The demand shows sales of electric vehicles are starting to take hold as carmakers spend billions to meet tightening emissions regulation.

“Customer demand is much higher than the 10 or 15 per cent we first expected,” Gernot Doellner, head of the Panamera model line, said at a press briefing near Stuttgart on Thursday.

Tax benefits in some European countries helped boost the hybrid’s share to more than 90 per cent in Belgium and 70 per cent in France.

In Germany, the region’s largest car market, about a quarter per cent of Panamera models are partly battery-powered.

Global carmakers are spending record amounts on new electric models to comply with stricter emission limits worldwide.

Demand for the vehicles, outside of jurisdictions with significant incentives, has so far remained tepid as consumer shy away from limited driving ranges and high-cost product choices. That’s slowly changing as technology improves.

Tesla Competitor

Porsche’s success with its plug-in hybrid Panamera, which can go for about 50 km in battery-only mode, comes as Tesla is struggling to ramp up production of its US$35,000 Model 3.

The electric-car pioneer enjoyed early success with its Model S, which proved a thorn in the side of incumbent car manufacturers. But it is now burning through more than US$1 billion a quarter.

Porsche, which will unveil its all-electric Mission E in 2019, competes in the same segment as Tesla’s luxury Model S and Model X.

The brand could increase capacity to make the Mission E, Porsche production chief Albrecht Reimold said, after initial expectations for output of 20,000 vehicles annually.

It was also considering a fully-electric version of the Panamera, Reimold said.

Porsche, the most profitable brand for Volkswagen with a return on sales of 18 per cent through to the end of September, will invest more than €3 billion (US$3.5 billion) in plug-in hybrids and purely electric vehicles over the next five years.

The plan is part of parent company Volkswagen’s €20 billion push to build electric variants of all 300 models in the 12-brand group’s line-up.