AUTONEWS

EU to reduce VAT on EVs, implement stronger uptake targets, leaked electrification strategy shows

The EU’s electrification strategy, due to be published this week, commits the European Commission to presenting a framework for reducing VAT on EVs.

A leaked draft of the strategy, seen by EV Infrastructure News, includes measures to increase EV uptake. It will assess stronger zero emissions vehicle uptake targets for public procurement, with the Commission due to put forward a recommendation for fiscal and nonfiscal demand-side incentives for EV uptake by Q4 2026.

As part of the Green VAT initiative announced in the Clean Industrial Deal, which targeted 30% electrification by 2030, the Commission will present an EU framework for Member States to reduce VAT on electrification assets including EVs, heat pumps and domestic batteries.

The formal publication of the electrification strategy was announced for 15 July, though some reports now say it will be out on 17 July.

An overall electrification target of [X]% by 2040, which will become EU legislation, is not included in the leaked document seen by media, but it sets out the measures the European Commission (EC) will take to achieve its targets.

This will include removing five barriers to electrification:

Reducing the gap between electricity and fossil fuel costs by adding flexibility to reduce the costs of operating the system, making electricity cheaper and deploying more homegrown clean energy.

Lowering the upfront costs of electrification for end-users across the industrial sector, transport and buildings.

Increased access to infrastructure and enhancing the productivity of electricity grids through investment in transmission, EV charging networks, port infrastructure and district heating and cooling.

Accelerating innovation in electrification solutions, including emerging technologies such as small modular nuclear reactors (SMNRs), hydrogen and carbon capture and storage (CC&S).

Growing and upskilling electrification technologies workforces and the European manufacturing and supply chain sectors.

Measures include deploying 200GW of energy storage by 2030 to meet energy system flexibility needs. The details of how the EC will achieve this are explored in an article available on our sister publication, Energy-Storage.news.

Clean Vehicles Directive strengthened in 2027...The Clean Vehicles Directive promotes clean mobility solutions in public procurement tenders across EU Member States. In August 2021, when it became law, the directive set a minimum percentage of clean vehicles in the aggregate public procurement across a Member State. Targets ranged between 17.6% and 38.5% for light-duty vehicles.

By Q4 2027, the Commission will review the Clean Vehicles Directive to assess possible further strengthening of the targets. Perhaps notably absent from the draft is the equivalent for consumer vehicles: in October last year, EU Member States agreed in principle to enshrine the 2035 phase out of all carbon emitting vehicles (including traditional hybrids and plug-in hybrid vehicles) into law.

In March, however, several EU countries threatened to block the ban unless an exemption that would allow sales of new cars with internal combustion engines that run only on e-fuels was included, an amendment that was passed but may not get through parliament successfully.

There have been rumours of the phase-out date being changed, but the electrification strategy just states that the number of battery EVs on European roads has increased sixfold since 2020, with over 8 million now registered.

European EV charging infrastructure...Any measures to increase EV uptake will drive charging infrastructure demand. The electrification strategy states that “multiple measures and support have been provided” for recharging infrastructure, seeing over 1.1 million public EV chargepoints now installed across the EU.

It continues that additional financial support is needed to “reassure” chargepoint operators (CPOs) and “convince consumers that electric mobility will rapidly become the most reliable and accessible form of transport, even in less densely populated areas”.

As such, the Commission commits to reviewing the Alternative Fuels Infrastructure Regulation (AFIR) this year, to further support charging rollout, including for electric heavy-duty vehicles (e-HDVs). It will update the common technical specifications used in the AFIR to ensure interoperability and that bi-directional charging capabilities are included.

For e-HDVs, the Commission will expand the e-HDVs Clean Transport Corridors initiative to other TEN-T corridors and facilitate financial support for the derisking of investment in e-HDV recharging stations.

It said it will work with Member States to identify remaining ways it can enable the deployment of e-HDVs and the infrastructure to support them, “including incentives for the demand for the vehicles and agree on joint action plans for the enabling framework for the transition under the 2030 CO2 targets for e-HDVs”.

V2G to reduce electricity costs...The Commission also commits to launching a framework for regulatory sandboxes and living labs across Member States to enable new vehicle-to-grid (V2G) business models, to increase the potential for consumer flexibility to address high electricity costs.

The draft document says that by mid-2027, the Commission will assess and promote the introduction of smart charging by default in electricity supply contracts related to EVs, introducing V2G requirements for new EVs by the end of the same year.

Those requirements would include technical specifications to enable interoperability, such as standardised communication protocols. Currently, it is a lack of standardisation across technology and legislation that presents a barrier to wider deployment of V2G.

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