Science Says No, Policy Says Yes: The Hybrid Car Fallacy

Last week, we provided a high-level analysis of the new federal government agreement, highlighting four major points. Today, we look at one specific aspect: climate policies. While the overall targets remain unchanged, new policies have been introduced, including adjustments to the fiscal treatment of plug-in hybrid vehicles (PHEVs) used as company cars.

Since 2023, the tax deductibility of fuel costs for PHEVs has been capped at 50 percent, whereas the electricity used to charge hybrid and fully electric vehicles remains fully deductible. This meant that, since then, fully electric vehicles (EVs) have become the number one option for companies, and PHEVs have died a silent death [1]. However, under the premise that electric vehicles are not a suitable option for everyone, the government has decided to extend the transition period for hybrids with a more favorable tax regime. The new policy ensures that the tax deductibility for hybrid company cars remains at 75 percent until the end of 2027. Only in 2028 (i.e., when tax deductibility should have ended completely), this rate will decrease to 65 percent, followed by a further reduction to 57.5 percent in 2029. Crucially, these rates will apply for the entire lifecycle of vehicles purchased in those years.

 

A Policy That Ignores Science

At first glance, this policy appears to support a pragmatic transition. However, it ignores crucial research about the real-world emissions of plug-in hybrid vehicles. A 2022 study [2] by the International Council on Clean Transportation, conducted by the Fraunhofer Institute, has demonstrated that the official emissions figures used for PHEVs significantly underestimate their real-world impact. This discrepancy is primarily due to user behavior, specifically charging habits. Car manufacturers assume plug-in hybrids operate in electric mode for 70 to 85 percent of their mileage. However, real-world data tells a different story. For private users, the actual electric driving share is only 45 to 49 percent, while for company cars, the percentage is even lower, at just 11 to 15 percent. This means that many PHEVs are driven much like conventional combustion engine vehicles, resulting in significantly higher fuel consumption and emissions than expected. In fact, real-world fuel consumption is three to five times higher than manufacturers’ estimates.

 

Figure 1: Gap between theoretical fuel use and actual consumption based on real-world PHEV (company cars) driving and charging behavior

 

Figure 2: Gap between theoretical fuel use and actual consumption based on real-world PHEV (private cars) driving and charging behavior

 

A Misguided Use of Public Funds

At a time when balancing the government budget is a key priority, largely through spending reductions, it raises questions as to why increased fiscal support is being directed toward a technology that delivers lower-than-expected environmental benefits. Tax incentives are, in essence, government expenditures in the form of foregone revenue. If public funds are to be used for such incentives, they should be allocated to technologies that provide a verifiable and substantial environmental impact. Fully electric vehicles offer a clear and effective alternative. Unlike hybrids, they always operate on electricity and produce zero tailpipe emissions.

Additionally, arguments suggesting that PHEVs serve as a stepping stone toward full electrification hold little weight in the company car market. Leasing companies have acknowledged that an electric range of 60 kilometers, as many plug-in hybrids already offer, is sufficient for daily commutes [3]. If the goal is to transition toward sustainable mobility, encouraging full-electric adoption through decisive policy measures may be the most effective approach.

One remaining concern is the higher purchase price of EVs, which may pose a challenge for those with limited lease budgets. However, this challenge is becoming less relevant with the anticipated introduction of more affordable models, such as Volkswagen’s ID.2 and other competitively priced EVs. Furthermore, options already exist in the lower price segment, including the fully electric Dacia Spring, which starts at 17,000 EUR. Additionally, concerns about charging infrastructure are diminishing rapidly. Public charging points are expanding at an unprecedented pace, significantly reducing range anxiety as a barrier to adoption [4].

This policy change is another example of decision-making that overlooks critical scientific insights. Given their limited real-world impact on emissions, the Fraunhofer Institute has explicitly recommended phasing out fiscal incentives for plug-in hybrids. Yet, the new agreement does the opposite. If the objective is to maximize societal value while managing limited public resources effectively, policies should align with evidence-based insights. Supporting technologies that reliably deliver on their environmental promises, rather than those that fall short of expectations, should be the cornerstone of a forward-thinking climate strategy.

At Ortelius, we firmly believe that any decisions must be rooted in the latest scientific insights and market developments. We continuously monitor emerging research, regulatory changes, and technological advancements to provide our customers with the most accurate, data-driven advice. If you want to discuss how evidence-based decision-making can strengthen your policies or business strategy, get in touch with us today!

 

 

Sources:

[1] https://www.tijd.be/politiek-economie/belgie/federaal/nieuwe-regering-blaast-hybride-bedrijfswagen-nieuw-leven-in/10585587.html

[2] Plötz, P., Link, S., Ringelschwendner, H., Keller, M., Moll, C., Bieker, G., ... & Mock, P. (2022). Real-world usage of plug-in hybrid vehicles in Europe.

[3] https://www.tijd.be/dossiers/de-verdieping/de-zwanenzang-van-de-plug-inhybride/10436262

[4] https://www.tijd.be/ondernemen/auto/laadpalen-in-publieke-ruimte-bijna-verdubbeld-in-een-jaar/10586574.html