The EU‘s five largest economies—Italy, Germany, France, Poland, and the United Kingdom—spend a combined 42 billion euros (USD 45.6 billion) annually subsidizing fossil-fuel company cars, according to a study by consultancy Environmental Resources Management (ERM), commissioned by environmental group Transport & Environment (T&E). The report urges the EU to redirect these subsidies towards electric vehicles (EVs) instead.
Italy leads with 16 billion euros in subsidies, followed by Germany with 13.7 billion euros. France and Poland provide 6.4 billion euros and 6.1 billion euros, respectively. The subsidies support a significant portion of new car sales in Europe, with company cars comprising 60% of the market. Many companies offer cars as employee perks, enhanced by benefits that include tax reductions and fuel subsidies.
The report highlights that 15 billion euros across these countries are spent specifically on subsidizing SUVs. Company car drivers receive tax benefits averaging 6,800 euros annually, with high-polluting models offering benefits as high as 21,600 euros. T&E’s director of fleets, Stef Cornelis, criticized the policy as contradictory to the EU’s green transition agenda.
The study’s release coincides with a decline in EV sales across the EU, partly due to their higher prices compared to fossil-fuel models. In August, sales of fully electric vehicles dropped 43.9% in the EU, with major markets like Germany and France seeing declines of 68.8% and 33.1%, respectively.
The ERM study found that the UK is the only country offering significant financial incentives for company car drivers to switch to EVs. European Commission President Ursula von der Leyen has tasked the new EU climate chief, Wopke Hoekstra, with prioritizing a proposal to phase out fossil-fuel subsidies, as outlined in a letter dated September 17.