German and international car makers came to Munich earlier this month to present their newest models. There was one common message: we really want to sell EVs but there’s just not enough demand. Their solution? Lobby the European Commission to weaken the emissions targets for cars.
In the meantime, the Commission promised to work on demand creation: in the next months Brussels will present a new law that will ask companies to buy more electric cars. As European carmakers point out, 60% of new sales are company cars and therefore a great opportunity to boost demand. Especially in Germany, where company cars have an even larger market share of 67%.
But only a few weeks ago, the European automotive lobby ACEA - led by Mercedes boss Ola Källenius - shot this idea down. They put forward three reasons why Europe can’t ask companies to go faster on electric. None of them holds up.
First, ACEA claims that early adopters will be penalised by a higher total cost of ownership (TCO). Research from Ayvens shows that for most car models the TCO for electric cars is already lower today in at least half of the European countries. With battery and EV prices dropping, this will only improve. For Germany the TCO picture is less positive, as Germany is a European champion in giving tax breaks to petrol company cars. While such tax breaks also exist for EVs, the incentive for companies in Germany to go electric is much lower than for example in Belgium or France, where tax advantages for petrol company cars are being reduced. But also here, the Germany auto lobby is rejecting any fiscal measures to change this.
Second, ACEA claims that “charging infrastructure availability is insufficient”. Again, the official numbers debunk this. All EU Member States are meeting their charging targets under the AFIR in 2025. Together, they actually overshoot the EU-wide target by 174%. And charging infrastructure speeds up when companies go faster on electric. In Belgium, hugely successful company car electrification policies have led to a massive increase of charge points at company sites. It is now 13 times higher than four years ago.
Third, they say that “a sluggish second-hand market and bad residual values for EVs would hamper company car electrification”. Setting the right residual value for a new technology is indeed challenging, but the sector can and is already adapting. More and more leasing companies are now offering second-hand leasing of electric cars, putting them in a much better position to manage their residual values.
Do carmakers want to accelerate electrification or just to slow things down?
Instead of an EU law that would boost company car electrification, ACEA calls for a non-legislative initiative to “better coordinate national fiscal incentives and best practices at the EU level.” ACEA refers to Norway and Belgium as good examples where softer measures such tax reductions or other privileges boosted EV uptake. That is a misrepresentation of what those countries did. Both countries didn’t electrify the market with just some EV perks. It is the result of far-reaching (and smart) fiscal reforms where taxes for petrol and diesel company cars were increased.
Today most of the EU’s biggest governments (and car markets) have badly designed fiscal systems that are not nudging companies to buy electric. Do carmakers really believe that better coordination and more talking between countries will change this and provide the demand boost they urgently need?
The question we need to ask ourselves is: are carmakers genuinely interested in a solution? With the revision of their own CO2 reduction targets coming up, they have a strong interest in painting a picture that all is doom and gloom: The EV market doesn’t move, so weaken our targets.
The European Commission shouldn’t fall for this.Giving in to carmakers now and slowing down new EU electrification policies - while Chinese carmakers are not waiting - would be an industrial own-goal. To put it plain and simple: the longer we wait, the more we will lose.
