Social leasing: how low-price EVs can help transport vulnerable drivers

In 2024, France introduced a subsidised low-price electric vehicle (EV) leasing scheme known as ‘social leasing’, to help overcome social barriers in the EV transition. Since then, social leasing has gained attention as a key tool to ensure a socially just EV transition. By the end of June 2025, Member States are required to submit their Social Climate Plans, outlining measures to support the most vulnerable transport users. To evaluate the potential of social leasing in the EU, T&E commissioned Öko-Institut to conduct a dedicated study to quantify transport vulnerability. This briefing builds on analysis by quantifying available revenue from ETS2 and the Social Climate Fund (SCF) in order to estimate the potential of implementing social leasing schemes in the EU’s five largest markets.

Millions of Europeans, particularly in rural areas, remain dependent on fossil-fueled cars in their daily lives, which, on a limited income, makes them vulnerable to rising fuel prices. Öko-Institut finds that in the five largest EU countries - France, Germany, Italy, Spain, and Poland - around 20 million people are in a situation of transport vulnerability. T&E has defined transport vulnerability among the adult population as: owning a car, living in a rural area, and are in income deciles 1-4.

While public and active transport are essential for transport decarbonisation, cars will continue to play a central role in mobility outside cities. To ensure that the transport vulnerable populations mentioned above are not left behind, Europe must maintain ambitious CO₂ reduction targets for cars that push carmakers to roll-out smaller affordable EV models and introduce targeted support measures — most notably, social leasing schemes for affordable EVs.

Social leasing schemes provide electric vehicles to low- and middle-income households at subsidised lease rates. These schemes aim to make EVs accessible for those who would otherwise be unable to afford them, addressing the social inequities in the EV transition. France’s 2023 initiative, which offered EVs from €100/month, was a major success, receiving 90,000 applications in just six weeks, showing the strong public demand.

The EU's Emissions Trading System 2 (ETS2), which covers emissions from buildings and road transport, is expected to generate substantial revenues. T&E estimates that, under a proposed allocation model, €16 billion could be made available by 2032 to fund social leasing across the five largest EU countries.

Assuming a €5,000 subsidy per vehicle, this funding could support 1.5 to 3 million leasing contracts, covering 6-14% of the targeted population, depending on the country. In comparison, BEV fleet penetration in the overall population by 2032 is estimated at 15%, meaning vulnerable transport groups would not be left behind on the EV transition thanks to social leasing.

Well-designed policies enable low and middle-income groups to access affordable electric vehicles (EVs). In addition, social leasing programs will boost EV demand, contributing the automotive industry plan production of affordable, EU-made electric vehicles. If 3 million vehicles are covered by social leasing schemes, this could create demand for electric vehicles among a new market segment – equivalent to 12% of the EVs on the road in 2032. This incentive would provide a high level of demand certainty which allows the car industry to plan the volumes of affordable Made-in-EU EVs accordingly.

Recommendations

To ensure the shift to electric mobility, T&E recommends implementing two complementary measures to boost demand: a European corporate fleet EV mandate and targeted support for car-dependent households currently unable to access electric vehicles. This support could take the form of social leasing schemes, building on the example of the French initiative.

T&E relies on analyses by the Öko-Institut to estimate the number of drivers in a situation of transport vulnerability who are likely to require some form of government support (see T&E briefing). The following criteria are used to identify the target group for support:

While median income is often used as a point of reference, the Öko study shows that for France and Germany, around 80% of the households that cannot afford a car belong to the first four deciles, while in Italy, Spain and Poland around 80% of the households that cannot afford a car belong to the first five deciles. This gives an indication of the differences in individual capacity of income groups across the five countries.

Based on these criteria, the study quantifies the rural adult population which would be in need of support as shown below: in total, the study identifies 20 million vulnerable people in the five largest EU countries. T&E recommends targeting these people with social leasing programmes in the countries in question. Herein, T&E refers to the target group as the vulnerable transport group.

What is social leasing?

Social leasing here refers to a form of support for the purchase or lease of electric vehicles targeted at households that are in a situation of transport vulnerability (here low and middle income adults, car dependent in a rural area). The measure is based on a subsidy designed to make EV accessible at a moderate rental price.

This support is intended to be time-limited to address the challenges in the early phase of the electrification of the car fleet (higher upfront prices and low availability on the second hand market). It could be supported at European level, but initiated and implemented in a way that is specific and adapted to the context and social needs of each country.

Social leasing is identified as an effective scheme to address the social barrier in the EV transition amongst the vulnerable transport groups. It will be complementary to other measures expected from national governments through active mobility options, public transport, car sharing schemes, scrappage programmes or charging infrastructure support.

The French initiative

Initiated in France in 2023, social leasing provided electric vehicles from €100 per month for middle- and low income households and has been a great success (90,000 applications in one and half months, despite many industrial stakeholders and policy makers declaring that there would be little interest in the scheme).

Europeans citizens want affordable and efficient electric cars

A 2023 YouGov survey commissioned by T&E in France, Germany, Italy, Spain, Poland and the UK found that there is high demand for affordable €25k BEVs. If the survey results were replicated in the car market, the advent of affordable small BEVs would bring the sales share of fully electric cars from 25% to 35%. The increase due to the availability of small EVs would result in an additional 1 million electric cars being sold annually, replacing combustion equivalents.

