the accuracy of WLTP values, a regular review of the UF based on real-world data is essential.

A higher electric range does not lead necessarily to lower PHEV emissions

A higher electric range does not lead necessarily to lower PHEV emissions, real-world data shows. Under the WLTP, a PHEV’s electric range determines its utility factor (UF), which in turn defines the share of driving assumed to be in charge-depleting (CD) mode. The higher the electric range, the larger the assumed CD share and the lower the official CO₂ emissions. However, this link between range and emissions is in reality far weaker than the WLTP methodology assumes.

As the figure illustrates, actual emissions do decrease as electric range increases up to a point, but this trend breaks down for long-range PHEVs. Vehicles with an electric range above 75 km actually emit more CO₂ on average than those with a range between 45 and 75 km, despite their longer electric range. But long-range PHEVs not only display higher absolute real-world emissions, they also have the largest gap between real-world and official emission values. This observation is not caused by a small number of atypical vehicles: the >75 km segment contains a similar number of vehicles as the three categories below and shows no outliers. The main distinguishing feature is diversity, with around 15 brands present compared to about 20 in the shorter-range groups.

The high real-world emissions in absolute terms are attributable to significantly higher emissions in charge-sustaining (CS) mode. For vehicles above 75 km range, real-word CS emissions average 202 gCO₂/km, nearly 25% higher than in the 65-75 km range group. The main parameters impacting emissions of this group are higher vehicle mass and combustion engine power: long-range PHEVs are the heaviest in the dataset, averaging 28% more mass and 33% more engine power than the group just below.

At the same time the most pronounced gap between real-world and WLTP emissions is found in the long-range category. This discrepancy is the result of three factors coming together:

Together, these factors lead to a pronounced mismatch between official and real-world emissions of long-range PHEVs.

A correlation analysis confirms that electric range is the weakest predictor of real-world PHEV emissions, while vehicle mass and engine power are the strongest (see Annex A.5 for details). This means that simply increasing electric range does not guarantee lower emissions. Indeed, longer ranges come with larger and heavier batteries and often more powerful combustion engines needed to power heavier vehicles when the battery is depleted, which push-up real-world emissions when operating in CS mode. CD emissions are also expected to be higher with heavier vehicles when the electric motor alone is not powerful enough to sustain accelerations. We also suspect that the charging behaviour does not necessarily improve with longer range, especially for corporate vehicles owners who can use fuel cards to refuel.

Most PHEVs do not have fast-charging capability, which reduces drivers’ incentive to plug in regularly. This limitation means charging often takes several hours, making it less convenient than simply refuelling with petrol or diesel. Also when considering fuel tank size the issue becomes apparent: the average PHEV has a fuel tank of around 51 litres, providing a driving range of about 730 km in CS mode, according to WLTP figures. This long range using the combustion engine alone allows drivers to rely almost entirely on fossil fuels. To encourage regular charging, the fuel tank size could be limited and PHEVs be equipped with fast-charging capabilities.

Some carmakers benefit more from the WLTP flaws

Some carmakers benefit more from underestimation of emissions from the WLTP, creating unfair competitive advantages. Brands like Mercedes-Benz and Land Rover show gaps well above the average difference between real-world emissions and WLTP figures. While the average gap is at 300%, these brands exceed it by more than 70 percentage points. This means their true emissions are understated far more than those of other manufacturers, making it easier for them to be compliant with EU targets.

The gap between WLTP figures and real-world emissions for PHEVs is widening year by year across OEM pools. For vehicles registered in 2021, 2022 and 2023 the divergence has grown steadily for all major European carmakers, with Mercedes-Benz group showing the most pronounced increase: its 2023 PHEVs exhibit a gap of 494%, significantly more than from other carmakers, underlining again how some manufacturers benefit increasingly from WLTP’s shortcomings.

This widening gap is driven by heavier and more powerful vehicles entering the PHEV fleet that also have longer ranges. For example, between 2021 and 2023 the GLC-Class, one of Mercedes-Benz’ top-selling PHEV models, nearly tripled its average electric range from 44 km to 112 km. The brand’s second most sold PHEV also exceeds 100 km of electric range, pushing the overall average electric range across the Mercedes-Benz PHEV fleet up by almost 45%. Yet despite this substantial increase, real-world emissions of the entire group only fell slightly from 136 gCO₂/km in 2021 to 128 gCO₂/km in 2023: a reduction of just 6%. This is far below what WLTP values suggest, which assume a drop in emissions of about 55%.

