Why are European luxury brands offering so many plug-in hybrids?

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The 2016 model year may well be known as the time mainstream luxury brands went electric. Although gas prices are expected to remain low in 2016 and market share for all electric vehicles accounts for less than 1% of US auto sales, European luxury brands are clamoring to introduce their own plug-in hybrid vehicles.

BMW is adding a plug-in hybrid version of both the 3 series and the X5 and plans to do the same for the rest of its line. Mercedes-Benz will release ten new plug-in hybrids between now and 2017 including the 2016 C350e and S550e, and Audi’s first plug-in hybrid, the A3 Sportback e-tron, is expected this fall with more to come next year.

In this article, we’ll examine why so many luxury car makers are adding plug-in hybrid vehicles and look at what we can expect to see in the next few years.


The Tesla Effect

One common explanation is that the European giants are “taking on Tesla.” Numerous articles can be found which claim one brand or another is trying to create a model that will compete effectively with Tesla. While Tesla has undoubtedly proven that there is a market for luxury-class electric vehicles, the brand reported 2015 third quarter sales of 11,580 or roughly a third of what BMW sold in just the month of August. The Tesla effect could certainly explain luxury automakers introducing one or two plug-in models, it doesn’t explain the large number of entries currently planned.


California Zero Emission Vehicle laws

A more plausible explanation is the legislation passed in California (and other states and countries) to encourage the sale of zero-emissions vehicles. While the federal government has regulated that that the average fuel economy of all vehicles sold must be 54.5 mpg by 2025, California has taken this one step further. California’s Zero Emission Vehicle (ZEV) mandate requires that between 2017 and 2025 automakers must ramp up their production of ZEVs, like plug-in hybrids and fuel-cell vehicles, to account for 15.4 % of vehicles sold. California estimates that by 2025 when these rules are fully implemented, new vehicles will emit 34% fewer global warming gases and 75% fewer smog-forming emissions.



This legislation has been adopted by nine other states and the District of Columbia which add up to account for nearly one-third of US auto sales. As the chart above illustrates, the percentage of ZEV cars that must be sold by each manufacturer rises annually until it hits the 15.4% target.

This puts tremendous pressure on auto makers to produce commercially viable plug-in hybrids and electric vehicles over the next several years. Here's what you can expect to see from each of the major European luxury car makers.



Audi (2016 Audi A3 Sportback E-tron shown)

What to expect: Audi's first plug-in hybrid is already on the roads in Europe and it will be available in the US only as a five-door hatchback for the 2016 model year. The brand offers its own charging system, the Audi Energy Program, which comes with the vehicle and includes a home charger, carbon offset program and available solar power installation. The brand plans several new plug-in hybrids in the next few years including e-tron versions of the A6, Q7 and R8. Audi has partnered with Samsung and LG to design an all-electric version of the allroad that will go 300 miles on a charge.



BMW (2016 BMW X5 xDrive40e shown)

What to expect: BMW entered the EV market with the 2014 i3 and i8. The brand is now beginning its planned release of plug-in hybrid versions of its core vehicles—the 2016 model year will introduce an eDrive version of the 3 series, 7 series and the X5. The brand is already making strides towards the 2025 goal of 15.4%, September 2015 sales of the i3 and i8 made up close to 10% of BMW's total car sales volume (excluding SUVs).



Mercedes-Benz (2016 Mercedes-Benz C350 Plug-In Hybrid shown)

What to expect: Mercedes-Benz released the electric drive B-Class in 2014, and is adding a plug-in hybrid to the C-Class, S-Class, and GLE-Class for the 2016 model year. A total of ten plug-in hybrid vehicles are in the works and a fully electric crossover with a range between 250 to 300 miles has been strongly hinted.




Porsche (2016 Porsche Cayenne S E-Hybrid shown)

What to expect: Porsche currently offers a plug-in hybrid version of both the Cayenne and Panamera (as well as the very limited release of the 918 Spyder supercar). The brand intends to extend the E-Hybrid line to all of its models; the Macan and 911 E-Hybrids likely to arrive next. The company just won the prestigious Le Mans 24 hour endurance race using hybrid power and we're excited to see how that will translate into their iconic sports car line.




Volvo (2016 Volvo XC90 T8 Plug-In Hybrid shown)

What to expect: Volvo's first plug-in vehicle, the XC90 T8 Plug-In Hybrid, is expected to arrive in the US in the first half of 2016. The brand has plans to release similar versions of other models in its line. Volvo has a scalable platform in place to grow both their plug-in hybrid production and that of fully electric vehicles as demand for both increases.


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