Invigorating the Second-Hand Automobile Sector

The European Commission has set a 2040 climate target to intensify emission reductions, with road transport being a major contributor. While new car registrations often grab headlines, the used car market deserves greater attention. This essential segment plays a significant role in economic growth, environmental sustainability, and social accessibility, particularly for low- and middle-income families.

However, a concerning trend has emerged. In some cases, leasing companies, often affiliated with banks or automakers, promote misleading green solutions. Despite their strategic position, leasing companies, with their vast fleets and typical ownership period of three to four years, are not acting as the green leaders they claim to be in transitioning to electric vehicles.

Instead of driving the transition to electric vehicles, leasing companies are observed to follow market trends. The current analysis indicates that leasing companies are not leading the way in adopting battery electric vehicles (BEVs), aligning with market trends and not committing to phasing out fossil fuel cars.

This lack of commitment is troubling, as transitioning from internal combustion engine (ICE) cars to BEVs is considered one of the most effective measures to reduce EU emissions. A faster electrification of the leasing sector could result in an additional 18 million BEVs entering the used car market by 2035, representing a significant increase of over 50% compared to a business-as-usual scenario.

Eight million of these additional used BEVs would be priced below 10,000 euros, making them more affordable for middle-income households. This affordability is crucial, as the used car market is a crucial segment that significantly contributes to the transition towards electric vehicles.

Policymakers are encouraged to reform company car taxation, increasing taxes for fossil cars and plug-in hybrids, and propose binding electrification targets for corporate fleets, reaching 100% by 2030 at the latest. The briefing recommends that leasing companies commit to phasing out fossil cars by 2028 to become true green leaders.

The European Commission is set to unveil a 2040 climate target to intensify emission reductions. It is hoped that this target will encourage leasing companies to take a more proactive role in promoting green solutions and driving the transition to electric vehicles. The used car market, with its potential to significantly reduce EU emissions, cannot afford for leasing companies to continue falling short.