WLTP flaws have allowed four major carmaker groups to avoid more than €5 billion in fines between 2021 and 2023. The underestimation of emissions by the WLTP directly benefitted OEMs by making it easier to comply with fleet-average CO₂ targets. Between 2021 and 2023, real-world data shows that carmakers emitted nearly 52 million tonnes more CO₂ than official figures suggest. If PHEV sales shares had remained the same but compliance had been based on real-world emissions rather than WLTP values, OEM pools would have needed to compensate for this excess by increasing BEV sales to avoid penalties. The shortfall in necessary BEV sales over this period equates to 1.1 million vehicles.

Volkswagen, Mercedes-Benz and BMW account for the lion’s share of fines avoided over the past three years, together responsible for 89% of the total. This presents a significant competitive advantage. By contrast, other carmakers such as Renault and Stellantis had little or no benefit, as they sell far fewer PHEVs, meaning the systematic underestimation of emissions has minimal impact on their compliance. For a detailed breakdown of target compliance information for each pool, please refer to the Annex.

High-emitters are heavy premium PHEVs with high engine power and limited e-motor power

PHEVs with the greatest real-world emission underestimation share three features: high electric range, high vehicle mass and a high combustion engine-to-electric motor power ratio. A closer look at individual models shows how these design choices widen the gap between official and real-world emissions.

Among PHEVs with over 10,000 registrations in 2023, the Mercedes-Benz GLE-Class shows the highest real-world emissions gap, exceeding its WLTP value by 611% (a 140.9 gCO₂/km gap). The Land Rover Range Rover and BMW X5 follow closely with gaps of 557% (159 gCO₂/km) and 486% (145 gCO₂/km), respectively. On average, these high-gap models weigh 2,555 kg, which is 28% heavier than the PHEV fleet average, and offer an average electric range of 87 km, 38% above the fleet average. Crucially, the combustion engines in these vehicles are more than twice as powerful as their electric motors, while the average PHEV sold in 2024 had an engine 1.6 times as powerful as its electric powertrain.

Weight and powertrain design impair real-world performance. Because PHEVs carry both a combustion engine and an electric drivetrain, they are inherently heavy. This high mass results in elevated emissions in charge-sustaining mode, when, in addition to the car body, the depleted battery must be carried by the combustion engine alone. A low-battery-to engine power ratio worsens the problem: the heavy PHEVs, especially SUVs, need powerful engines to maintain strong acceleration, but their e-motors are often underpowered. As a result, the combustion engine frequently kicks in during charge-depleting (CD) mode, pushing real-world emissions far above official figures. The Range Rover illustrates the consequences of this power imbalance. Its combustion engine delivers more than twice the power of its battery (a ratio of 2.2), driving real-world "electric" mode emissions up to striking 192 gCO₂/km.

Improved electric motor-to-engine power ratios are essential. To improve real-world emission performance, PHEVs must be designed with sufficiently powerful electric motors. A sound principle is that the electric motor should deliver at least twice the power of the combustion engine to ensure real electric driving while minimising combustion emissions. Today, no PHEV meets this standard with the maximum electric-to-engine power ratio being at 1.6, which explains part of the real-world emission estimation shortfall that policymakers must urgently address.

PHEVs cost consumers more than official figures suggest

The significant gap between WLTP values and real-world emissions not only jeopardises the EU’s path to climate neutrality, but also tacitly burdens the wallets of PHEV owners. In practice, these vehicles consume far more fuel than laboratory tests suggest, resulting in drivers spending on average four times more on fossil fuel refuelling than WLTP estimates. These additional costs amount to around €940 extra per year. When taking into account the total energy costs, including charging, drivers have to pay about €500 more than expected, meaning that real-world expenses are almost 50% higher than official figures suggest. Among privately owned PHEVs, the best-selling model in 2023 was the Ford Kuga. While its gap between official and real-world performance is smaller than the average across all models, real-world fuel costs are still more than three times as high as when taking WLTP figures, which adds roughly €640 in extra annual fuel expenses for drivers and €360 overall additional energy costs.

