Electrifying the used car market

This briefing emphasises the crucial role of the used car market in expediting the transition to zero-emission vehicles (ZEVs), as nearly 80% of people purchase their cars from the used car market. The affordability and accessibility of electric cars in the used car market are pivotal for a socially equitable shift to electromobility. Leasing companies, which constitute over half of new car registrations, wield significant influence in shaping the EU’s transition to a zero-emission transport system.

Leading instead of following

Despite their potential impact, a recent study has revealed that leasing companies, often affiliated with banks or automakers, are not acting as the green leaders they claim to be. Rather than driving the transition to electric vehicles, they are observed to follow market trends and, in some cases, promote misleading green solutions. The analysis in this briefing explores how leasing companies can contribute to increasing the supply of battery electric vehicles (BEVs) in the used car market.

Looking ahead, the European Commission is set to unveil a 2040 climate target to intensify emission reductions. Given that road transport is a major contributor to EU emissions, transitioning from internal combustion engine (ICE) cars to BEVs is deemed one of the most effective measures. While new car registrations are typically the focus of environmental analyses, the used car market deserves greater attention,

In the EU, the used car market is more than just a secondary component of the automotive industry; it is an essential segment that contributes significantly to economic growth, environmental sustainability, and social accessibility. Its importance is perhaps most profoundly felt by low- and middle-income families, for whom this market represents an affordable gateway to personal mobility.

Driving the transition towards EVs

Leasing companies, with their vast fleets and a typical ownership period of three to four years, are well-positioned to drive the transition towards electric vehicles. However, the current analysis suggests that these companies are not leading the way in adopting BEVs. Their uptake of electric cars aligns with market trends, and none of the top leasing companies has committed to phasing out fossil fuel cars, despite their substantial profits.

The briefing proposes that a faster electrification of the leasing sector, with the largest companies going 100% electric by 2028 and the entire sector by 2030, could result in an additional 18 million BEVs entering the used car market by 2035. This represents a significant increase of over 50% compared to a business-as-usual scenario. Importantly, eight million of these additional used BEVs would be priced below 10,000 euros, making them more affordable for middle-income households.

The briefing concludes with recommendations for leasing companies and policymakers. Leasing companies are urged to become true green leaders by committing to phasing out fossil cars by 2028. Policymakers at both national and EU levels are encouraged to reform company car taxation, increasing taxes for fossil cars and plug-in hybrids. Additionally, binding electrification targets for corporate fleets, reaching 100% by 2030 at the latest, are proposed to unlock the full potential of leasing companies in accelerating the electrification of the used car market and making BEVs more accessible to a broader population.