9 Oct 20

Transport & Environment: “Stop subsidising company cars”

Subsidies for company cars are costing European taxpayers €32 billion every year, a new study commissioned by Transport & Environment (T&E) shows, and almost all of it is spent on polluting petrol and diesel engines. T&E said governments should end the VAT deductions and write-offs for fossil fuel vehicles and instead guide corporate fleets towards 100% emissions-free vehicles.

Let’s get the terminology out of the way first. T&E refers to “subsidies,” a term traditionally used to denote taxpayer money given to individuals or companies, whereas the practice the organisation is criticising is not one of giving money but one of not taking money. The subsidies T&E refers to are a combination of VAT deductions and depreciation write-offs and exclude other taxation like benefit-in-kind schemes.

However, T&E does have a point when it says these deductions and write-offs for company cars in the eight largest markets alone (see graph) cost European taxpayers €32 billion every year, an amount that dwarfs the €2 billion investment needed per year to deploy public charging infrastructure until 2030.

6 out of 10

These massive corporate fleet taxation benefits explain why almost 6 out of every 10 new cars sold in Europe today are registered through the corporate channel – a number that goes beyond and reaches up to 70% in countries like Germany and Poland.

On average, these vehicles drive 2.25 times further than private cars, causing them to contribute disproportionally to road transport pollution. Indeed, the 10 largest leasing companies alone cause 8% of EU car CO2 emissions.

EVs have lower TCO

T&E performed a TCO analysis and concludes that fully electric company cars are already the cheapest option to use today, both for large/premium and medium models. For large company cars the all-electric option is 9% cheaper than the diesel option, which can bring over €4,300 in savings per vehicle in a four-year period of car usage.

Nevertheless, the latest data available on corporate fleet registrations show that EVs may have a growing marketshare but 96% of new company car registrations are still petrol and diesel vehicles.

T&E believes corporate fleet electrification will also have an impact on the private car market, as corporate vehicles enter the used car market quicker than private ones. Accelerating electrification of fleets means much faster and more affordable penetration of those cars into the wider European car stock.

Reforming policies

Reforming company car policies and taxation could be one of Europe’s most powerful policy instruments in the electric vehicle race worldwide. According to T&E, the low-hanging fruit is corporate fleets, as millions of high-mileage polluting vehicles can be targeted with only a few measures, which can reap huge climate benefits.

In particular, T&E believes the current Alternative Fuels Infrastructure Directive (AFID) should be revised and turned into a Zero Emission Infrastructure Regulartion (ZEIR) for a more harmonised and rapid implementation of charging infrastructure around three main pillars:

  1. Promoting the installation and use of charging points at company facilities
  2. Developing national plans for fast and ultra-fast charging infrastucture for the highways network
  3. Creating charging hubs in urban areas, mainly targeting zero-emissions fleets for passenger transport, last-mile delivery and carsharing services.

As carmakers are ramping up supply to meet strict EU emissions targets in 2020/2021 and beyond, more affordable electric cars are finally becoming available. Several large fleets have already unveiled plans for accelerated electrification. Companies have a role to play to lead the change but stronger government mandates would certainly help to get there faster.

Image copyright: Transport & Environment

Authored by: Benjamin Uyttebroeck