Clean Corporate Vehicles Proposed EU Regulation: Understanding how corporate fleets could become subject to mandatory greening targets

Executive Summary

• The Clean Corporate Vehicles Proposal has been proposed by the European Commission in December 2025 in the context of the broader Automotive Package which intends to accelerate the decarbonization of the automotive industry in Europe
• In this context, the European Commission proposes that each Member State should be assigned different greening trajectories for cars and vans newly registered by large companies in 2030 and 2035
• The scope of the proposal extends beyond large companies, with impacts ranging from potential fines to reduced vehicle choice for any business or individual leasing vehicles
• From 2028, it could significantly disrupt corporate fleet tax regimes by limiting indirect financial support to low- and zero-emission vehicles, creating uncertainty for businesses.
• The key challenge is making decarbonisation work in practice which can only be effective by taking the full dynamics of the automotive market (including the used car market) into account and by supporting a fair transition - one that is adapted to market realities and underpinned by stable, predictable and incentive-based measures.

Some periods are particularly intense for certain sectors, and the one we are currently experiencing is particularly challenging for the entire automotive ecosystem. The most active discussions are taking place in Brussels. They focus on the Automotive Package proposed last December by the European Commission, which is mainly intended to give manufacturers more flexibility in meeting their CO₂ emissions reduction targets set for 2035. On the demand side, the Commission is breaking new ground: for the first time, it puts forward a dedicated Clean Corporate Vehicles Proposal aimed at greening the vehicle fleets of large companies in Europe.

This article focuses on this latter proposed Clean Corporate Vehicles Regulation[1].

In accordance with the ordinary legislative procedure of the European Union, the Commission’s proposal is currently being examined by the European Parliament. At the same time, it is being discussed by the Council of the European Union, which will need to reach an agreement with Members of the European Parliament before the text can be adopted (or rejected).

What is the Commission proposing and what is its objective?

Let’s start with the objective

Through its proposal, the Commission aims to reduce emissions from road transport, which represents a major share of the EU's emissions[2]. It also seeks to support the competitiveness of the European automotive industry by increasing demand for low-emission vehicles.

Why are corporate fleets being targeted?

In its proposal, the Commission states that corporate fleets have strong potential to accelerate the adoption of zero- and low -emission vehicles. This is because companies play a major role in new vehicle registrations. In Europe, out of around 11 million new vehicles registered each year[3], approximately 60% are registered by companies[4]. The Commission further argues that the uptake of zero- and low- emission vehicles in corporate fleets remains insufficient.

While the Commission is right to highlight the crucial role of corporate fleets in the decarbonization of the car park, available data do not support its view that corporates are lagging behind in the uptake of zero- and low- emission vehicles.  Indeed, in most major EU markets, corporate fleets are more electrified than private individuals (26% for corporates against 18% for individuals in Q1 2026  in the top 8 European markets[5]).

To reach its objective, the Commission proposes that each Member State[6]  should be assigned greening trajectories for cars and vans newly registered by large companies in 2030 and 2035.

Who would qualify as a “large company”?

According to the EU definition[7], a large company is any company which, on its balance sheet date, exceeds at least two of the three following three criteria: a) balance sheet total: EUR 20,000,000; b) net turnover: EUR 40,000,000; c) average number of employees during the financial year: 250.

What would be the practical consequences for companies if the text were adopted?

A scope covering more than large companies with differentiated impacts

In practical terms, large companies, in whose name vehicles are registered, could face fines if they fail to meet the targets set by the Regulation[8] with potential consequences extending beyond fines.

France already provides an example of the effects of a binding and coercive system. Indeed, a similar law, which entered into force in March 2025, added financial penalties to an already existing system of mandatory greening quotas for French companies through a tax known as the Annual Incentive Tax[9], or “TAI”.

Since March 2025, a greening of the French corporate fleet has indeed been observed, with BEV registrations up by more than 70% in the first quarter of 2026 compared with the first quarter of 2025[10]. However, this progress is due both to the reform of benefit-in-kind rules[11],  and to the introduction of the new TAI. At the same time, despite this positive greening effect, the French corporate fleet has aged[12] and even decreased in size. After steady growth between 2019 and 2024, with cumulative growth of 28.7%, the number of vehicles in corporate fleets declined for the first time in 2025[13].  When fleets get older, older petrol and diesel cars stay on the road for longer, making the shift to electric cars slower.

Another risk is that binding targets for corporate fleets could push some companies with company cars to move away from leasing and offer cash allowance to their employees instead.  This could reduce the number of electric cars registrations and lead to more petrol and diesel cars on the road, undermining the very objective of the proposed Regulation.

