European lawmakers are considering proposals to phase out tax incentives for combustion-engine company cars and redirect support toward electric vehicles produced in Europe, according to reports from Germany.
The proposal, cited by German business newspaper Handelsblatt, is part of ongoing negotiations surrounding the European Commission’s Automotive Package and broader efforts to accelerate transport electrification across the European Union.
According to the reported draft proposal prepared by a Social Democratic rapporteur in the European Parliament, EU member states would no longer be allowed to grant tax or financial incentives for company cars powered by fossil fuels beginning in 2028.
Instead, tax advantages would be limited to battery-electric vehicles manufactured in Europe.
The proposal aligns with the European Commission’s previously announced objective of linking public financial support for vehicles to both zero-emission technologies and European manufacturing.
The Commission also said in its Automotive Package released in December that it plans to introduce binding targets for the electrification of company vehicle fleets in EU member states beginning in 2030, with country-specific requirements.
The reported proposal has prompted concern within the automotive industry as lawmakers negotiate the final structure of the package.
Handelsblatt said the initiative reflects a broader political debate within European institutions over industrial policy, vehicle electrification and competitiveness.
The newspaper noted that although the proposal may not secure sufficient support in its current form, it signals the direction of negotiations currently taking place within the European Parliament.
The Automotive Package must still pass through both the European Parliament and the Council of the European Union before it can become law.
Under EU legislative procedures, the proposal would require a simple majority in the European Parliament and a qualified majority in the Council, meaning approval from at least 15 member states representing at least 65% of the EU population.
The discussions come as European governments and automakers continue debating how to balance industrial competitiveness, emissions reduction targets and support for the region’s automotive manufacturing sector during the transition toward electric vehicles.
