2025 Finance Bill : €1.5 billion in additional road tax revenue justifies maintaining the envelope dedicated to fleet greening in 2025

In an uncertain budgetary and political context, the Institut Mobilités en Transition would like to point out that the tax revenue generated by all the tax mechanisms linked to roads could generate additional revenue of €1.5 billion in 2025 compared with 2024. While the budgetary logic of allocating resources does not prevail in France within government budgets, we believe that this factor in itself justifies maintaining at least the amount of the envelope dedicated to the greening of vehicles next year. The aim of this blog post is firstly to recall the tax changes already discussed in 2023 for the year 2025. Here we show the usefulness and necessity of maintaining the ambition of the CO2 and weight penalty mechanisms, because of the room for manoeuvre they provide in terms of tax expenditure. This ambition makes it possible not to reduce support for the greening of vehicle sales on the eve of a pivotal year for the European regulatory framework (new milestone to be crossed in the CAFE trajectory). Lastly, this blog post proposes a change in the conditions for greening support within the €1.5 billion expenditure envelope in 2025, to make it more effective from a social and environmental point of view, while incorporating the expected changes in the energy mix of sales.

1.5 billion in additional revenue generated in 2025 by taxes on the sale of new vehicles

For over 2 years, the ITM has been monitoring the structure of French road taxation. The internal analyses carried out show that the cumulative evolution of the 23 tax mechanisms that impact and shape the vehicle fleet and mobility practices could generate more than €1.5 billion in additional revenue in 2025, while ensuring greater fairness and environmental virtue. The proposed changes (or the choices already made for 2025 in the PLF 2024) break down as follows:

580 million euros in additional revenue generated by the CO2 penalty [ITM proposal]: by shifting the trigger threshold by 5g, from 118g to 113g, and by increasing by 30% the scale that has remained unchanged for 5 years. This increase is justified by the rise in transaction prices observed for all private vehicles sold over the last 3 years, so that the unit amounts of the tax do not fall in proportion to the purchase price of the vehicles.

690 million in additional revenue generated by the weight tax: by including rechargeable hybrid vehicles from 1800kg (measure decided in 2023) and triggering the scale at 1550kg for all other engines – except electric – [ITM proposal]. ITM insists on the need for multi-year visibility over 6 years for the weight penalty, with a reduction in the trigger threshold of 50kg per year until 2030 to create a signal likely to guide manufacturers’ offerings, which are built up over several years.

410 million in additional revenue generated by revising the mileage scale (which cuts across a number of tax mechanisms such as actual expenses, reimbursement of mileage allowances, etc.) [ITM proposal]: by eliminating the use of the vehicle’s tax rating to determine mileage expenses. This variable currently subsidises the use of heavy, powerful vehicles. The ITM is proposing to retain only a scale based on the energy of the vehicle to encourage the use of electric vehicles.

250 million euros in additional revenue generated by a review of the specific taxation of B100 and NGV [ITM proposal].
The ITM considers that the logic of encouraging B100 through dedicated taxation does not contribute to increased decarbonisation in a context where the incorporation of 1G biofuels is limited to 7% of energy in Europe and a fortiori in France. ITM also recommends aligning the taxation of fossil CNG with that of B7 diesel, as it does not offer any added value in terms of decarbonisation. At the same time, this measure would encourage the switch to bio-NGV, particularly for uses that do not have electrified solutions for doing without fossil fuels.

120 million in additional revenue generated from taxes levied on electricity (including CTA, TLFCE, TICFE and VAT).
This is simply the additional revenue generated by the increase in the number of electrified vehicles on the road.

40 million in additional revenue generated by taxes on the use of vehicles for economic purposes (ex-TVS ) [measure voted in 2023].
This additional revenue is linked to the end of the exemption for simple hybrids and plug-in hybrids in 2025. The TCO of simple hybrid vehicles will remain more advantageous in 2025 despite this abolition.

570 million reduction in VAT and ex-TICPE revenues.
The decarbonisation of transport should naturally contribute to a fall in fuel consumption, resulting in a drop of half a billion euros in TICPE and VAT revenues on fuels.

In the end, all of these factors have the potential to generate additional revenue of €1.5 billion in 2025 compared with 2024, justifying retaining at least the same amount of funding as in 2024, i.e. €1.5 billion, for the greening of vehicles.

Proposed adjustment to maintain expenditure on greening at the same level as in 2024

The ITM considers that the social leasing initiated in 2024 has proved its usefulness. It reinforces the need to produce competitive B-segment electric vehicles. Thanks to a new offer that is beginning to appear in this area, it will be quite possible to achieve a significant increase in the volumes involved in 2025 for a State support of €600 million. The ITM therefore considers that aid of €6k to €7k per vehicle is necessary and could be sufficient to achieve monthly payments of €100/month on B-segment vehicles. The need for manufacturers to meet the CAFE 2025 targets presents an interesting opportunity to make electric vehicles available at a negotiated price that is compatible with a social leasing deployment objective.

Furthermore, as the SGPE has pointed out, the decarbonisation of road transport also requires moderation in vehicle size. ITM is therefore proposing that the bonus should be conditional on an unladen kerb weight of less than 1,950kg. This adjustment, combined with the maintenance of the eco-score and the €47k price limit, would leave a budget of €530m for the ecological bonus, maintained at €7k for deciles D1 to D5 and €4k for deciles D6 to D10.

In 2025, the unit aid set for LCVs could be maintained at €3k, and the amount of aid for two-wheelers would also be kept at its current value of €900. The bonus for quadricycles with zero tailpipe emissions would be increased to €2,000, with a view to developing the range. This would result in expenditure of €180 million for LCVs and €100 million for two-wheelers and quadricycles. The conversion incentive would be retained, but reduced to €90 million, to focus solely on electric vehicles.

In the end, all these adjustments would leave a greening budget of €1.5 billion. A €1 billion scenario would mean abolishing the conversion premium, cutting aid for LCVs by a factor of 3, and halving the €4k aid for private vehicles in deciles 9 and 10. These effects would be deleterious and risk setting a precedent at a time when manufacturers need to maintain a high level of sales of zero-emission vehicles in order to meet the new CAFE standard in 2025. It should be remembered, however, that this target has been known and anticipated by manufacturers for more than 5 years.

Lastly, it should be noted that the energy saving certificate scheme needed to support the sale of zero-emission HGVs will need to be topped up by €190 million in 2025, in line with the reporting period for HGV CO2 standards from mid-2025. These sums should enable a sustained transition to battery-electric HGVs, with the aim of achieving a share of zero emission vehicles in registrations of more than 5% by early 2026. As this mechanism is financed by energy saving certificates, it does not come under the State budget and is therefore not considered in the quantifications below.

Non-budgetary levers to be used in parallel to accelerate the greening of fleets

The ITM points out that in order to meet the targets for greening vehicle registrations, it is perfectly legitimate to use more coercive measures for company fleets. In this sense, the ITM supports the measures aimed at reviewing the ambition of the greening quotas as recommended in the Adam bill. Accounting rules for depreciating private company vehicles could also play a significant role. In 2024, a massive number of company tax exemptions will be granted for the purchase of internal combustion vehicles. Revising the depreciation categories and corresponding emission limits could have effects comparable to what Belgium has observed in its sales, without initially having a negative impact on State budgets. Lastly, a review of the benefits-in-kind mechanism also seems to be of major importance for the issue of greening corporate fleets, which in 2024 will still be lagging far behind sales to private individuals.