Know Your EV: The Pros and Cons of Plug-in Hybrids

Businesses were among the earliest adopters of plug-in hybrids. Generous tax incentives and reduced CO2 emissions, but without the ‘range anxiety’ of electric vehicles, helped to create a market a decade ago, and it’s still going strong. Almost half of the UK’s plug-in hybrids – 515,145 cars, at the end of 2023 – are company owned [1], and evolving technology is delivering a wider choice of more affordable, options for fleets.

However, they are not a direct alternative to petrol or diesel and differences in usage can have a significant impact on running costs. Read on to find out why.

They’re similar to a full (or ‘self-charging’) hybrid, using one or more electric motors to assist a combustion engine or enable short-range driving without using any fuel, both of which can improve efficiency. The key difference is a larger battery, which can be charged from an external source – a chargepoint or plug socket – which typically provides a fully electric range of 30 and 50 miles before reverting to hybrid mode.

The potential advantages of plug-in hybrids include:

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  Smooth, quiet, electric driving and zero tailpipe emissions in urban areas
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  Reduced fuel bills and carbon emissions for fleets
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  Short refuelling stops on longer journeys, with no reliance on public charging
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  Familiarising drivers with charging routines and their daily mileage

However, plug-in hybrids also have downsides:

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  Unlike an electric car, they still have a combustion engine to service and maintain
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  Boot space, seating and fuel tank capacity are often reduced compared to a petrol or diesel version
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  Charging rates are usually a lot slower than a fully electric car
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  Cost savings rely on regular charging and a high share of local driving

Driver behaviour has a much bigger impact on fuel efficiency with a plug-in hybrid than it would with a petrol or diesel car. High-mileage drivers who rarely (or never) plug in won’t come anywhere near the published efficiency figures, while those who charge regularly and do a lot of local mileage could conceivably beat them. Most drivers should fall somewhere in the middle – they won’t achieve the published efficiency but would still reduce their fuel bills.

This was illustrated in a recent European Environment Agency study of real-world data drawn from 620,000 cars. The plug-in hybrids averaged 47.6mpg, beating the petrol and diesel counterparts by 33% and 15% but falling 72% short of their published efficiency [2]. Assuming they would meet the average non-hybrid efficiency (38.0mpg) once the electric range is depleted, the following table illustrates the importance of plugging in. .

These savings add up. If all of the UK’s PHEVs were driven on battery power for half of their country’s average annual mileage [3], it would reduce tailpipe CO2 emissions [4] by 463,070 tonnes compared to not charging them at all. That’s equivalent to the annual CO2 output of around 35,500 petrol cars [5].

Average fuel economy is only part of the picture. Most drivers will plug in at home, and that electricity isn’t free, so cost per mile calculations need to include the energy used to charge the battery.

Based on the latest Ofgem-capped rate of 24.5p/kWh [7], a compact PHEV (such as a Kia Niro, Peugeot 308 or Audi A3) would cost around £3 to fully charge. Total costs per mile then depend on usage, as shown below.

In this example, fuel and electricity costs for the plug-in hybrid would be less than an equivalent diesel for any journey where 25% of the distance can be carried out on battery power. It would also have the advantage of driving the final few miles without any tailpipe emissions.

There are several simple steps to control plug-in hybrid running costs:

Businesses can pay to install charging equipment at employees’ homes without this being classed as a taxable benefit [8]. There is also a 75% OZEV grant (capped at £350) to support installations at flats, rented houses and (where possible) properties without off-street parking [9]. Click here to find out more.

HMRC recommends treating hybrids the same as petrol or diesel cars when reimbursing for fuel expenses [7] and many of them will attract the highest mileage rates (26p/mile for petrol, 20p/mile for diesel) because they have large engines. Setting a lower mileage allowance for plug-in hybrids, recognising the reduced cost of driving on electricity, could encourage drivers to plug in more often.

