Weak Corporate Car Taxes Risk Intensifying the EU’s Oil Dependency

Two-thirds of EU member states are failing to provide sufficient tax incentives for companies to switch from fossil-fuel vehicles to electric cars, according to recent analysis by Transport & Environment (T&E). In 18 out of 27 countries, the tax difference between electric vehicles (EVs) and petrol or diesel cars does not offset the higher initial purchase cost of EVs, which was estimated at around €10,650 in 2025. This lack of financial motivation risks entrenching Europe’s dependence on oil imports, particularly at a time when the EU is pushing to reduce fossil fuel consumption and accelerate electrification of transport. Company cars play a crucial role in the EU’s road transport emissions, representing 59% of new car registrations and accounting for 78% of oil imports consumed by new vehicles. The EU’s Clean Corporate Vehicle regulation, introduced last December, aims to address this by setting national targets for large companies to electrify their fleets, with an EU-wide goal of 45% new electric company cars by 2030. T&E supports this approach, emphasising that Member States must reform tax policies to widen the financial gap between EVs and conventional cars. Countries like Belgium and France have demonstrated the effectiveness of such reforms, with corporate EV registrations jumping significantly following tax adjustments. However, major car markets including Germany, Spain, Italy, and Poland have yet to implement reforms that make electric vehicles financially more attractive than fossil-fuel alternatives. In fact, nearly half of EU countries still offer subsidies for petrol company cars, with Germany providing a particularly large net subsidy of around €10,000 per vehicle. This contrasts sharply with countries like France and Denmark, where petrol cars face substantial taxation. Such disparities contribute to continued high oil consumption in large markets and risk locking the EU into prolonged reliance on oil imports, undermining broader climate and energy goals. T&E also highlights that tax systems across Europe often fail to impose progressively higher taxes on more polluting, larger fossil-fuel vehicles. For example, Germany provides greater subsidies for larger petrol cars compared to smaller ones, while in other countries the tax increase for bigger vehicles is minimal. To address these issues, T&E urges the EU to adopt provisions in the Clean Corporate Vehicle regulation that would end subsidies for petrol cars and restrict financial incentives exclusively to electric vehicles manufactured within Europe. This policy, they argue, would not only reduce oil imports but also support local job creation and strengthen the European automotive industry. Stef Cornelis, T&E’s Fleets and Freight director, stressed the urgency of reforming corporate car taxation in the EU’s largest markets. He called on the EU Council and Parliament to enhance the ambition of the Commission’s proposals to ensure a rapid reduction in oil dependency. Cornelis also criticised the continued subsidies for petrol company cars in many countries, describing it as “perplexing” and warning that without decisive action, Europe risks missing a critical opportunity to accelerate the transition to cleaner transport.