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How OEMs can transform plug-in hybrids from “ecological cheat packages” to tools for sustainable mobility

Dr. Philipp M. Haaf
August 20, 2020

Car manufacturers need to find ways to meet the European Union’s fleet average CO2 emission targets for the first time in 2021, or they will face severe financial penalties. For many car manufacturers, electric mobility plays a significant role in reaching these ambitious targets. Because the majority of OEMs are struggling to sell battery electric vehicles (BEVs) on a large scale, plug-in hybrid electric vehicles (PHEVs) look like a major lever. This is also due to the fact that PHEVs that emit less than 50g/km of CO2 (e.g. the BMW X5 xDrive45e or the Ford Kuga) qualify for “super-credits” awarded by the EU. As well as being beneficial for OEMs, PHEVs are also very attractive for customers due to environmental bonuses. For instance, in Germany customers receive an environmental premium subsidized by the German government that is currently doubled to counteract COVID-19; business customers benefit additionally from lower taxes.

PHEVs may seem to be the perfect solution to one of the core problems of the automotive industry and a major contributor to sustainable mobility; they are attractive for customers and environmentally friendly in terms of emissions. However, a growing segment of the public holds a different view and is heavily criticizing PHEVs as “ecological cheat packages” with little to no benefit for the environment. OEMs are accused of selling “ecological” cars while in reality fuel consumption is several times higher than manufacturers indicate based on WLTP results and intended usage projections.

This discrepancy is due to the fact that the eco-balance of a PHEV is highly dependent on actual usage and customers’ personal driving routines (see Figure 1 for a detailed explanation). Some PHEV drivers may always use their vehicle with the internal combustion engine and never switch to electric mode (where the car runs exclusively on electric power from the battery). This behavior stems from the fact that these customers do not want to deal with charging and the associated challenges. In that case, the OEM receives CO2 credits for the sale of a “clean” car that is actually used like a conventional vehicle. Therefore, many experts and stakeholder representatives have long been calling for the financial benefits of PHEVs to be reduced and the whole system to be rethought. For instance, environmental premiums should be linked to the proportion of an individual’s driving that is done in electric mode, according to Jens Hilgenberg, board member of “Bund für Umwelt und Naturschutz Deutschland” (BUND), an NGO for environmental protection.

Figure 1: PHEV emissions based on actual usage in Germany for 2020

Figure 1 shows an approximate calculation of the CO2 emissions of PHEVs in Germany in 2020 according to the proportion of use that is in electric mode. To derive the CO2 emissions, the emission values of five conventional vehicles and their respective plug-in hybrid counterparts were used. As of 2020, there are around 100,000 PHEVs registered in Germany. Thus, emissions could reach from 0 kt CO2 (100% electric driving) up to 180 kt CO2 (100% conventional driving). In the literature, the average proportion of driving that is in electric mode varies considerably between about 40–80%. If all PHEV owners drove in electric mode 100% rather than 50% of the time, then approximately 90 kt CO2 per year could be saved in Germany. This saving equals around 400,000 domestic flights within Germany. The potential savings in CO2 emissions from PHEVs will be increasingly important, as PHEV sales are expected to grow.

To counter public accusations of greenwashing and differentiate themselves from their competitors, OEMs need to show a clear commitment to environmental protection. They can do this by motivating their PHEV customers to drive in electric mode more often, especially for inner-city trips and short journeys such as commuting – the ideal uses for this mode. But how can OEMs tackle this challenge? Below, we present some promising and highly innovative approaches.

Loyalty and reward programs are an effective way to increase use of electric mode

Customers are more likely to change and modify their behavior if they get something in return. Even though the motivation for sustainable behavior is often intrinsic, some OEMs have started to offer customers loyalty and reward programs to incentivize beneficial behavior in the context of sustainable driving. We have conducted an in-depth competitive analysis of available loyalty and reward programs from OEMs and other players in the mobility ecosystem. We have identified three interesting programs that share a goal of substantially improving the sustainability of customers’ driving behavior (see Figure 2).

