(March 5): When Ronald van Steenweghen leaves his home near picturesque Leuven for a 40-minute commute to Brussels, his employer effectively foots the bill, including the cost of his electric-powered SUV from BMW.
 
Like hundreds of thousands of other Belgians, van Steenweghen benefits from a tax perk that has made company cars the biggest segment of the country’s auto market — accounting for about two-thirds of annual new-car sales. 

Until two years ago, that policy incentivised big, polluting cars, but a change has transformed Belgium into the European Union’s (EU) third-largest electric vehicle (EV) market almost overnight, even though private demand remains below average. 

“I don’t want to be considered an eco-fundamentalist,” said van Steenweghen, a 43-year-old bond trader for Degroof Petercam Asset Management, who drives a BMW iX3 that starts at around €70,000 (RM329,083). “In all honesty, it is due to this fiscal incentive.”

Belgium’s focus on corporate sales is now seen as a potential model for other European countries to tilt buying decisions towards cleaner transport and get the region’s EV transition back on track. 

The European Commission highlighted the policy as part of a set of measures on Wednesday designed to get the bloc’s auto industry out of its rut. Alongside greater flexibility around key emissions targets, the EU’s executive branch is encouraging changes to national company-car policies as a way to quickly bolster EV demand, according to the plan.

In Belgium’s case, EV sales surged 37% last year and jumped another 37% in January after changing the tax incentives. Over the past two years, annual EV sales have almost tripled — the biggest gain in the EU. EV registrations in the country are already outpacing those in more populous nations such as Italy and Spain, while sales in Germany slumped last year after rebates expired.

A key advantage of the Belgian approach is that it doesn’t involve cash being handed over from taxpayers to automakers. Instead, it’s more about accounting. 

Under the programme, which started in 2023, businesses can deduct 100% of the value of their all-electric vehicles from corporate taxable income — reducing their burden, while at the same time providing a benefit to employees. For the government, it still involves a fiscal hit from lost revenue, but it’s not a cash transfer and revenues can be made up elsewhere. 

“It’s one of the most successful climate policies that the Belgians may have ever done,” said Stef Cornelis, director of electric fleets at lobby group Transport and Environment, or T&E. “Belgium was really quite mediocre and actually even worse than that.”

Across the EU, various incentives mean that roughly two of three new cars are sold to corporate buyers. In Belgium, for instance, it’s often a better deal for companies to provide staff with a vehicle rather than increase wages, half of which can be eaten up by taxes. 

Since the segment is effectively created by government policy, changes can have a major impact and make for a faster transition, since company cars are usually swapped out every three to four years. It’s also less controversial since buying decisions are more about numbers than emotions in a sector where concerns over range and battery power persist.

Other forms of support — like direct subsidies for consumers — are costly and demand plummets when they’re removed. For instance, in Belgium’s wealthy northern region of Flanders, a €5,000 incentive was terminated early last year after becoming too expensive for authorities. Similarly, in the Netherlands, consumers raced to get hold of battery-powered vehicles before a subsidy fund was depleted.

Until recently, the Belgian programme incentivised cars with internal combustion engines, irking climate activists. But as of July 2023, only EVs qualify for a 100% tax write-off. Fossil-fuel and hybrid vehicles still get a deal, but it’s lower and will be phased out more quickly. 

It’s had a major impact, with 128,000 more EVs on the road at the end of 2024 than a year earlier. Also, charging points surged 72% last year.

“As you see more and more battery-powered vehicles on the street, it doesn’t look like a freak technology anymore,” said Erwin Ollivier, general manager at Ethias Lease, which operates an electric-only fleet on behalf of employers.

The change has meant that a policy long blamed for subsidising millions of tonnes of carbon-dioxide emissions is now driving the transition of one of the dirtiest sectors of Belgium’s economy. 

Van Steenweghen has seen that firsthand. When he joined Degroof in 2007, he was given a diesel-powered car and then switched to a hybrid. He got his electric BMW over three years ago, and his second EV is due to be delivered later this year. So without changing his commuting habits or digging deep into his own pocket, he saves nearly six tonnes of CO2 a year compared to when he started.

Belgium — the EU’s sixth-biggest car market — was below the bloc’s average when it came to greening the six million cars on its roads. Five years ago, EVs made up less than 4% of the total, compared to over 20% in the Netherlands. Now, the country is firmly in the top five in Europe when it comes to clean mobility, despite sluggish private demand.

EU policymakers have started to see the corporate market as a way to help the embattled auto industry. Aside from the massive volumes, it’s been resistant to competition from outside Europe, with four of the top five brands in the segment in Belgium coming from Germany.

While the bloc has set carmakers the goal of only selling emission-free vehicles after 2035, local manufacturers are struggling to match the prices and technology offered by Chinese brands. That’s prompted the likes of Volkswagen AG and BMW AG to call on the EU to provide billions of euros in financial relief.

Other countries haven’t yet followed the Belgian model. In fact, in Germany and France, the corporate sector is lagging behind private EV demand. That’s largely because leasing companies — which own the cars on behalf of employers — face huge losses as the resale value of EVs plummets in a knock-on effect from price cuts by Tesla Inc and others. Demand from consumers is also sluggish amid concern about buying an EV with a four-year-old battery.

“Corporate clients are struggling like hell,” said Bart Beckers, deputy chief executive officer of Arval Service Lease SA, the world’s second-biggest car leaser with a fleet of around two million vehicles. Battery-powered vehicles “are a very interesting asset to have as a second-hand buyer, but it’ll take some more time before people really see that.”

Apostolos Tzitzikostas, European Commissioner for transport, lauded Belgium’s success as he pitched his plan Wednesday to “clean” corporate fleets. He’s now spearheading discussions to help automakers bolster sales and avoid emissions fines.

Still, it’s not a fix on its own. Carmakers are facing myriad challenges beyond the green transition, not least the prospect of punitive tariffs from US President Donald Trump.

“Some tend to believe this is another silver bullet,” said Sigrid de Vries, director general of the European Automobile Manufacturers’ Association. “As usual, reality is more complex.”

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