Is It Really Time for PHEVs?

Automakers are asking themselves whether it is worth it to invest a lot in plug-in hybrid-electric vehicles (PHEVs) or bring out more hybrid-electric vehicles (HEVs) while consumers take more time to adopt battery-electric vehicles and public charging infrastructure builds out.

Subaru, for example, has decided to offer at least three HEVs by 2028: the Forester, Crosstrek and Outback. The company, 20% owned by Toyota, has delayed a decision on whether to make the Ascent SUV an HEV or BEV, according to company sources, until after this November’s elections.

Subaru’s decision to bypass PHEVs has to do with the very low rate of usage for recharging the battery on Subaru’s now-discontinued Crosstrek. Ford’s Lincoln brand, too, discontinued the Aviator PHEV for the 2025 model year because of its very low take-rate, as well as low battery usage among those who did buy one.

General Motors is readying new hybrid vehicles, and CEO Mary Barra said recently that the company’s first PHEV since the Chevy Volt was discontinued will arrive in 2027 and will likely be a version of the Chevy Equinox. The reason for diversifying GM’s electric strategy to include HEVs and PHEVs is due to the updated federal emissions standards that affect cars and trucks sold in the 2027-2032 model years.

Based on experience, automakers have been frustrated over PHEV usage. The common refrain is that customers paid a premium to buy one to secure federal and state tax credits or to gain access to HOV lanes, but then didn’t charge them with any regularity, and so did not get the benefit of driving locally – under 30-40 miles (48-64 km) per day – on electric-only power.

Some consumers have also expressed confusion over fueling a vehicle with gasoline and plugging it into a charger. Toyota executives have even said that consumers regularly ask the company and dealers where an HEV gets plugged in after 25 years of selling hybrid cars, never mind questions about a PHEV.

Regulators have been perplexed as well, with buyers in some regions of the world gaining tax credits for purchasing a PHEV but rarely plugging it in. That trend is expected to change quickly in the EU countries, though, as central-city bans on internal-combustion engine use take effect. Already, several PHEVs with limited electric range are being introduced to allow consumers the ability to drive electrically into European central cities without giving up the ICE power they expect to keep pace on the autobahn.

Growth of electrified vehicles in 2024 will be predominantly driven by BEVs, says J.D. Power, with EV volumes forecasted to grow by 23.5% this year. PHEVs are forecasted to improve by just 5.9%.

Times are changing fast in the U.S too, as consumers grapple with the best propulsion system for their lifestyle while multiple choices remain available.

J.D. Power’s midyear report on the electrified-vehicle market shows interest in PHEVs is hard to predict. The firm noted, for example, 39% of current BEV owners are likely to consider purchasing/leasing a PHEV for their next purchase despite the obvious benefit of not being range-constrained on long trips.

“It’s notable, too, that 87% of current PHEV owners say they’re likely to consider purchasing/leasing another PHEV and 66% saying they’re likely to consider stepping up to a BEV. Forty-four percent of PHEV owners, a high percentage, say they are likely to consider a gas-powered vehicle for their next purchase,” thus eliminating electricity from their driving altogether, says Elizabeth Krear, vice president, electric vehicle practice at J.D. Power.

Hyundai is out in front in offering PHEVs, with both the Tucson and Sportage in the showroom for 2025. Earlier this year, Hyundai CEO Jose Munoz told WardsAuto: “I have no doubts that PHEVs must be part of being compliant with ZEV (zero-emissions vehicles) mandates. But I believe Hyundai and the rest of the industry need to do a better job of explaining and demonstrating what a good solution PHEVs are for most drivers.”

According to charging-technology firm Enel X Way, a Hyundai Tucson Plug-in Hybrid can take up to eight hours to fully charge on a Level 1 charger. Level 1 charging uses a common 120V AC outlet, which is the slowest charging method. It can take less than two hours, though, on a Level 2 charger.

A 2021 U.S. Department of Energy study showed that about 20% of PHEV owners charge their vehicles less than once per week. This group often relies primarily on the gasoline engine, reducing the potential environmental benefits of the PHEV. A 2023 J.D. Power study found only 35% of EV owners schedule a time to charge their vehicles at home, while 49% did not.

The lower-than-expected charging of PHEVs moved the Biden Admin. to adjust downward the tax credits available for PHEV purchases because real-world usage indicated they were much bigger CO2 generators than previously thought.

As of now, California does not have specific policies in place that require verification of whether PHEV owners are regularly charging their vehicles. However, the state has reduced PHEV incentives and is exploring various measures to ensure that the growing number of electric vehicles, including PHEVs, are charged in a manner that is consistent with grid stability and environmental goals. This could include monitoring how often PHEVs are being charged through chargers recognizing the car’s digital identity; a measure that will be unpopular with consumers wary of privacy invasion.

One significant change in California has been the closure of the Clean Vehicle Rebate Project (CVRP) for PHEVs as of last November. This project had offered rebates to California residents purchasing or leasing eligible PHEVs, but the program has ended as part of the state’s transition to prioritize fully zero-emissions vehicles.

The PHEV market share in California remained flat in the first half of 2024 versus the same period in 2023 at 3.4% of all new vehicle registrations. This indicates that with the elimination of some incentives, PHEVs’ share of sales will likely decline as more BEV options hit the market.

Between those factors and pricing relative to ICE vehicles and bigger BEV tax credits, PHEVs could be a tougher sell than automakers and regulators think.

The price of a 2025 Tucson PHEV is $40,775 and all the way up to $48,485 for the Limited trim. The price of a similarly equipped ICE Tucson ranges from $29,750-$39,690, and the price of an HEV varies between $34,510-$42,340. The Hyundai Tucson PHEV does not qualify for the federal $3,700 tax credit available for PHEVs that meet the U.S. content and manufacturing threshold.

High gas prices tend to drive sales of HEVs, PHEVs and BEVs. The forecasted trend, though, could also spell trouble for sales and production planners, not to mention regulators and policy makers. The national average for a gallon of regular has fallen more than 20 cents since May and is now at $3.38 – about 47 cents lower than this time a year ago. Many experts say the trend is likely to continue in coming months, possibly leading to $3-a-gallon gasoline for the first time since 2021.