Figure 2: Overview of competitive landscape for OEM loyalty programs

BMW – BMW Points
The BMW Points program is aimed specifically at encouraging PHEV drivers to do more of their driving in electric mode. Customers earn points for every kilometer they drive in electric mode. The points collected can be redeemed for free credits at BMW Charging (formerly ChargeNow), motivating customers by enabling them to save money. In addition, BMW has linked the BMW Points program to its eDrive Zones concept, so that points are doubled within predefined inner-city environmental zones.

Volkswagen – We Connect Go
We Connect Go is an app-based solution that incorporates gamification elements to influence customers to drive more sustainably. After purchasing a dongle, users can compete with other Volkswagen drivers and friends to collect points and trophies. Points can be earned through efficient driving, visits to dealerships, and several online interaction challenges (e.g. regular use of the app). Once the driver reaches a certain level of points, new challenges are unlocked. The focus of the program is purely on gamification and VW does currently not offer any redemption options.

BYD – Carbon Credits Program
With its Carbon Credits Program, BYD – one of China’s largest manufacturers of electric vehicles – calculates the individual footprint of its drivers. This is done based on a specific carbon reduction formula and processed completely on a carbon banking blockchain. Mileage, fuel, and electricity consumption serve as inputs and can be viewed by drivers both on vehicle displays and on a mobile phone app. BYD has linked the carbon footprint calculation to a reward program; credits earned through sustainable driving can be redeemed with third parties in return for attractive rewards.

Besides BMW, VW, and BYD, other OEMs have recently taken a step towards loyalty and reward programs in the context of sustainable driving. For example, Mercedes has announced the launch of the Mercedes me Eco Coach, a new digital service for battery electric vehicle (BEV) and PHEV drivers. Customers receive tips and recommendations on efficient driving, charging, and parking. In addition, the service will be linked to a bonus points program with personalized earn-and-redeem options. Another program intended to encourage use of electric mode by PHEV customers comes from Toyota. In the newest generation of its Yaris Hybrid, Toyota enables drivers to collect points for electric driving. Accumulating these points can reduce a driver’s insurance premium on renewal.

Loyalty programs offer benefits for OEMs and customers while promoting more sustainable electric mobility

We’ve seen that some OEMs (BMW, VW, BYD, Toyota) already provide their customers with incentives that actively encourage sustainable driving. These programs bring significant advantages for both the car manufacturers and their customers, summarized in Figure 3.

Figure 3: Benefits of loyalty programs for OEMs and customers

Key takeaways

  • Existing and planned initiatives from OEMs aim to influence the driving behavior of customers through loyalty and reward programs.
  • OEMs’ involvement in and (financial) commitment to these programs shows that they recognize that their responsibility for sustainability goes beyond the sale of potentially “eco-friendly” vehicles.
  • Customers receive valuable benefits through redemption options that potentially decrease the total cost of ownership while enhancing sustainability.
  • Actively shaping the way PHEVs are used can prevent OEMs from another looming environmental image scandal that could damage relationships with customers, regulators and the general public.

How Capgemini Invent can support OEMs in achieving sustainability

Traditional OEMs face growing pressure to comply with regulations and keep up with new competitors while having to meet changing customer needs. The increasing importance of electric mobility in the portfolio is an opportunity to stabilize a wavering business model but presents strategic challenges of its own. At Capgemini Invent, we know your current challenges and are already helping our clients to move to the next level of electric mobility, addressing challenges in areas such as electric mobility adoption and charging. Besides project work, we release valuable insights on a regular basis in the form of blogs and studies. Our global network of experts – supported by ongoing customer surveys – knows the issues faced by EV customers in various markets and how to tackle them.

For more information, you can reach out to the authors:
Dr. Philipp M. Haaf – Senior Manager, Head of Electric Mobility
Manuel Wiener – Senior Consultant, Innovation & Strategy
Maren Aurich – Consultant, Brand & Experience