Electrifying company cars? The effects of incentives and tax benefits on electric vehicle sales in 31 European countries

Abstract

Battery electric vehicles and plug-in hybrid electric vehicles have remarkable potential to reduce CO₂ emissions in road transport. Many governments have introduced incentives to accelerate the market penetration of these vehicles and several studies have shown their effectiveness. Vehicles owned by a company but allowed for private use by employees – so-called company cars – represent a large new car market in Europe. However, little is known about the effect of incentives beyond the early market stages and the effect of company car incentives. Here, we use panel data regression to estimate the effect of purchase incentives on battery and plug-in hybrid electric vehicle sales in 31 European countries from 2010 to 2022. We thus go beyond early market studies and obtain the first empirical estimate of the effect of company car incentives on electric vehicle sales. We find that a €1000 per year recurring incentive for company cars increases sales shares relatively by 50–90 % for plug-in hybrids and by 17–40 % for battery electric vehicles, e.g., from 10 % without incentive to 15–19 % or 12–14 %, respectively. Our results confirm the impact of purchase incentives and demonstrate the importance of company car taxation on electric vehicle sales.