For smaller businesses and private individuals, the consequences could be more indirect. The Commission has chosen to rely on Member States’ vehicle registration records to identify the companies covered by the Regulation. Yet in most EU Member States, vehicles are registered in the name of the vehicle owner. In these Member States, when a company chooses to lease its fleet from a leasing (or finance lease) company, the greening obligation would therefore fall on the large leasing company. As a result, a very small business, an SME or even a private individual leasing a vehicle from a large leasing company could be indirectly affected by this proposed Regulation. These smaller businesses or individuals would not face a fine themselves, but their freedom to choose the vehicles that best meet their operational constraints and needs could be limited- and any penalties imposed on leasing companies could also increase their lease payments and ultimately raise the total cost of ownership of the vehicles they lease.

Are the proposed clean trajectories achievable for corporates?

The proposed Regulation includes five groups of clean trajectories[14], depending on the Member State.  It is very likely that many Member States will struggle to meet the thresholds proposed by the Commission.

To understand the possible gap between the proposed trajectories and Member States’ ability to reach them, it is important to look at how the highest thresholds would work. These thresholds combine zero-emission and low-emission vehicles. From 2027, however, the reform of CO₂ emissions calculations for plug-in hybrid vehicles, through the strengthened utility factor under Euro 6eBis[15], could exclude most plug-in hybrid vehicles - as the current standard already does for hybrids - from the definition of low-emission vehicles[16]. As a result, in practice, only electric vehicles, or other zero-emission vehicles such as hydrogen fuel cell vehicles, may count towards meeting the higher of the two thresholds proposed by the Commission. For example, a large Italian company may in practice need to reach a 69% electric vehicle target in 2030, rather than 45% because most plug-in hybrids may no longer count as low-emission vehicles. This could make it even more difficult for some EU countries to meet the proposed objectives.

Could the tax regime for corporate fleets be significantly disrupted from 2028?

In Article 4 of the proposed Regulation, the Commission provides that, from 2028, Member States would no longer be allowed to grant financial supports to vehicles unless they are zero- or low-emission vehicles, and unless they are “Made in Europe” vehicles. The intention behind this provision is understandable, as it is intended to prevent Member States from granting direct financial support to internal combustion engine vehicles. However, this article has triggered strong opposition from many Member States and from many stakeholders, largely because its scope remains unclear. Without a clear definition of the scope of this prohibition, it could imply a complete overhaul of the tax regimes applying to corporate fleet vehicles, as these tax regimes may be regarded as a form of indirect financial support. Such a change would very likely be harmful for companies, which need stability and visibility in order to continue moving towards fleet electrification.

A split Parliament and a sceptical Council: the proposal faces a difficult road ahead

At this stage, the text is facing significant opposition from a majority of Member States in the Council of the EU[17], while a smaller group of countries, including France and Spain, supports the initiative. In the European Parliament, positions are more fragmented between and within the political groups. Although the pro-European "Von der Leyen majority"- comprising the European People’s Party (EPP), the Socialists and Democrats (S&D), Renew Europe and the Greens – remains the Parliament's main governing coalition, it is divided on this proposal. The EPP, together with some Renew Europe members and right-wing parties, generally favours either rejecting the proposal, making the trajectories indicative rather than binding, or lowering the greening targets. By contrast, S&D and the Greens are broadly supportive of the initiative, with some members calling for even more ambitious trajectories. Renew Europe remains divided, with its members split between these different approaches.

Decarbonizing Europe’s car park is a no brainer – the question is how to make it work

A look into the existing successful levers driving fleet decarbonization

There is no doubt that the decarbonization of the European car park must accelerate, and that this will require a broader electrification of the vehicle fleet as a whole, including the continued electrification of corporate fleets. Intermediate players in the value chain, such as leasing companies, have an essential role to play. They advise customers, support change management and help spread over time the investment required to purchase a vehicle, especially as electric vehicles remain more expensive to buy than comparable internal combustion engine vehicles[18]. This leaves us with the essential question: what is the right tool to achieve this objective? No one can claim to have a crystal ball. But the experience of the European countries that are furthest ahead in electrification points[19], so far, to one consistent lesson: their transition has been built over time through stable, predictable and incentive-based measures, rather than through binding obligations.

The used-car market: blind spot of the proposed Regulation

The blind spot of this proposed Regulation is the used electric car market. For several years, this market has suffered from the rapid depreciation of electric vehicle values, often referred to as a residual value crisis[20]. Yet the used car market accounts for three times more transactions than the new car market. If this crisis is not addressed through supportive public policies, it could weaken the transition to electric mobility.

Corporate fleets are already acting as early adopters of electric vehicles, as shown by BEV penetration trends in the first quarter of 2026[21]. But this first step will only be successful if it leads to wider adoption by individuals, who mainly buy vehicles on the used car market[22]. Households will not make the switch if they do not trust that their vehicle will retain value over time, if they lack transparency on battery health, or if charging infrastructure is not efficient enough. In short, the entire market dynamic must be taken into account if the transition is to be supported effectively.  A stuck used car market means a stuck transition.

We cannot predict the future of this proposed Regulation. But we are convinced that such regulatory change can only be effective if it takes the full dynamics of the automotive market into account and supports a fair transition - one that is adapted to market realities and underpinned by stable, predictable and incentive-based measures.