Volvo will start selling its V60 Plug-in hybrid diesel car next year in Europe.
The hybrid is the result of co-operation between Volvo and Swedish energy supplier Vattenfall.
"It is our mission to develop carbon dioxide-lean cars, but it is the society that is responsible for creating a sustainable future," says Stefan Jacoby, the president and CEO of Volvo.
"This project shows how co-operation between experts in different areas brings us closer to the transition from individually carbon dioxide-lean products to a climate-smart lifestyle."
When powered solely by electricity, the V60 Plug-in hybrid has a range of up to 50km.
The car's total operating range is up to 1200km. Carbon dioxide emissions will be an average of 49g/km and fuel consumption will be 1.9 litres per 100km.
The cost of the battery pack means the plug-in hybrid will be more expensive to buy than a Volvo V60 with a conventional combustion engine. But fuel costs will be one-third compared with a conventional combustion engine.
Work on the V60 Plug-in hybrid progresses in parallel with development of the Volvo C30 Electric, which runs entirely on electricity.