The uptake of plug-in hybrid electric vehicles in Europe's company car fleets: Trends and policies

Electrification Zero-emission vehicles

The electrification of Europe’s passenger car fleet is, to a large part, driven by companies. Looking at true fleet data* in the 21 European countries for which it is available, over 553,000 new electric passenger cars were registered by companies in 2020. This was 54% of all new electric passenger car registrations in the selected European markets. The remaining 46% were made by private individuals.

Registrations of electric company cars—including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs)—varied greatly across European countries in 2020. The figure below shows that Belgium and the Czech Republic recorded the highest share of new electric passenger car registrations by companies in 2020 with 86% each. In total numbers, the majority of new electric company cars were registered in Germany (over 140,000 registrations), followed by the United Kingdom (over 100,000), and France (55,000).

Figure 1. New electric passenger car registrations by companies in selected European markets in 2020 (data considered include true fleet registrations for markets where data was available; source: Dataforce).

Yet, the numbers above only tell part of the story. More important than total percentages of electric vehicles is how the registrations are split between BEVs and PHEVs. This information is fundamental since BEVs contribute greatly to lower greenhouse gas (GHG) emissions. This is hardly the case for PHEVs, particularly when they are used as company cars. Our recent study found that the fuel consumption and tailpipe carbon dioxide (CO2) emissions of PHEV company cars during real-world driving are about three to four times higher than the official type-approval figures. By comparison, emissions from privately-owned PHEVs are two to three times higher than type-approval figures. This difference is mostly due to the fact that PHEVs used as company cars tend to be charged less frequently and are driven for longer distances than is the case for private users. As a consequence, the share of kilometers driven in electric mode is reduced, limiting the potential environmental benefit.

Let us have a closer look at some European markets. In 2020, 52% of total new electric company car registrations in Europe were PHEVs, with Germany, the United Kingdom, France, Sweden, and Belgium responsible for 76% of the total. By country, the PHEV registration shares of total new electric company car registrations in 2020 were the highest in Cyprus and Finland (100% and 87%). This was followed by Sweden and Belgium with shares of 73%, and 72%, respectively. In the United Kingdom, almost 4 out of 10 newly registered electric company cars were PHEVs, basically identical to the 38% PHEV share of the country’s 2020 total new electric passenger car registrations. In the Netherlands, the share of PHEVs in total electric company car registrations was one of the lowest with 14%, and slightly lower than the 17% overall PHEV share of total 2020 new electric passenger car registrations in the country. These figures are in contrast to Germany. There, 64% of new electric passenger cars registered in company fleets were PHEVs in 2020. This was significantly higher than the country’s 51% average of PHEVs in total new electric passenger car registrations.

Figure 2. New battery electric and plug-in hybrid company car registrations in selected European markets in 2020 (data considered include true fleet registrations for markets where data was available; source: Dataforce).

National policies are largely shaping these market developments. Typical benefits for electric cars as part of company car fleets include one-time subsidies and fiscal incentives on car purchases or ownership (yet not always exclusively aimed at companies), or special depreciation rates or write-offs for companies acquiring an electric car. In Europe, some businesses provide company cars to employees as part of their regular salary. If these vehicles are also used for private purposes, the in-kind benefit is taxed as private income. Many European countries have adopted preferential taxable rates for the use of an electric vehicle. Let’s have a look at the two largest European markets by total new passenger car sales and selected policies:

  • In the United Kingdom, companies can claim 100% of the first-year writing down allowances for new cars up to 50 g CO2/km, applicable for the 2020/2021 tax year. In addition, employees privately using a company car with emissions of 0 g CO2/km are not taxed for the in-kind benefit during the same period. This was a significant drop from the previous year, where the taxable rate was at 16%. PHEVs emitting between 1 g CO2/km and 50 g CO2/km (based on WLTP) also pay rates of 0%-10% depending on the electric range compared to 13%-37% for vehicles with CO2 emissions above 50 g/km. In addition, the UK government offered a one-time subsidy at purchase of £3,500 (€4,000) at the beginning of 2020, reduced to £3,000 (€3,500) in April 2020, which is applicable to vehicles with CO2 emissions less than 50 g/km and an all-electric range of at least 112 km. In addition, taxis qualify for a maximum grant of £7,500 (€8,700). These incentives have likely stimulated new BEV rather than PHEV registrations by companies. The registration share of new PHEVs as part of company fleets might be lower in 2021 as the government is enacting additional policies to encourage businesses to acquire zero-emissions vehicles. For example, the threshold for the 100% capital allowance has been reduced from 50 g CO2/km to 0 g CO2/km in April 2021.
  • In Germany, purchasers or leasers of a BEV or PHEV with emissions up to 50 g CO2/km or an all-electric range of at least 40 km also benefit from a one-time bonus. In response to the COVID-19 pandemic, the maximum amounts were increased from €6,000 to €9,000 in mid-2020 for the purchase of a new BEV, and from €4,500 to €6,750 for a new PHEV. Employees privately using a company car also benefit from preferential tax rates for BEVs. In January 2020, the monthly taxable rate was reduced from 0.5% in 2019 to 0.25% (6% to 3% annually). BEVs with a gross list price above €60,000 and PHEVs pay a reduced monthly rate of 0.5%, which is half the rate imposed on combustion engine cars. As companies benefit from high subsidies and preferential tax deductions, the share of PHEVs in Germany is particularly high in new electric company car registrations. This is likely to prevail in 2021 as the subsidy amounts, eligibility criteria, and tax benefits will be maintained. For PHEVs, the eligibility criteria to receive the one-time bonus in terms of all-electric range will be tightened to at least 60 km starting 2022 and 80 km starting 2025. This is still below the current 120 km threshold in the United Kingdom.

While all these incentives are helpful for spurring the uptake of electric vehicles within company car fleets, thereby tackling climate change, the purchase incentives and tax breaks come at a cost to society. Also, since company cars are typically used by high-income households, incentive-based company car policies favor high-income over low-income households. Both policy shortcomings can be addressed by introducing higher tax rates for vehicles with higher CO2 emission levels, as part of a bonus-malus system. For PHEVs, including those used as company cars, tying any incentives to the condition of (real-world) electric driving is key for increasing the climate benefit. We will follow up regularly on how the market will develop in due course.

* True fleet data includes company cars, long-term rentals, leased vehicles, taxis, and cars belonging to driving schools, public administrations, and diplomats.