In presenting the results of a study on the Luxembourg automotive market, the House of Automobile calls for appropriate rules to preserve company cars, an essential lever for the energy transition. The market itself faces major challenges: choice of engine type, financing methods, tax pressure and regulatory uncertainties, leaving consumers undecided.
The House of Automobile (HOA) has unveiled the results of surveys conducted among 13,000 individuals and 355 companies to analyse mobility behaviours and expectations. The aim was to take stock of the current situation in terms of engine types and financing methods – private leasing, company cars or purchase with own funds – in a context marked by electrification. ‘The aim of this study was not only to collect figures, but above all to draw concrete lessons for the Luxembourg economy, for the attractiveness of businesses and for the transition to more sustainable mobility,’ emphasised Gerry Wagner, spokesperson for the House of Automobile (HOA). The results reveal that the car remains a pillar of everyday life: 2.14 vehicles per household on average in Luxembourg, a figure higher than that of Belgian (2.05) and German (2.07) cross-border workers, and very close to that of French workers (2.15).
In terms of purchase intentions, the study clearly shows a rise in electrification. ‘Electric vehicles are no longer a curiosity, they are a reality that is already well established for a significant proportion of households. This is very important, because the real experience of users is often the most powerful factor in changing perceptions,’ said Gerry Wagner. The data also confirms a shift in purchase intentions towards electric vehicles. For example, 16.1% of respondents are considering purchasing a 100% electric car (BEV) (compared to 10.2% currently) and 7.4% are considering a plug-in hybrid (PHEV) (compared to 4.7% currently). Conversely, purchase intentions for combustion engines are falling, from 41.7% to 19.9% for petrol and from 36.2% to 9.8% for diesel. However, the shift is not complete: 37% of respondents remain undecided about their next engine type. This figure reveals both persistent barriers and strong potential to support the transition.
The study indicates an interesting correlation between housing and electric cars. Electric car drivers are mostly homeowners and, to a lesser extent, flat tenants. Installing a charging station is not always easy in shared housing such as apartment buildings. The inability to charge at home (27% of respondents) ranks fourth among the most significant barriers to switching to 100% electric. Lack of range (46% of respondents), the impression that the technology is not yet mature (35% of respondents) and the high purchase price (35% of respondents) are the main concerns.
Leasing and company cars: key drivers of the transition
Beyond individual choices, financing solutions play a strategic role in accelerating electrification. To overcome these uncertainties, private leasing and company leasing appear to be powerful levers for accelerating electrification. The study shows that these two solutions are clearly preferred when purchasing an electric car. ‘However, there is a worrying sign: more and more employees are no longer considering keeping a company car. Why is this? The increase in benefits in kind, the new VAT rules, but also the desire of some to separate their private and professional lives,’ Gerry Wagner pointed out with concern. This trend could have serious consequences, both economically and environmentally. ‘If employees abandon company cars in favour of private purchases, they will overwhelmingly opt for combustion engine vehicles, which remain in the fleet for an average of eight years,’ Gerry Wagner added. The study shows that 22% no longer plan to continue with a company car and 27% are undecided. On the other hand, only 9.2% do not plan to continue with private leasing, but 46% are still undecided!
Nevertheless, company cars still have a positive image. The study shows that nearly 80% of companies and 62% of individuals consider company cars to be an essential benefit for attracting talent, especially those aged 24-44. What’s more, 50% of business respondents rank company cars as the top extra-legal benefit, far ahead of extra days off and pension plans! Add to this the fact that most electric vehicle drivers do not plan to return to combustion engines.
Taxation considered problematic
However, the increase in the benefit in kind to 2% and the new VAT rules are perceived as penalising, threatening attractiveness and competitiveness. “If we consider the company car and corporate fleet sector, we will meet the PNEC targets this year. However, at the national level, it is now clear that the country will not achieve the target of 49% electrified cars by 2035. We have made the effort, but we now need to receive clear signals from the government,” argued Dominique Roger, president of the Luxembourg leasing association (Mobiz). The study shows that increasing the rate of the benefit in kind to 2% is considered highly problematic by all respondents. Finally, the non-recovery of VAT on company car leases by businesses was also considered very problematic by respondents, as was the inability to adjust the tax base according to private use.
Market figures also show a sharp decline in the number of company cars in recent years. While they still accounted for 63% of new registrations in 2022, they currently account for just under 50% of new registrations. ‘We can therefore clearly see that the share of company cars in new registrations is falling significantly, particularly since the increase in the ATN and the introduction of the new VAT rules,’ analysed Gerry Wagner, before adding: “When company car registrations fall, electric vehicle registrations fall proportionally. The fluctuation in electric car registrations is strongly correlated with that of company cars.”
To address this, the HOA has presented four recommendations for businesses: develop clear and consistent fleet policies, support employees in the transition, invest in corporate charging infrastructure and participate in the permanent market observatory with the HOA. At the same time, the HOA has made six recommendations to the public authorities: stabilise and make the tax framework predictable, review the ATN level at 2%, better calibrate VAT rules on company cars, maintain and target Klimabonus-type subsidies, accelerate the roll-out of charging, especially in collective housing, and above all keep company cars alive.
In conclusion, all players in the automotive sector are unanimous: company cars still have a bright future, provided that the tax framework is made more flexible, employers are supported in the transition to electric vehicles, and all players are aligned around common objectives.
The government is listening
On the public sector side, Finance Minister Gilles Roth, who was present at the presentation of the study, took the floor to reassure professionals in the sector. “Cars will continue to play an important role in the mobility of tomorrow. I have listened carefully and taken note of the results of this study and the recommendations of professionals in the sector. I will not make any promises, but my intention is to move up a gear to achieve sustainable and inclusive growth,” said the minister.
The Minister for the Economy, Lex Delles, also left a video message in which he also expressed a positive outlook and explained the measures to come, such as a forthcoming law on the right to charging stations and the introduction of rules to facilitate the installation of stations in residential areas.
