“Company car privilege”: maintain the current regulation and restrict it exclusively to fully electric vehicles!

Under the previous government, the company car scheme was amended in order to keep electric vehicles attractive, while hybrid cars were no longer favoured. Pressure is now being exerted to reverse this change. The current system must not be weakened, says the Mouvement Ecologique. Read the arguments.

Real climate benefits must be the benchmark for public support – promote only efficient electric company cars

Promoting electric mobility is a key pillar of a future-oriented, climate- and resource-friendly mobility policy. Regardless of the broader question of whether the company car privilege itself is justified, it is essential that the design of benefits in kind for company cars promotes the best available technology – namely electric vehicles – and increases their market share. This helps ensure that Luxembourg’s CO₂ emissions can be reduced to the required extent.

However, this requires that such incentives are designed accordingly and are based on clear facts. It appears that car manufacturers are exerting pressure to modify the current regulation on benefits in kind. Their aim seems to be that plug-in hybrid vehicles (PHEVs), portrayed as a “bridging technology” between combustion engines and fully electric cars, should once again benefit from a flat-rate tax value of 0.5 % for the benefit in kind. This rate is calculated based on the vehicle price: the lower the rate, the less tax is payable on the company car.

This preferential treatment for plug-in hybrids was deliberately abolished several years ago, with a clear political decision: public funds (as “tax expenditures” are public funds) should no longer be used to support this technology, especially given the sufficiently wide range of fully electric vehicles available. Since 2022, the rate for 100 % electric vehicles has been 0.5 %. For plug-in hybrids, the applicable rate depends on CO₂ emissions and engine type (hybrid petrol or hybrid diesel) and ranges between 0.8 % and 1.8 %.

From the Mouvement Ecologique’s perspective, this decision was consistent: public incentives must be aligned with the real contribution to reducing greenhouse gas emissions. For plug-in hybrids, however, scientific evidence has for several years painted a clear picture: the gap between officially stated theoretical emissions and actual real-world emissions is substantial.

1. Significant resource consumption

Plug-in hybrids combine an internal combustion engine and an electric motor in a single vehicle. Equipping a vehicle with two powertrains is problematic in itself. The result is high weight, technical complexity and significant resource consumption. This is particularly critical at a time when natural resources are being depleted at an unsustainable rate and must be used far more sparingly. Hybrid vehicles represent the opposite: an unnecessarily high consumption of resources due to their dual-motor design.

2. “Emissions gap” – real-world data exposes the promises of hybrid vehicles, especially company cars

This dual powertrain often leads, in practice, to inefficient operation and consequently to high energy consumption and CO₂ emissions.

Batteries that are rarely or irregularly charged, long distances driven using the combustion engine and high real-world CO₂ emissions are the rule rather than the exception.

Recent studies show that, under real driving conditions, plug-in hybrids emit three to five times more CO₂ than indicated by the Worldwide Harmonized Light-Duty Vehicles Test Procedure (WLTP) values. These values are used as a reference when purchasing a vehicle and often form the basis for public subsidies. The main reason is a much lower share of electric driving than originally assumed, combined with test conditions that rarely reflect real-life use.

According to a recent study by Transport & Energy, the gap between theoretical and actual emissions has widened significantly in recent years: the real emissions of a plug-in hybrid registered in 2023 were almost five times higher than the manufacturer’s “official” figures. While private vehicles are driven electrically for about half of their mileage on average, this share drops to sometimes below 15 % for company cars. In the very segment where tax incentives are most relevant, combustion engines and fossil fuel consumption therefore continue to dominate.

3. Avoid perverse incentives – ensure a consistent transformation

Continuing to exclude plug-in hybrids from benefits in kind and restricting support exclusively to fully electric vehicles sends the right signals. Only in this way can the necessary transition to fully emission-free drivetrains be achieved.

It would be irresponsible for the state to reinvest public funds in a measure that would be clearly counterproductive from a climate policy perspective. Public subsidies must be linked to a reliable contribution to emissions reduction. This is currently the case. If the controversial company car privilege is to be maintained, then company cars should at least make a genuine contribution to decarbonising the mobility sector.

Promoting hybrid vehicles would simply make it even harder for Luxembourg to meet its climate targets. More than half of newly registered company cars are currently electric vehicles. Any decline in this share would be devastating.

The company car sector also has an important role-model function. Companies and public authorities shape vehicle fleets, influence the second-hand car market and help determine future mobility patterns. A clear focus on fully electric vehicles strengthens investment security, supports the expansion of charging infrastructure and drives the technological transformation of the transport sector.

Conclusion

The Mouvement Ecologique therefore calls for the current system to be maintained and for tax-favoured benefits in kind for company cars to continue to be strictly limited to fully electric vehicles, given that the government does not question the existence of the company car privilege itself. This position is based on the proven poor real-world CO₂ and resource performance of plug-in hybrids, particularly in the company car segment. Only a clear, ambitious and evidence-based design of support instruments can ensure that tax incentives genuinely contribute to emissions reduction and effectively accelerate the transition to climate-friendly mobility.

15.12.25