Not only are PHEVs expensive to drive, they are also more expensive to buy than clean alternatives. According to Bloomberg Intelligence, the average selling price of PHEVs in Germany, France and the UK in 2025 is €55,700. This is €15,200 higher than the average price of a BEV. Despite their higher upfront and running costs, carmakers continue to promote PHEV models. This raises concerns about their suitability for a clean transition, especially as consumers seek affordable options. Even in the case of larger vehicles, a study by the Boston Consulting Group (BCG) found that D-segment BEVs are €9,300 to €10,100 cheaper to own and operate over five years than their PHEV counterparts.

EREVs are not exempt from PHEV shortfalls, especially extensive use in combustion mode

EREVs typically have large fuel tanks which allow for around 900 km of travel in combustion mode. As long as the size of the fuel tank is not limited, there is a significant risk that drivers would choose to drive mostly in combustion mode, rarely charging the depleted battery. This is a particular risk in Europe, where many drivers do not regularly charge their vehicles, for example when using a company car with a company fuel card.

With reported values ranging from 15% to 70%, the utility factor that can be achieved in Europe is highly uncertain

In the 2025 EV Outlook, Bloomberg New Energy Finance (BNEF) estimated that 70% of the distance travelled by Chinese EREVs was in electric mode, using data from 2022 provided by the National Big Data Alliance of New Energy Vehicles of China, a Chinese think tank associated with car manufacturers and academic institutions in China. Further studies with more recent data are needed to confirm whether this utility factor remains at this level when sales extend beyond early adopters from 2022. Moreover, the Boston Consulting Group (BCG) mentioned in a 2025 report that some OEMs and experts forecast a 15% utility factor for EREVs when projecting the utility factor of European customers. Therefore, there is a high level of uncertainty regarding the utility factor that would be achieved in Europe.

With four long-distance trips over 1,000 km per year and daily use in electric mode, EREV could potentially reach a 72% utility factor

The following figure shows the potential proportion of distance driven in combustion mode for a typical European use case. In this example, the utility factor is applied over the course of a full year, during which the driver would use the vehicle for 27 km per day for 45 weeks and take 4 long-distance trips of 1,050 km. If the owner charges every four days (similar to the charging frequencies for PHEVs achieving a 41% share in charge-depleting mode), and if the long-distance trips are done without charging along the way, then an EREV could reach a 72% utility factor over one year. This order of magnitude would be consistent with 2022 data observed in China. However, under the right conditions and with the EREV models designed to the highest standards, for instance by limiting the fuel tank size to incentivise charging during long-distance trips, then, a higher utility factor could potentially be reached.

Despite optimised engine operating points, EREVs have high fuel consumption in combustion mode - in line with conventional petrol SUVs.

Based on the specifications of Chinese models (more details in Annex A.8), we calculated that EREVs in China consume 6.7 litres per 100 kilometres on average when the battery is depleted. This is no better than some European petrol SUVs. For example, the Volkswagen Tiguan has a petrol variant with combined fuel consumption of 6.0 L/100 km.

Since the combustion engine is not connected to the wheels in an EREV, it should theoretically operate at an optimal point. However, when the battery is fully depleted, the relatively small ICE needs to run at high power to provide enough energy to drive the large vehicle and its heavy depleted battery. Although PHEVs carry smaller batteries, the combustion engine of a PHEV generally operates at less than optimal points. Nonetheless, data analysed by T&E suggests that average EREVs in China and average PHEVs in Europe have similar fuel consumption when the battery is depleted, averaging close to 7 L/100 km. Therefore, in addition to the uncertainty surrounding the proportion of distance driven using electricity, EREVs do not offer any benefits in terms of CO₂ emissions once the battery is depleted.

Chinese EREVs show some design advantages over conventional PHEVs

Firstly, EREVs have e-motors that are 2.7 times as powerful as their combustion engines. In comparison, the e-motors of European PHEVs are 30% less powerful than their combustion engines (see Annex A.8 for details). This higher electric power is a significant advantage, given that an EREV can operate in fully electric mode during periods of strong acceleration. PHEVs, on the other hand, rely on combined ICE-electric operation in such conditions, with the combustion engine providing additional power to the e-motor. This increases overall emissions in real-world driving conditions, as the combustion engine is used for one third of the distance travelled in "electric" mode. With smaller combustion engines and no need to start the combustion engine during acceleration, EREVs could display lower real-world emissions in electric mode.