The Emissions Trading System for building and road transport (ETS2)

A new emissions trading system, ETS2, has been established as part of the 2023 revisions to the ETS Directive, and will mainly apply to emissions from the buildings and road transport sectors. The European Emissions Trading Scheme 2 (ETS2) operates on a ‘cap and trade’ basis: a limit is imposed on the total CO₂ emissions allowed from installations and operators falling within the scope. The cap is reduced each year to align with the EU's climate targets, giving the signal for a gradual reduction in the EU's overall emissions.

Although fuel suppliers are responsible for monitoring and reporting emissions, there are legitimate concerns that they will pass on the costs to citizens who fill up with diesel and petrol, for example, and that this will have a disproportionate and negative impact on people on low incomes.

Hundreds of billions of euros in revenue will be made available to Member States to support the green and fair transition. It is up to Member States to decide whether the ETS2 becomes regressive or progressive in their country. More information can be found in T&E’s upcoming report on the ETS2 implementation.

There are three types of revenues under the ETS2:

T&E suggests that Member States should use the total revenue - the combination of ETS2 auctioning revenue and SCF revenues, to support the transition of the transport and buildings sectors, with a focus on the most vulnerable transport groups.

Although Member States decide the allocation of funds based on their specific national context and their needs, T&E has proposed the following breakdown of the revenue:

Assuming a constant auctioning price of €55 (inflation adjusted soft cap price of €45/tCO₂), and once applying the above scenario to the five biggest EU member states, we show that between €8 billion (scenario with 75% financial support) and €16 billion can be spent on social leasing by 2032.

Note that higher auctioning price projections (e.g. up to €149/tCO₂ by 2030) would go hand in hand with higher resources available for both financial support and sectoral measures.

Social leasing will have to compete with market prices. In 2025, affordable offers from carmakers include EVs starting at €200/month over 37 months (for a mileage of 9,700 km per year and a €2,700 upfront payment) with a €4,000 subsidy (Renault 5 E-Tech), or as low as €129/month in the case of the Citroen e-C3 under similar terms. 

Across the five main European car markets, ETS2 funding could enable between 1.5 and 3 million households to access an electric vehicle through leasing by 2032, depending on the level of revenues set aside for financial support.

The 3 million social leasing units potential for the period 2026-2032 cover 14% of the vulnerable transport population (6% in low scenario). In Poland, the coverage of these vulnerable individuals is the lowest (10%), in France and Italy it is slightly higher (12% and 15%), while Spain and Germany would see the highest coverage (18% and 19%).

The average EU penetration of EVs in the fleet is expected to be around 15% in 2032. The impact of social leasing contracts varies per country, depending mainly on the share of new EV sales during the period. In the case that 3 million contracts are subsidised, the penetration rate on the vulnerable transport group could be raised to match the overall BEV uptake. We also approximate the impact on the number of households by using country level average household sizes adjusted for the approximate share of adults in the overall population. This reflects the case where one family living under one roof may opt to take advantage of the scheme for one car.

Although the vulnerable transport group (individuals) can’t be compared directly with EV penetration (car fleet), this study shows that thanks to social leasing, transport vulnerable groups can stand alongside others in the EV transition. In other words, the electrification rate of this group could approach the average electrification rate amongst drivers. This is important because transport vulnerable groups are typically laggards in the transition to electrification. Social leasing enables a fairer distribution of clean transport solutions.

Social leasing must be supported at the European level and implemented nationally by taking into account the social and territorial challenges specific to each Member State. A prior analysis of national needs will help identify eligibility criteria for individuals, the types of vehicles required (models, price range, equipment, environmental performance), as well as the governance framework for the public policy (monitoring, involvement of sector stakeholders). The assessment of needs will highlight the advantages of social leasing compared to other support measures for sustainable mobility (such as improving public transport, expanding cycling infrastructure, or developing shared vehicle fleets).

Key recommendations for governments on how to design and implement social leasing are described in Annex.

T&E recommends that at least half of the ETS2 revenues raised domestically should be returned as financial compensation to households, while the remaining funds can be allocated to sector-specific investments in buildings and transport.

Member States will be able to mobilize part of the transport-related resources from ETS2, including the Social Climate Fund, to implement a social leasing scheme that ensures tailored support for vulnerable transport groups.

If Member States want to subscribe to the SCF to fund the scheme, they need to put social leasing in their Social Climate Plans, due by the end of June 2025.

T&E recommends that EU Member States include social leasing in their National Social Climate Plans and fund it with their broader national ETS2 revenues. However, in 2026 - the first year of the SCF - the amount 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 measures such as social leasing in advance of the start of the ETS2 road fuel pricing mechanism in 2027.

More specifically, the Commission could use the undersubscribed loan compartment of the Recovery and Resilience Facility (RRF) to provide these loans.

Beyond national governments, the EU Commission also should also play a role in order to facilitate the set up of social leasing schemes at national level. As part of the upcoming guidelines on social leasing for electric vehicles (as announced in the Clean Industrial Deal), the Commission should set up an ‘affordable EV platform’. This platform could be designed to support member states in setting up national social leasing.

Such a scheme would act as a one-stop shop which aggregates the demand and supply information for social leasing. The platform would aggregate demand from member states (in terms of volume of affordable EV for ‘social leasing’-like support) and compile offers from carmakers and leasing companies.

As a second step, the platform would facilitate the matching of the demand from Member States and offers from industry to obtain large scale pan-EU projects. Finally, the Commission would oversee, support and act as the intermediate in the negotiations.

By setting up such a platform, the EU would boost demand for made-in-Europe compact EVs, and help address the social barrier in the EV transition across the EU thanks to low-price EVs. Furthermore, the platform would facilitate negotiation and policy set up for smaller Member States that have lower administrative capacity and negotiation power to also implement social leasing schemes.