Europe’s EV Pause Opens Temporary Opportunity For Plug-In Hybrids

Mazda seems to have picked the perfect time to launch its plug-in hybrid MX-30, just as faltering sales from Tesla underline the point that electric cars aren’t ready for prime time, yet.

Worries about the high price of range anxiety-inducing electric cars, their fast depreciation and eye-watering insurance costs would seem to point the way for plug-in hybrids to seduce prospective car buyers.

After all, if you are a typical motorist driving less than 30 miles a day, a plug-in hybrid (or this range-extender) can mean all your daily usage will be electric only, and on the rare occasion you drive long distances, the combustion engine can kick in and give you up to 400 miles of range at highway speeds, effectively more than twice as much as the best electric cars.

The trouble is European CO2 emissions rules will make it progressively harder for PHEVs to compete with pure EVs and ban them by 2035. Some experts argue this will close an efficient and popular choice.

The Mazda MX-30 R-EV has a battery capable of more than 50 miles of electric-only driving. When the battery runs out, or it requires a bit of extra power for overtaking, the 830cc rotary engine kicks in to generate electricity. It’s always powered by the battery.

Electric car sales in Europe, and the U.S., have been faltering lately and the likes of Volkswagen, BMW, Mercedes, GM and Ford have been forced to scale back ambitious targets.

Tesla’s first-quarter sales woes, despite a warning from CEO Elon Musk, led to a shake-out on the stock market, and much media hand-wringing about the future of electric cars to the benefit of plug-in hybrid electric vehicles and regular hybrids. (PHEVs can give up to 70 miles of electric-only driving. Hybrids allow perhaps a mile of electric-only driving while the computer manages a mix of battery and combustion engine to improve efficiency and therefore range).

But long-range forecasters suggest this setback for electric cars is a temporary blip. According to investment researcher Jefferies, sales of EVs in Europe will rise from about 2 million in 2023 to 8.9 million in 2030 for a market share of 65% versus 16%, while PHEVs will slowly decline from around 1 million last year to just over 800,000 in 2030 (7.7% versus 6.0%). Investment bank UBS reckons EV sales will reach 9.6 million in 2030, while PHEVs will rise slowly through 2028 then slip to around 900,000 in 2030.

A powerful factor behind the likelihood of EV sales resuming a powerful upward trend at the expense of PHEVs is EU regulation, which insists 100% of all new car sales by 2035 are electric only. Rules governing emissions of carbon dioxide make it progressively more difficult to include a combustion engine, even if it runs alongside a battery.

Matt Schmidt of Schmidt Automotive Research was an early identifier that there would be a pause in EV sales in Western Europe, triggered by a change in EU rules.

“Our forecast will be staying the same for BEVs as we fully factored in the slowdown in growth in 2024 given the change in EU CO2 fleet emission legislation from 2025 and established manufacturers purposefully planning a slow hand in 2024 and accelerating once again from 2025 to remain compliant,” Schmidt said in an interview.

Schmidt expects EV sales in Western Europe to reach 8.4 million or 60% of the overall market by 2030, compared with just under 2 million in 2023 (16.9%).

“We expect Western European PHEV volumes to hover at an annualized rate of around 1 million units for the foreseeable future,” Schmidt said.

Schmidt said PHEVs are favored mainly by more upmarket manufacturers.

“We expect premium manufacturers to continue to leverage PHEVs to meet (EU) targets heading up to 2030 due to profitability and cost advantage they bring, while mainstream volume (manufacturers) will likely introduce more mild hybrid models,” Schmidt said.

Last year, top PHEV sellers in Europe included the Ford Kuga, Volvo XC-60, Mercedes GLC and BMW 3 series.

(Mild hybrids run a 48-volt electrical system to power components that would have previously been powered by the engine, enabling more efficiency.)

But by 2035, the EU has banned hybrids, PHEVs and anything with an internal combustion engine (ICE). This decision will astonish its citizens who drive only limited daily miles, want the practicality of a PHEV but don’t trust EVs because of range and price doubts. They want the freedom to hit the highway and head for the sun once a year without range anxiety.

The drive by politicians in Europe, and the U.S., to declare that electric cars alone are the best way to reduce global CO2 will waste valuable and proven resources which could be provided by hybrids and PHEV technology, according to expert engineers like Kelly Senecal of the U.S.

That’s one of the conclusions of a recent book “Racing Toward Zero” written by Senecal and Felix Leach of the U.K.

Hybrids, PHEVs, and now this Mazda rotary engine solution, use small batteries compared with the huge BEV batteries and avoid consuming large quantities of scarce and likely ever more expensive commodities like lithium, nickel, cobalt and copper. They also offer a more affordable option. If battery-only electric cars come to dominate the market, this is likely to price average earners out of their cars.

“Banning plug-in hybrids would eliminate a potentially ideal solution for many drivers in Europe. PHEVs provide the freedom to drive without tailpipe emissions in city centers while maintaining the flexibility and range of an internal combustion engine for longer distances” Senecal said in an email exchange.

Green lobby organizations like Brussels-based Transport & Environment disagree. In a report published last year “Plug-in hybrids: A dangerous distraction”, T&E said PHEVs shouldn’t get tax breaks from governments because they don’t contribute to CO2 reduction and can even make it worse.

T&E said company car drivers often have no incentive to use the battery-only range, so the increased weight of the PHEV makes its overall fuel efficiency worse than an ICE vehicle. This could be solved with geo-fencing, which would penalize non-use of the battery-only range.

But this criticism makes little sense for private buyers with small average annual mileage, not convinced by the efficacy of battery-only vehicles (BEV), and who would be denied a vehicle which for maybe 90% of use would be electric only.

Meanwhile this pause in the growth path of EVs and predicted massive resurgence makes a huge assumption. To get from 2 million sales now to say 9 million by 2030 requires a revolution in the type of EV available. They will be much cheaper and smaller – say €10,000 ($10,800) – and designed for urban use. Currently, there are no European contenders in this new class of EV. They exist in China, and the earliest European contender is unlikely until 2027.

This potential existential threat from China has led leading manufacturers like BMW, Volkswagen and Renault to suggest the EU change the rules. The EU has promised a review of the whole timetable for 2035 in 2026. Meanwhile, Renault has asked the EU to launch the equivalent of the Marshall Plan, the U.S.’s massive aid program to Europe after the Second World War, to rescue Europe’s carmakers from the consequences of its own regulations.