The European Two-Speed Transition: Renewable Electricity, Plug-In Hybrids, and the Threshold for Full Electrification

The European 2035 decarbonisation framework rests on a conditional premise—that higher renewable-electricity penetration accelerates battery electric vehicle (BEV) adoption—yet it has not been tested at the panel level. The question is timely: the December 2025 Automotive Package would soften the 2035 target from 100 to 90 percent CO2 reduction and permit continued production of plug-in hybrids beyond 2035, while the Alternative Fuels Infrastructure Regulation (AFIR) imposes binding charging-coverage targets from 2025 onwards. We assemble an annual panel of 31 European economies over 2015–2024 (310 country-year observations) and combine a two-way fixed-effects baseline on five disaggregated powertrain shares, an interaction model with public charging coverage as a moderator, and a Hansen-style threshold panel. The within-country BEV-share coefficient on renewable-electricity penetration is statistically null (β = +0.18, p = 0.247), rejecting the linear premise. The plug-in hybrid share, by contrast, responds positively and unconditionally (β = +0.36, p = 0.001)—a “PHEV paradox” of compositional response. The BEV channel, by contrast, is conditional on infrastructure: its marginal effect rises with public charging coverage and is positive only in the upper part of the charging distribution (interaction β3 = +0.13, p = 0.027). A formal Hansen-style threshold test in the renewable share does not reject the linear specification (sup-F = 0.73, bootstrap p = 0.97), so the BEV conditionality is identified through the charging-coverage interaction. The findings characterise a two-speed European transition. The first channel reflects compliance-led PHEV hedging; the second reflects BEV charging network complementarity enabled by AFIR-mandated coverage. Subsidy rebalancing away from PHEV eligibility, strict AFIR enforcement, and PHEV utility-factor reform are necessary policy levers for the 2035 framework to deliver full electrification rather than the partial electrification that current incentives yield.