An alternative fuel vehicle (AFV) is any vehicle designed to run on something other than conventional gasoline or diesel. That includes cars powered by electricity, hydrogen, natural gas, propane, ethanol blends, and biodiesel. Some AFVs run exclusively on their alternative fuel, while others can switch between an alternative fuel and a traditional one. The key distinction: standard gasoline-electric hybrids do not count as alternative fuel vehicles because their primary input is still gasoline. Plug-in hybrids, however, do qualify because their primary input is electricity from the grid.
Fuels That Qualify as “Alternative”
The Energy Policy Act defines a specific list of fuels that count as alternatives for transportation. Electricity tops the list and dominates today’s market, but the full roster is broader than most people realize. It includes compressed and liquefied natural gas, propane, hydrogen, methanol, ethanol blends of 85% or higher (known as E85), biodiesel, and liquid fuels derived from coal. Each fuel has different storage requirements, vehicle modifications, and availability at the pump, which is why the AFV landscape is more varied than the current focus on electric cars might suggest.
Battery Electric Vehicles
Battery electric vehicles (BEVs) are the most common type of AFV sold today. They have no engine, no fuel tank, and no exhaust pipe. One or more electric motors draw power from a large onboard battery, with capacities typically ranging from 40 to 80 kilowatt-hours, though some newer models push as high as 200 kWh. That battery is the entire energy source, so charging infrastructure matters a lot.
You charge a BEV by plugging it into an external power source. A standard household outlet works but can take over a day for a full charge. Most owners install a dedicated wall-mounted charger at home or use public charging stations. Fast-charging stations can bring a BEV to a usable level in under an hour. The U.S. currently has roughly 77,980 public charging station locations with about 239,800 individual charging ports, a number that continues to grow.
Electric cars accounted for about 18% of all cars sold globally in 2023, up from just 2% in 2018. In terms of environmental impact, a European lifecycle analysis found that BEVs produce about 73% fewer greenhouse gas emissions than gasoline cars when you account for everything from manufacturing to driving. When charged exclusively with renewable electricity, that figure reaches 78%.
Plug-in Hybrids vs. Standard Hybrids
This is where the classification gets confusing for many people. A standard hybrid (HEV) pairs a gasoline engine with a small electric motor and a battery of up to about 8 kWh. You never plug it in. The battery recharges through regenerative braking, capturing energy every time you slow down. It improves fuel economy, but gasoline remains the primary fuel, so it is not classified as an alternative fuel vehicle.
A plug-in hybrid (PHEV) is a different animal. It has a larger battery, around 15 kWh, and you charge it from an external outlet just like a BEV. That bigger battery lets you drive roughly 20 to 30 miles on electricity alone before the gasoline engine kicks in. Most PHEVs charge fully in a couple of hours using a standard household outlet. Because the primary input fuel is electricity, PHEVs count as alternative fuel vehicles. They appeal to drivers who want electric commuting capability but still need a gasoline engine for longer trips.
Hydrogen Fuel Cell Vehicles
Fuel cell electric vehicles take a completely different approach. Instead of storing electricity in a battery, they carry compressed hydrogen gas and convert it to electricity on demand using a fuel cell stack. Inside the stack, hydrogen reacts with oxygen from the air to produce electricity, with water vapor as the only tailpipe emission. The electricity then powers an electric motor, so the driving experience feels similar to a BEV: quiet, smooth, with instant torque.
The practical challenge is infrastructure. The entire United States has only about 52 hydrogen refueling stations, nearly all of them in California. That limited network makes fuel cell vehicles a niche option for now, though they hold appeal for applications where fast refueling and long range matter more than charging convenience.
Natural Gas and Propane Vehicles
Compressed natural gas (CNG) vehicles store natural gas under high pressure in onboard tanks. They’re most common in fleet applications like transit buses, delivery trucks, and taxis, where vehicles return to a central depot for refueling. Liquefied natural gas (LNG) is natural gas cooled to a liquid state, which makes it energy-dense enough for heavy-duty Class 7 and 8 trucks that need extended range.
Propane, also called liquefied petroleum gas (LPG), powers a smaller but established segment of vehicles. It’s popular in fleet vehicles like school buses and police cars. Both natural gas and propane burn cleaner than gasoline or diesel, producing fewer particulate emissions and lower levels of several pollutants, though their greenhouse gas advantage over gasoline is more modest than what electric vehicles offer.
Ethanol and Biodiesel
Biofuel vehicles run on fuels made from biological materials. The two main types are ethanol, fermented from crops like corn or sugarcane, and biodiesel, produced from vegetable oils, animal fats, or recycled cooking grease.
Most gasoline in the U.S. already contains 10% ethanol (E10), but that low blend doesn’t make your car an AFV. The threshold is E85, a blend of 51% to 83% ethanol mixed with gasoline (the exact ratio shifts by season and region). Vehicles labeled “flex-fuel” can run on E85 or regular gasoline interchangeably. On the diesel side, B20 (20% biodiesel, 80% petroleum diesel) is the most common higher blend, while lower blends like B5 and B2 are widespread but not considered alternative fuels.
Federal Tax Credits for AFVs
If you’re buying a new alternative fuel vehicle, a federal tax credit of up to $7,500 is available for qualifying plug-in electric and fuel cell vehicles. To get the full amount, the vehicle must meet specific manufacturing and mineral sourcing requirements. There are also income limits: your modified adjusted gross income can’t exceed $300,000 for married couples filing jointly, $225,000 for heads of household, or $150,000 for single filers. You can use either the year of purchase or the prior year’s income, whichever is lower.
The credit applies at tax time, reducing what you owe dollar for dollar. Some dealers now allow you to transfer the credit at the point of sale, effectively lowering the purchase price upfront. State and local incentives often stack on top of the federal credit, varying widely by where you live.
Choosing the Right Type
Your best option depends on how you drive and what infrastructure is available to you. If you have home charging access and drive under 250 miles per day, a battery electric vehicle covers most needs and delivers the largest emissions reduction. If you split time between short daily commutes and occasional long road trips, a plug-in hybrid offers flexibility without range anxiety. Hydrogen fuel cell vehicles make sense only if you live near refueling stations. And CNG, propane, or biofuel vehicles tend to be strongest in commercial fleet settings where centralized fueling simplifies logistics.
The AFV category is broad by design, covering everything from a fully electric sedan to a propane-powered school bus. What ties them together is the move away from petroleum as the sole energy source for transportation, each technology offering a different balance of cost, convenience, and environmental benefit.