Secondly, due to the larger batteries in EREVs, most car manufacturers have chosen to design these models with fast-charging capability, typically DC charging with an output of over 100 kW. This fast-charging capability would encourage drivers to recharge their vehicles more regularly.

Thirdly, EREVs have a longer electric range, averaging 180 km in China compared to 80 km for European PHEVs. Among Chinese models, some even reach electric ranges well above 200 km, for instance the Stelato S9 is a luxury sedan with an electric range reaching 290 km. While longer range alone does not guarantee the models would reach the lowest levels of real-world emissions, the combination of long range, a powerful electric motor and fast charging capability increases the likelihood that some drivers would operate in electric mode over longer distances when compared to the typical use of PHEVs.

Most Chinese EREVs would not match European needs

In China, 99% of EREVs are sold in the larger segments (segment D and above), predominantly in the executive and luxury SUV segments. However, these large SUV models would not meet the needs of the European market, where executive and luxury vehicles represent only 6% of BEV sales and 18% of PHEV sales. Furthermore, these vehicles would compete with similar-sized European PHEVs which have stronger brand recognition. From a technical perspective, SUVs and larger vehicles provide more space for a dual powertrain. Furthermore, buyers of larger vehicles can absorb the additional costs of an EREV drivetrain. Some medium-sized C-segment EREVs such as the Deepal SL03 (electric range of up to 165 km) are sold in China.

While EREVs can go further than PHEVs, they can't go as far as BEVs with current technology

As discussed in previous sections, the average electric range of Chinese EREVs is above 180 km, surpassing the 80 km range of PHEVs but falling short of the average 500 km range of BEVs in Europe. However, the best-in-class Volkswagen ID.ERA concept car is expected to reach 300 km, and future EREV models fitted with new battery technology could extend this further. CATL announced its new Freevoy battery could unlock electric range over 400 km. For example, the Stellar drive from IM Motor is expected to use a 66 kWh Freevoy battery to achieve an electric range of 450 km. These future long-range models with an electric range of over 300 km have the potential to offer a range comparable with that of today's entry-level BEVs.

While EREVs can be cleaner than PHEVs, today's model falls short of the high environmental standards required in Europe

EREVs benefit from powerful electric motors and a series configuration that enables emissions to be minimised in electric mode. This is an advantage over PHEVs, which have less powerful electric motors and therefore drive in combined electric-combustion mode for a significant proportion of their use.

EREVs could reduce NOx emissions compared to PHEVs. If engineered well, the EREV combustion engine would operate almost like a stationary generator with a steady load, reducing NOx emission spikes that occur during dynamic engine operation.

Due to their long ICE range capability, the average utility factor of EREVs could be between 15% and 70%. They may therefore exhibit similar charging behaviour to PHEVs, which travel more than half of their distance in Europe in depleted battery mode. Nevertheless, well-designed, long-range (300+ km) EREVs with a limited fuel tank size (e.g. 15 L) could be driven predominantly in electric mode, achieving a utility factor close to 70%.

Taking the whole lifecycle of the vehicles into account, including the production phase, BCG calculated that EREVs with a 15% utility factor emit, on average, 127% more CO₂ than similar BEVs. Even with a utility factor of 65%, EREVs would emit 48% more CO₂ than BEVs over their lifetime, making them suboptimal in terms of environmental performance.

EREVs benefit from fast-charging capability, yet they rely on fossil fuel infrastructure

With the ability to use DC fast charging at a rate above 50 kW, all EREV models have a significant advantage over PHEVs. Moreover, the ability of these vehicles to drive in combustion mode can be useful for a certain category of users during the transition, particularly those living in areas with limited charging access. However, as the transition progresses towards the end of the 2020s, European regulations such as the Alternative Fuel Infrastructure Regulation (AFIR) and the Energy Performance of Buildings Directive (EPBD) are expected to provide most drivers with sufficient access to public and private charging. While an ICE range is beneficial in the short term, it will not be a significant advantage for EREVs in the 2030s as fuel stations become scarcer. Furthermore, the implementation of carbon taxes as part of the Emissions Trading System for road transport (ETS2) is expected to increase fuel prices and therefore driver costs. Reliance on fossil fuel infrastructure could also become a disadvantage as Europe increasingly prioritises energy sovereignty.

