Up to 3 million households on low or modest incomes in Europe's five largest countries (Germany, Spain, France, Italy and Poland) could switch to electric cars by 2032 thanks to social leasing, according to an analysis by T&E based on data from the Öko-Institut. This scheme, which allows affordable electric vehicles under €25,000 to be leased at reduced rents (from €130 and up to €215 per month [1]), already exists in France and could be implemented by other EU countries.
Marie Chéron, e-mobility specialist at T&E, said: “To put an end to dependence on fossil fuel cars and the threat of rising costs, many households need help switching to electric cars. EVs remain unaffordable even for middle income households, while purchase subsidies too often benefit those who don’t need them. Social leasing can make clean, cheap-to-run electric cars a reality for millions who are otherwise stuck with expensive polluting vehicles.”
Social Climate Plans: an opportunity for member states to fund social leasing from 2026
In order to finance the scheme, T&E says that EU member states could include social leasing in their National Social Climate Plans, funding it with their revenues from the extension of the EU carbon market to road transport and buildings (the so-called ETS2). According to T&E’s analysis, up to €16 billion [2] will be available across the five countries studied to support social leasing by 2032.
However, in 2026 - the first year of the Social Climate Fund - the amount available is capped at €4 billion and could be even less. To address this gap, T&E recommends front-loading some of the ETS2 revenues to 2025 and 2026 by allowing member states to borrow against future revenues. This is justified by the need to implement several measures such as social leasing before the impact of the carbon market on road fuel pricing is felt in 2027.
20 million people with low and medium-income rely on combustion cars
T&E examined the potential needs based on a transport vulnerability analysis. In the five biggest EU countries, which account for 65% of the EU's population, around 20 million low and medium-income individuals living in rural areas are trapped in reliance on combustion cars. This dependence makes these people vulnerable to rising fuel costs: they need a vehicle to get around, but the price of fuel is putting a strain on their budgets. What's more, any future price rises, linked for example to carbon pricing, could make the situation even worse.
The high level of transport vulnerability among European citizens calls for a comprehensive set of measures to support households in the transition to sustainable mobility. Social leasing has an important role to play, alongside initiatives promoting vehicle sharing, improvements in public transportation, and the expansion of active mobility options.
Social leasing will create demand for EVs among a new market segment
Social leasing schemes should be designed at national level to be tailored to local circumstances. To define the beneficiaries, countries should take several criteria into account: car ownership, income decile and place of residence. For example, a German family in the bottom 40% of households living in the countryside could be eligible for social leasing.
Assuming a six-year lease period, T&E estimates that social leasing could benefit between 1.5 and 3 million households in the five countries studied [3], depending on the level of subsidies granted. This could reach up to 27% of low and medium-income households in rural areas which are trapped in reliance on combustion cars. It could also create demand for electric vehicles among a new market segment – equivalent to 12% of the EVs on the road in 2032 – which could benefit European manufacturers if governments favour vehicles produced in Europe.
Create an ‘affordable EV platform’ at EU level
The EU should help member states to come together and get the best possible deals from car companies when buying vehicles for their social leasing schemes, T&E said. As part of the upcoming guidelines on social leasing (announced in the Clean Industrial Deal), the EU Commission should set up an ‘affordable EV platform’. This could act as a one-stop shop which aggregates the demand and supply information for social leasing and facilitates negotiations with automakers.
Finally, social leasing should not be the only transport measure implemented by governments to address transport vulnerability. Government support should also include socially targeted support measures for active mobility (bikes), public transport, car sharing schemes, scrappage schemes and charging infrastructure installation support.
Notes to editors:
[1] On models between €20,000 and €25,000 with a €5,000 subsidy at a reduced 6% VAT rate, and with no deposit for the first rent. These estimates apply to the 2026–2028 period. Assuming one car with social leasing per household (which could include two or more adults that are vulnerable to rising fuel cost).
[2] Assuming a constant ETS2 price of €55 per tonne of CO2
[3] Assuming a constant ETS2 price of €55 per tonne of CO2. T&E recommends allocating at least half of the total ETS2 revenues to financial support. The remaining funds should be used for sector-specific measures and investments in the building and road transport sectors, such as social leasing.