Most plug-in hybrids take two or three hours to fully charge, so they can be topped up when energy is cheapest. Octopus, which has tariffs set up for EV owners, charges 7.5p/kWh for electricity overnight – which is 70% less than the Ofgem-capped flat rate [10]. That could make a significant difference to running costs.

Most plug-in hybrid and electric vehicles are supplied with Type 2 cable, which is the European standard and compatible with most home and public charging points. If drivers don’t have a dedicated charging point at home, they might also need a cable to plug into a three-pin socket. These are usually a cost option.

The UK Government has steadily wound down grants for plug-in hybrids during the last few years, but there are still some financial incentives available:

A £10 First Year Rate applies for vehicles with CO2 emissions between 1g/km and 50g/km and, until April 2025, hybrids’ annual renewals are discounted by £10. However, a £410 annual supplement applies for five years after registration if the list price is £40,000 or more, regardless of CO2 emissions [11].

Businesses can write down 18% of the purchase cost or 100% of rental or lease payments against pre-tax profits where vehicles emit 50g/km or less CO2 [12].

Ultra-low-emission vehicles (up to 50g/km CO2) are incentivised based on their electric range [13]. Some comparisons are shown below..

Tax incentives for low-emission fleets are outlined in our Essential Guide to Fleet Funding and Taxation, which is available here.

[1] Department for Transport. (2024). VEH0133: Licensed ultra low emission vehicles by body type and propulsion or fuel type: United Kingdom. [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/985632/veh0133.ods [Accessed 31 May 2024].

[2] European Environment Agency. (2024). Real-world emissions. [online] Available at: https://climate-energy.eea.europa.eu/topics/transport/real-world-emissions/data [Accessed 31 May 2024].

‌ [3] Department for Transport. (2021). NTS0901: Annual mileage of cars by ownership and trip purpose: England, since 2002. [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/906055/nts0901.ods [Accessed 31 May 2024]. [4] Anon. (2019). Calculation of CO2 emissions. [online] Available at: https://people.exeter.ac.uk/TWDavies/energy_conversion/Calculation%20of%20CO2%20emissions%20from%20fuels.htm [Accessed 31 May 2024].

[5] Department for Transport. (2021). ENV0103: Average new car fuel consumption: Great Britain. [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/944686/env0103.ods [Accessed 31 May 2024].

[6] Ofgem. (2024). Changes to the energy price cap between 1 April - 30 June 2024. [online] Available at: https://www.ofgem.gov.uk/news/changes-energy-price-cap-between-1-april-30-june-2024 [Accessed 31 May 2024].

[7] HMRC. (2024). Advisory fuel rates. [online] Available at: https://www.gov.uk/guidance/advisory-fuel-rates [Accessed 31 May 2024].

[8] HMRC. (2024). Employment income manual: EIM23900. [online] Available at: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23900 [Accessed 31 May 2024].

[9] OZEV. (2024). Electric vehicle chargepoint and infrastructure grant: guidance for installers. [online] Available at: https://www.gov.uk/guidance/electric-vehicle-chargepoint-and-infrastucture-grant-guidance-for-installers [Accessed 31 May 2024].

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[10] Octopus Energy. (n.d.). Intelligent Octopus Go. [online] Available at: https://octopus.energy/smart/intelligent-octopus-go/ [Accessed 31 May 2024].

[11] Department for Transport. (2023). Rates of vehicle tax for cars, motorcycles, light goods vehicles and private light goods vehicles. [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1146222/v149-rates-of-vehicle-tax-for-cars-motorcycles-light-goods-vehicles-and-private-light-goods-vehicles.pdf [Accessed 31 May 2024].

[12] HMRC. (n.d.). Claim capital allowances. [online] Available at: https://www.gov.uk/capital-allowances/business-cars [Accessed 31 May 2024].

[13] GOV.UK. (n.d.). Tax on company benefits. [online] Available at: https://www.gov.uk/tax-company-benefits/tax-on-company-cars [Accessed 31 May 2024].

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