EU fleets lag private buyer EV adoption

Lack of targeted incentives mean a different picture to the UK

EU fleets lag private buyer EV adoption
Europe's fleet buyers could drive quicker EV adoption if incentives are right

BEV adoption in most continental European countries could not be more different to the UK. Sales of electric company cars in the UK are soaring, largely driven by favourable benefit-in-kind (BIK) taxation and the growth of salary sacrifice schemes, while the retail sector lags behind.

BEVs have a 22.5pc share of the new UK corporate car market, but make up just 8.4pc of new cars privately sold, according to analysis of Dataforce figures by thinktank Transport & Environment (T&E).

In the EU it is the opposite. BEVs have a 14.1pc share of new cars sold to private buyers so far that year, down slightly from 14.5pc for 2022. But only 12.3pc of new corporate sales are BEV, up from 10.8pc for 2022.

There are national exceptions to the EU-wide trend. In Belgium, for example, BEVs make up 22.6pc of new corporate fleet buying, and just 4.8pc of new private sales.

“EV growth in Belgium is the highest of any country in Europe,” says Griffin Carpenter, company cars analyst at T&E. Like the UK, Belgium has taken a “corporate-first electrification strategy”, albeit incentivising companies through depreciation write-offs, rather than focusing on employee tax benefits as the UK has.

“From 2026 in Belgium you cannot write off the depreciation on a vehicle if it is a polluting vehicle. This is ICE vehicles, but also PHEVs, and [depreciation is already] being phased out from 2023,” says Carpenter. “From now until then there is a decreasing percentage of depreciation that you can write off.

“This is a policy that has really caught fleets’ attention. The timeline is very impressive. Last year, Belgium was behind the European average for EV uptake, now it has actually shot up past Germany.”

In contrast, in France and Germany, BEV uptake is slower among corporate car fleets than private customers. Carpenter does not have an entirely satisfying explanation for the lagging but, based on T&E’s The Good Tax Guide analysis of different tax regimes across Europe, he thinks BIK is a factor.

“In France and Germany BIK is not strongly differentiated,” he says.

There is not “one best recipe for tax”, in Carpenter’s view. What matters most is that there is a clear tax differential between ICE vehicles and BEVs. And this differential is not “as strong” in Spain and Italy, according to T&E calculations, which may explain why they are punching below their weight.  

“They are major markets, and certainly middle income for Europe, and yet their EV adoption is below the European average,” Carpenter says.

Demand stimulus

OEMs are actually “outdoing” many EU governments, in Carpenter’s view, by having more ambitious ICE phase-out dates and increasing EV production. “Now we need measures on the demand side so there is a market ready and willing to receive them,” he says.

VAT is one lever governments can use — for example, by not allowing VAT to be written off as a business expense for more expensive, higher polluting vehicles.  Governments can also look at alternative ways to fund EV incentives — e.g. Romania is using revenues from the European emissions trading scheme.

“The Inflation Reduction Act in the US is a prime example of how effective regulation can have a significant impact on EV demand,” agrees Maria Bengtsson, UK electric vehicle lead at consultancy EY. The US has climbed from seventh in 2022 to third — behind only China and Norway — in 2023 in EY’s EV Country Readiness Index, which looks at supply, demand and regulatory preparedness in the world’s top 20 vehicle markets.

EU action

The European Commission will be proposing actions to boost the uptake of zero-emission vehicles in corporate fleets, known as the Greening Corporate Fleet’s Initiative. “Work on an initiative is ongoing. The Commission intends to organise a consultation of relevant stakeholders in the format of an open public event in order to update on the state of play and final steps of the initiative soon,” it says.

Major fleet owners, including Ikea, Coca-Cola, AstraZeneca, Ireland’s An Post, SAP, Tesco and Unilever, along with T&E, have previously called on the Commission to set a deadline of 2030 for all new company cars and vans to be electric. T&E also wants a 50pc interim target of by 2027 and believes these should be binding not voluntary targets. 

Several fleet operators have already declared 2030 fleet electrification commitments through the Climate Group’s EV100 global initiative. More than 120 companies across 100 markets have made the commitment so far.

Iron Mountain, a global leader in storage and information management services, joined EV100 to be “part of a circle of forward-thinking companies”, to ensure customers were aware of “our goals and objectives” and to “utilise the network to benchmark”, says Rory Morgan, the firm’s head of transportation in Emea.

It currently has 64 EVs in Emea, mainly in the UK, the Netherlands, and Poland, and 68 elsewhere. But this will grow to 500 EVs globally by the end of 2025, with the company car fleet fully electric by 2030.

EV adoption is dictated by lease renewals, Morgan says, and vehicle availability and lead times have been a challenge, along with infrastructure, range and cost. Grants have also “fallen away” in some countries.

Lacking ambition

As half of all new cars in Europe are leased, leasing companies have a huge role to play in BEV adoption. But T&E has accused Europe’s top leasing firms of a “lack of ambition”.

It wants them to set a target to stop leasing fossil cars by 2028 at the latest, have “ambitious interim targets” for BEV uptake, and “publicly advocate for policy changes that incentivise and enable the transition to electromobility”. It also believes they need to be more transparent about their uptake of BEVs in the EU, after a number of major leasecos didn’t respond to T&E’s request for data.

“Leasing companies have huge marketing power and they have huge leverage over OEMs,” says Carpenter. “I think everyone has a role to play and that involves leasing companies.”

He suggests leasing companies could work with governments to create more affordable monthly leases for EVs, pointing to France’s €100/month EV leasing scheme. EV inFocus has contacted Leaseurope, the European Federation of Leasing Company Associations, for a response to T&E’s campaign but has yet to receive a reply.

As for car manufacturers, Carpenter acknowledges that average CO2 emissions per car produced is currently “running ahead of the pathway that has been set” by the EU, but wants to see smaller, more affordable cars being produced. 

Interestingly, in France, the cities of Lyon and Paris will begin charging larger, heavier vehicles higher parking fees from next year on air pollution grounds. Measures like this, as well as clean air and zero or low emission zones can influence behaviour, Carpenter believes.

“We have seen lots of cities lead the way and fleets that are based in those cities change afterwards,” he concludes.

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