The future price of the EREV powertrain is uncertain but operating costs will be a burden

Compared to PHEVs, these models have larger batteries and could initially be sold at a higher price. However, as battery prices are expected to decrease, accounting for a smaller proportion of the total car price, other factors could influence vehicle pricing. For example, well-designed EREVs with small combustion engines for emergency backup could be built on the same platform as BEVs with a lower complexity than PHEVs, benefiting from the economies of scale of the BEV platforms. In the European market, PHEVs will face an increasing cost burden as the production volume on ICE platforms decreases. Therefore, EREV could become cheaper than PHEVs in the medium term.

Despite smaller batteries than BEVs, EREVs would be more complex and costly due to the additional ICE components that would likely not benefit from significant economies of scale. Therefore, EREV prices in Europe are unlikely to fall below BEV prices. BloombergNEF long-term modelling confirms this for the Chinese market as they show that, in the absence of subsidy, EREVs would never reach price parity with battery electric vehicles, but they could displace PHEV sales due to their lower price.

Overall, a well-designed EREV with a small combustion engine could be cheaper than a PHEV, but it is unlikely to be as affordable as a mass-market BEV. However, EREVs could provide cheaper options than BEVs in premium SUV segments where extra-large BEV batteries may be common.

In terms of total cost of ownership (TCO), reports from BCG highlight that EREVs incur higher costs than BEVs. BCG calculated that a D-segment EREV would cost €1,000–€1,200 more per year than a similar BEV over a five-year ownership period.

Based on sales price and TCO, EREVs appear to be better suited to premium segments, where users are less sensitive to operating costs and long electric ranges could limit the price benefits of BEVs.

EREVs are not suited to mass-market segments, but they could serve as a transition technology for certain users before 2035 when replacing combustion vehicles

Firstly, they can serve users driving long distances and living in remote areas, where charging infrastructure is expected to remain limited during the transition, and who lack access to private charging at home or at work. While this use case is quite common in China, explaining the popularity of EREV in the country, these conditions are far less common in Europe and should disappear by 2035 thanks to charging infrastructure coverage. In this use case, well-designed EREVs can provide an emergency backup drive in combustion mode. However, the fuel tank should not be oversized to prevent the vehicle from being used primarily in combustion mode.

Secondly, EREVs would be designed to target premium drivers seeking large vehicles with long-range capabilities and intermediate features between PHEVs and BEVs. A survey conducted by McKinsey has confirmed that the interest in EREVs was higher among owners of premium-brand vehicles. However, these use cases are expected to be relatively limited, given the increasing competition from long-range PHEV models (e.g. Lynk & Co has introduced a model with an electric range of 200 km) and new battery technology that enables ultra-long-range BEVs (e.g. Mercedes-Benz is testing a BEV prototype with a range of 1,000 km using a solid-state battery).

Chinese carmakers are leading the way with EREV technology, whereas European carmakers have limited plans in Europe

EREV technology does not appear to be a strategic priority for European carmakers. Many carmakers are already benefiting from, or planning to further develop, their PHEV technology, which benefits from the legacy ICE supply chain in Europe. In this context, carmakers have not focused extensively on EREV, a technology that is dominated by Chinese companies and would not significantly benefit the ICE supply chain in Europe.

This technology is being developed for the premium segment, with BMW considering selling an EREV version of the iX5 in Europe and luxury carmakers such as Lotus developing high-end EREV models. However, carmakers must prioritise investment in BEVs to develop the best BEV platforms for the market, and avoid making competing investments in PHEV or EREV technologies. For example, the CEO of Volkswagen declared that it makes no sense to have both range extenders and plug-in hybrids in smaller European cars, whereas this technology is relevant for large vehicles sold in the US.

