PHEVs get room, but near-100% BEV scenario remains most likely

The symbolic 100% CO₂ reduction target for 2035 is over: the European Commission now proposes a 90% cut, opening doors to PHEVs, e-fuels, and green steel offsets —while BEVs remain dominant. This analysis examines powertrain mix scenarios, PHEVs' transitional role despite real-world utility factor shortfalls and cost hurdles, and varying EU impacts —from near-100% BEV adoption in advanced markets to flexibility for Eastern Europe.

The European Commission has proposed major changes to the EU CO2 standards for light-duty vehicles

• The 2035 target for new cars and vans shifts from a 100% CO₂ reduction (0 g/km) relative to 2021 to a 90% reduction, allowing a residual 10% of emissions (11 g/km for passenger car)

• No restrictions on powertrain type for registered vehicles – unlike current regulation that mandates only zero-emission vehicles (BEV and FCEV)

• Carmakers must compensate remaining emissions, or face penalties, via

  • renewable fuels (biofuel carbon correction factor): up to 3%

  • low‑carbon steel credits for green steel adoption: up to 7% – though green steel competitiveness remains uncertain

• Several flexibilities are proposed on the way to 2035: super credits for small BEVs, 3-year averaging for 2030–2032 and weakening of the 2030 intermediate CO₂ targets for vans

• From 2030, a minimum share of newly registered corporate cars and vans must be zero- or low-emission (SMEs excluded). The European Commission sets differentiated quotas by EU countries, grouped into five clusters based on GDP per capita and national market maturity

In theory, diverse outcomes are possible depending on efficiency gains, PHEV utility factors and the level of offsets

Under the EU's proposed 90% CO₂ reduction target for 2035, BEV share in new passenger cars could range from 60% to 100%. In a PHEV expansion scenario, PHEVs could reach up to 40% share in 2035, assuming average WLTP CO₂ emissions of ~25 g/km per PHEV.

A strong penetration of BEVs appears to be the most plausible path given their growing cost‑competitiveness. Advanced markets should approach 100% BEV shares by 2035, while regulatory changes primarily support less mature markets, especially in Eastern Europe.

The proposed amendment creates more room for plug‑in hybrids, but they should remain a transitional solution

Plug‑in hybrids can ease the transition to electrification by cutting fuel use and CO₂ when regularly charged, while removing range anxiety for drivers not yet ready for a full BEV. They rely less on dense public charging networks, allowing many users to electrify a large share of their kilometers using mainly home or workplace charging.

However, PHEVs face major limitations:

• The calculation of CO2 emission of PHEV in the overall performance of car manufacturers relies on a technical but crucial criterion: the share of electric km, so-called the utility factor. real‑world data (OBFCM) show that many PHEVs are charged less and driven in electric mode far less than assumed, leading to real emissions 3–5× higher than WLTP lab tests

• PHEV is typically the most expensive of the three types of powertrains: the total cost of ownership hierarchy tends to be: BEV < ICE < PHEV for an average user, with PHEVs only becoming competitive in specific tax regimes and usage profiles with very high electric‑driving shares

• Market trends confirm PHEVs' bridging role: rapid early adoption fades as BEVs dominate post-transition

Enviny has developed strong expertise in e‑mobility, supporting stakeholders across the value chain in their strategic roadmaps, transformation programs, and investment decisions, including numerous commercial and technical due diligences.​
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