According to research from the Transport & Environment (T&E), only nine of the EU’s 27 member states offer a tax advantage for electric company cars that is large enough to offset the higher upfront purchase price of an EV.
The finding highlights a growing disconnect between the European Union’s ambitions to reduce oil dependence and the fiscal frameworks governing company vehicle fleets, which account for 59% of all new car registrations across the bloc and consume 78% of the oil used by newly registered vehicles.
At the center of the debate is a simple economic reality. While EV operating costs are generally lower than those of internal combustion vehicles, their purchase prices remain higher. T&E estimates that the average EV price premium in 2025 stands at €10,650. The organization argues that meaningful tax incentives should at least bridge that gap if governments want businesses to transition their fleets at scale.
Yet in 18 member states, the tax differential between electric and fossil fuel company cars falls short of that threshold. As a result, fleet managers often continue to view conventional vehicles as the financially safer option, particularly in markets where corporate tax structures still provide direct or indirect support for gasoline-powered cars.
The issue carries significant implications beyond vehicle sales. Corporate fleets play an outsized role in shaping the broader automotive market because company vehicles typically enter the second-hand market after several years, influencing affordability and availability for private consumers. Delayed fleet electrification therefore risks slowing EV adoption across the wider economy.
Recognizing this dynamic, the European Commission proposed the Clean Corporate Vehicle Regulation in late 2025, introducing national targets for the electrification of large company fleets. The proposal envisions an EU-wide average where 45% of newly registered corporate vehicles would be electric by 2030.
Notably, the proposal places responsibility on member states rather than individual companies. This reflects the reality that taxation remains one of the most powerful tools available to governments for influencing purchasing decisions.
Evidence from several countries suggests that tax reforms can produce rapid changes in fleet behavior. Belgium provides one of the clearest examples. After introducing significant fiscal changes in 2021, the share of electric vehicles in corporate registrations rose from 8.8% to 54.2% by 2025. France has also moved aggressively, implementing multiple reforms during 2024 and 2025 that helped corporate EV registrations reach a record 41.3% in March 2026.
However, the largest automotive markets have been slower to act. Germany, Spain, Italy, and Poland continue to maintain tax structures that, according to T&E, fail to make electric vehicles financially competitive enough to overcome their purchase-price disadvantage.
Germany stands out in particular. The country accounts for 28% of all new fossil fuel corporate vehicle registrations in the EU, yet companies still receive a net subsidy of approximately €10,000 for operating a petrol-powered company car. T&E calculates that this support level is more than double that available in any other member state.
The contrast with other European markets is stark. In France, corporate buyers of petrol vehicles face roughly €25,000 in taxes, while Denmark imposes approximately €37,000, making it the strongest performer in T&E’s ranking of tax differentiation between electric and fossil fuel vehicles.
These disparities translate directly into differing economic signals regarding fuel consumption. T&E estimates that Germany effectively subsidizes company vehicle fuel use by an amount equivalent to €0.50 per liter of petrol consumed. France, by comparison, generates tax revenue equivalent to €10.30 per liter. Similar contrasts exist elsewhere in Europe. Portugal collects revenue equivalent to €4.50 per liter, while Spain collects roughly €1.20. In Eastern Europe, Slovenia generates approximately €2.10 per liter compared with just €0.40 in Poland.
The implications extend beyond passenger car ownership. Europe continues to face strategic concerns regarding energy security and exposure to global oil markets. Weak taxation of fossil fuel company vehicles effectively prolongs oil demand, potentially undermining broader efforts to reduce imports and improve energy resilience.
The challenge becomes even more pronounced in larger vehicle categories. Germany and Poland together account for 52% of corporate registrations of D-segment vehicles, a category associated with relatively high fuel consumption. Yet both countries continue to impose comparatively weak tax burdens on these vehicles, limiting incentives to shift toward lower-emission alternatives.
T&E’s analysis also raises questions about the design of existing tax systems. In many member states, taxes do not increase proportionately with vehicle size and fuel consumption. France offers one of the more progressive approaches, where companies purchasing larger E-segment fossil fuel vehicles pay roughly twice as much tax as they would for a smaller C-segment model. Portugal goes further, with tax liabilities nearly five times higher for the larger vehicle category.
In contrast, many countries show only marginal increases in taxation as vehicles become larger and more fuel intensive. Germany again emerges as an outlier. According to the analysis, companies can receive an even larger subsidy for operating a fossil fuel E-segment vehicle than for a smaller C-segment model, creating a fiscal incentive that runs counter to both climate and energy-security objectives.
These findings are likely to intensify discussions surrounding the final shape of the Clean Corporate Vehicle Regulation. T&E argues that one of the most consequential provisions would be the elimination of subsidies for petrol-powered company cars, while allowing fiscal support only for electric vehicles manufactured in Europe.
Supporters contend that such an approach could address multiple policy objectives simultaneously: accelerating fleet electrification, reducing oil imports, and strengthening the competitiveness of Europe’s automotive manufacturing base. Critics, however, are likely to scrutinize whether linking incentives to European production could complicate trade relationships or limit vehicle choice in certain markets.