Finally, in the undesirable case where the EU allows for an exemption for the sale of vehicles running on carbon-neutral e-fuels under specific conditions after 2035, EREVs may be the preferred e-fuel compatible vehicle given that the high prices of e-fuels would limit such fuels to niche applications.

Planned utility factor corrections avoid drastically underestimating PHEV emissions

Our forecast of 71 gCO₂/km for 2030 is based on the planned correction of the utility factor curve in 2027/28 (see Section 1.1). Using the current utility factor (the 2025/26 UF curve) would result in average PHEV emissions at 38 gCO₂/km, while real-world emissions would remain 2.4 times as large. If the utility factor curve were weakened and reverted to the curve used prior to 2025, the average PHEV emission would be set artificially to 11 gCO₂/km, despite real-world emissions being nearly nine times as large. This assessment confirms the importance of safeguarding the planned correction to the utility factor curve as part of the Euro 6e-bis-FCM standard, although further strengthening of the curve would be needed to close the remaining gap.

Weakening or cancelling the utility factor correction would not only drastically underestimate PHEV emissions, but also reduce the incentive for BEV sales, slowing the transition to zero-emission mobility. If the utility factor corrections are not safeguarded, carmakers could rely heavily on overstated PHEV performance to meet their CO₂ targets, slowing the pace at which they increase BEV sales. As a result, fewer electric vehicles enter the market. Assuming a constant PHEV share, carmakers would need an average BEV share of 53% if both the 2025 and 2027 corrections of the utility factor are cancelled, instead of 58% under the planned utility factor updates. If PHEV production ramps up until 2030, with the market share of PHEVs doubling compared to 2025, the required BEV share could fall to just 45%, representing a shortfall of 13 percentage points (%p) in electric vehicles entering the market. Carmakers that have a stronger focus on PHEVs would benefit the most from the weakening of the utility factor and would be encouraged to sell more PHEVs if the utility factors are weakened. In this scenario of PHEV-optimised compliance, carmakers could sell the same number of PHEV than BEV with a 32% share for both, resulting in a 26%p reduction in the BEV share.

Design criteria would limit the increase in the real-world gap

In the business-as-usual scenario, we estimated that the gap between real-world emissions and the WLTP emissions calculated with the 2027-28 utility factor could increase from the 18%, which was observed for models released between 2021 and 2023, to 31% by 2030 because of the shift toward longer range models which have the highest gap (44% based on 2023 OBFCM data), see details in Annex A.10. However, we expect that implementing design criteria would prevent this increase as new long-range models would benefit from fast-charging capability and powerful electric motors. Therefore, once regulatory measures favouring well-designed PHEV models have been implemented, we assumed the real-world gap would converge to 18%.

If the market shifted towards well-designed models, average real-world emissions could approach 50 gCO₂/km in 2030

If the annual average range increase is maintained at 13% (the increase observed between 2023 and 2024), most models would reach 200 km by 2030. If this increase in range is accompanied by a significant improvement in engine efficiency and battery energy density, we could expect emissions in combustion mode to improve by an average of 2.2% per year — the average improvement observed between 2021 and 2024. Under these conditions, the WLTP average emissions of well-designed PHEV models would fall to 44 gCO₂/km by 2030. Real-world emissions could reach 53 gCO₂/km if the design criteria effectively reduce the real-world emission gap.

The real-world emissions of the best-in-class models with a range of over 300 km could reach 25 gCO₂/km by 2034

In the best-in-class scenario, we estimated the emissions of a well-designed segment C hatchback with a 300 km electric range. This well-designed long-range hybrid could achieve real-world emissions of 25 gCO₂/km, with WLTP emissions at 21 gCO₂/km.

Adjusting the reduction target to -90% from 2035 would increase emissions by 360 MtCO₂e

The VDA proposal would significantly weaken the regulation by replacing the 100% CO₂ emissions target with a -90% target in 2035. This measure would result in an additional 360 MtCO₂e of cumulative emissions between 2030 and 2050 — a 8% increase compared to the regulatory baseline. This is the equivalent of half a year of emissions from the 2022 car fleet. In a scenario where PHEV emissions are calculated based on the 2027/28 utility factor curve, this measure would allow carmakers to sell 10% ICEs (including all hybrid powertrains) in 2035.

