In theory, plug-in hybrid technology offers the best of both worlds: electric power for the city, backed by the range of a combustion engine. With a usable electric range and a four-cylinder gasoline engine, the BMW 530e appears to deliver on that promise – but there's no guarantee on-paper potential translates to on-road fuel savings. New Atlas spent a week driving a 530e iPerformance to see how little fuel a big, luxurious sedan could use.

There's a lot going on beneath the skin of the 530e iPerformance. Internal combustion power is supplied by a turbocharged four-cylinder engine with 180 hp (134 kW) of power, and electric propulsion comes from a 95 hp (71 kW) electric motor and 9.2-kWh battery pack, housed where the fuel tank usually sits. Combined, they give the driver access to 250 hp (186 kW) of power – we know the pure math doesn't quite work, but the way the power is managed means 95 and 180 hp don't add up to 275 hp.

The fuel tank now sits above the rear axle, and holds 46 liters (12 gal) instead of the 68 liters (18 gal) you get in pure gasoline or diesel models. You lose some boot space in the jump to hybrid power, down to 410 liters (14.5 cu-ft) in the 530e, compared to 530 liters (18.7 cu-ft) in the gasoline 530i.

Hybrid technology is still young, and some compromises are inevitable. Some buyers won't be able to look past the small boot, shrunken gas tank and 2,420 kg (5,335 lb) kerb weight, but those who can will be buying one of the more interesting powertrains on the market.

There are three driving modes on offer: Max eDrive, Auto eDrive and Battery Control. Max eDrive is fairly self explanatory, locking the car into pure electric mode for city driving with no local emissions. Top speed is limited to 140 km/h (80 mph) in eDrive mode, and the 530e does a decent impression of a pure electric car, provided you don't expect "Ludicrous" acceleration. Small motor and big car don't equal Tesla-aping sprint times.

We spent most of our time in Auto eDrive mode, where the car automatically manages the different power sources based on how much charge the battery has, how much power the driver needs and what direction the wind is blowing – well, maybe not that last one. Under light or medium throttle loads, the car will default to the electric motor, before adding the ICE to the mix when the driver calls for more power. In that case, the electric motor is able to supply a power boost, signified by a little glowing eBoost icon on the in-dash power meter.

Although the BMW hybrid systems are very clever, you're always aware there are two or three possible ways to complete any request. The engine cuts in quietly, and the handover between the two power sources is seamless, but the sheer complexity of what lies beneath the skin is hard to ignore. The 530e iPerformance really is the thinking man's sedan in Auto eDrive, but not necessarily for the right reasons. Oh, and Battery Control locks the car into gasoline mode and charges the car to a set battery percentage. We used this function the least.

Regardless of how intelligent the car (and unintelligent the driver), the hybrid system is capable of making a massive, spacious five-seat luxury sedan sip fuel like a supermini in the right conditions. With a fully-charged battery, the car has a real-world electric range of around 30 km (18.6 mi). For the first few days, charging the 9.6-kWh battery in the office garage during the day and tackling 30 km of my 50 km (18.6 of 31 mi) daily round trip on battery power, the car returned a staggering 2.1 l/100km (112 mpg).

Unfortunately, my house doesn't have a garage, and the notoriously fickle Melbourne spring weather is less than ideal for running an extension cord down the side of the house and into the driveway. That meant there was no chance to charge the car on the weekend, pushing the claimed fuel use to 6 l/100km (39 mpg). Still incredibly impressive for such a big car, don't get us wrong, but well above the 2.3 l/100km (102 mpg) you get on the combined test cycle.

Inside, the 530e is beautifully laid out and put together. The dashboard is topped with a 12.2-inch display, which is crystal clear and lightning quick to respond. BMW iDrive is our favourite of the German infotainment systems; it's simpler than Mercedes' COMAND and Audi's MMI, although there are still a few quirks built into the software. Speaking of quirks, even though the BMW HUD is objectively better than any other example on the market, I don't like it – and I can't explain why. Just a personal bias.

The driver and passenger sit in brilliant armchairs, both of which can be dropped right down to the floor. We said it in the M140i review, we're going to say it here: BMW knows how to nail the basics of an interior, and the driving position in the 530e is proof. Even though it might not be as glossy as the dual-screen setup in the E-Class or the razor-sharp Audi A6 layout, everything in the 5 Series is exactly where you'd expect it, and that makes it a great place to spend time.

From the outside, there's no mistaking the 530e for anything but a BMW. It isn't a knockout piece of design – not to our eyes, at least – but every family member or friend who saw the car instantly knew it was a 5 Series. The M Sport package fitted to the exterior of our tester no doubt helps, with a few chrome highlights and bigger wheels, but the basic shape is undeniably handsome. Feel free to disagree with us in the comments, of course.

So, does the 530e iPerformance deliver on its hybrid promise? That depends on how hard you're willing to work. Owners who plug their cars in every night, and play around with the drive modes to ensure the engine is feeding the battery in the most efficient conditions, will be pleasantly surprised by how little fuel the car uses.

But those who plan to just drive it like a regular internal combustion car and don't want to think about plugging in and mode cycling should look elsewhere. The 530i is a brilliant car and costs exactly the same as the 530e iPerformance. We'd suggest giving it a look if you're not quite ready for a hybrid revolution.

Just like the gasoline-only 530i, the 530e iPerformance will be priced from AU$108,900 at launch. Australia is a hostile market for electric cars, with no tax credits or rebates from the government to encourage adoption. Pricing the 530e like an internal combustion car is a big step for BMW.

The 530e iPerformance is priced from US$51,400 in the United States, but a Federal tax credit drops that to around $46,000 – and makes it the cheapest offering in the 5 Series range.

Product page: BMW Australia

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