The US Corporate Average Fuel Economy (CAFE) standards regulate the fleet fuel economy of automakers that manufacture and sell automobiles in the US. CAFE standards will increase by 24% (for the passenger car fleet) – 35% (for the light-truck fleet) over the period 2011–2025 leading to a renewed interest in the role that advanced technologies will play in enabling CAFE compliance. This study compares the effects of 2 designs of plug in hybrid electric (PHEV) to estimate the cost of CAFE compliance with PHEVs as a component of the domestic passenger car fleet and as a component of the domestic light truck fleet. Results show that for many of the US automakers and for a variety of incremental cost scenarios, the introduction of PHEVs into the vehicle fleet reduces the costs of CAFE compliance relative to baseline scenarios. Overall, results show that PHEVs can contribute to a reduction in the costs of CAFE compliance for domestic automakers and should be more thoroughly considered in near-term regulatory and industrial analyses of CAFE compliance strategies.