Allowing a third of sales to be long-range hybrids after 2035 could result in an additional 500–890 MtCO₂e
The VDA has proposed giving greater consideration to the role of PHEVs beyond 2035 by defining PHEVs with long electric ranges as a new vehicle category. Up to a certain fleet volume, these vehicles would be eligible for registration as ZEVs after 2035. Assuming PHEV sales are capped at one-third of the new car fleet and the new vehicle category is defined based on the long-range scenario in section 3.2, we estimate that new long-range hybrids sold between 2030 and 2050 could emit 500 MtCO₂e, a 12% increase compared to the regulatory baseline. This is equivalent to 1.1 years of emissions from the 2022 car fleet.

However, the situation could be worse if the definition of 'long-range hybrid' is not robust. For example, in a business-as-usual scenario in which the average range is limited to 140 km in 2031 (see Section 3.1), total additional emissions could reach 890 MtCO₂e, which is a 21% increase compared to the regulatory baseline. This would represent 2.3 years of emissions from the 2022 car fleet. Combined with the 90% reduction target for 2030, this weakening would result in an additional 1.3 GtCO₂e of emissions between 2030 and 2050.

Weakening the utility factor could have the worst impact, resulting in an additional 2.8 GtCO₂e.

The VDA has proposed suspending the planned adjustment of the utility factor (including the 2025 adjustment). Cancelling the correction to the utility factor curve from 2025 onwards would result in PHEV emissions being artificially reduced to an average of 10 gCO₂/km in 2035. A 90% reduction in emissions compared to the 2021 baseline would mean that the 2035 CO₂ target would be 11 gCO₂/km. Therefore, weakening the UF would effectively give PHEVs a free pass. Combined with other hybrid incentives, the worst-case scenario could see 100% PHEV sales from 2035 onwards, despite these models having real-world emissions close to 90 gCO₂/km. These vehicles would lead to total additional emissions of 2.7 GtCO₂e, a 64% increase compared to the regulatory baseline.

In a context where the automotive industry is seeking to increase sales of hybrid models beyond 2035, this study reveals that the emissions of most plug-in hybrid electric vehicles (PHEVs) are no better than those of conventional internal combustion engines (ICEs) in real-world conditions. Meanwhile, new EREV models face similar challenges, as their design would still allow drivers to predominantly drive in the combustion mode with a depleted battery. Proposals from the German carmakers' lobby group VDA, would – if accepted – derail the EU's path to climate neutrality by allowing the sale of hybrid vehicles disguised as zero-emission vehicles, potentially enabling them to make up 100% of new sales even after 2035.

Europe must urgently establish global electric car leadership to sustain economic value and create new jobs across its automotive value chain. To avoid setting the European car industry into a doomed future based on outdated and ineffective hybrid technology, the EU must stand firm during the upcoming regulatory review. The 2030 and 2035 targets must both be maintained to prevent significant climate-harmful emissions, and any proposal to create specific vehicle categories for hybrids should not be accepted.

In order to protect the integrity of the targets, every step of the planned correction of the utility factor curve must be safeguarded, in particular the 2027/8 correction. Furthermore, the utility factor methodology must be strengthened further to close the remaining gap with real-world emissions. OBCFM data must be used to calibrate the utility factor curve every two years from 2029 onwards. Additionally, carmaker-specific utility factors should be applied to prevent those with higher-than-average real-world emissions from benefiting from an unfair competitive advantage. Given that the EEA has noticed many OBFCM errors, we also recommend making over-the-air data transmission mandatory, and investigating and correcting the cause of data transmission errors. In addition, we recommend updating OBFCM devices to measure the electric energy entering the vehicle at the plug, as this is an essential parameter for understanding charging losses and assessing the vehicle's energy-based utility factor. This utility factor provides the most accurate methodology for understanding the factors contributing to the significant discrepancy between WLTP and real-world emissions, and for monitoring its evolution throughout the vehicle's lifetime and between generations.

During the transition period up to 2035, car manufacturers are expected to continue to rely to some extent on hybrid vehicles. Policies and tax incentives based could encourage a shift towards the best models which can lead to a decrease in real-world emissions of PHEVs if designed correctly. We propose the following list of criteria: