Despite attempts to persuade employees to think greener, the popularity of the company car continues unabated in Belgium. But while companies may not be buying less, they are certainly buying differently, as fleet managers respond to cost and sustainability challenges.

The continuing rise of the company car

The company car has always been big business in Belgium. Unlike a lot of their European counterparts, Belgian companies will still often offer a company car solely as a means of income, even if not required for the job, to avoid the high tax burden levied on a typical salary.

Like many other European countries, car registrations in Belgium nosedived at the beginning of the pandemic – dipping by 93% – but the market has shown signs of a slow but steady recovery, with the  year-on-year gap in sales narrowing.

As it stands, Belgium is the 24th-placed country in ranking of 137 countries based on number of vehicle registrations.

The share of company cars in Belgian car sales rose from 53% to 57% in 2019 – the fifth increase in a row – and company cars now make up around 20% of the total car fleet in Belgium.

No longer the exclusive privilege of senior management, the company car is firmly established as the entitlement of lower management and workers, and was described in 2020 as ‘democratized’ in Belgium, by Michel Martens of automotive importers’ Febiac.

This could all be set to change, however.  Belgium also enjoys an unenviable reputation as one of the most congested countries in the world, ranking 27th out of 28 EU countries for time spent in road congestion.

Faced with the fact that Belgians lose more than an entire working week sat in traffic each year, the government has introduced a number of measures designed to challenge the perennial popularity of the company car.

A move to mobility

The ‘Cash for Car’ scheme, introduced in January 2018, allows employees to exchange their company car for a cash payment, taxed at the same rate as the company car.  Although this means higher tax rate payers reduce their tax liability, the scheme has not proved popular.

More than a year after its launch, SD Worx, the payroll service provider for a third of privately-employed Belgians, reported no more than 142 employees who had signed up.

While ‘Cash for Car’ has had limited impact on company fleets, however, other government initiatives are proving more effective at persuading employees to go green.

In April 2019, Belgium became the first country in Europe to adopt a legal framework for mobility budgets.

Under the new scheme, employees receive an annual mobility budget equivalent to the annual cost of their company car which they can spend on a replacement ‘green’ car, mobility alternatives and/or a cash payment.

Such flexible rewarding is becoming increasingly popular with the Belgian workforce. It is helping to support the move to greener cars as employees choose more economical and smaller EVs, freeing up further budget to spend on alternative mobility solutions such as an electric bikes, car pooling or public transport.

Employees can even use the surplus budget to finance the rent or mortgage of a house within 5 km of work, with any remaining budget paid out in cash at a special tax rate of 38.07%. Due to the emerging trends and changing external factors, companies are reviewing their salary packages and mobility approach. They are introducing innovative and flexible rewarding plans and alternative mobility solutions.

Keen to be green: Investing for electric

The new Belgian government has included in its coalition agreement that all new company cars will be ‘greenhouse gas-free’ i.e. electric, by 2026.

New tax rules introduced in January 2020 have successfully pushed up the total cost of ownership of petrol and diesel cars and sharpened the focus on electric alternatives.

Fuel costs are no longer 75% deductible, but are subject to the same deduction limitation as other costs for a car, depending on the CO2-emissions, making running costs for combustion engine models much higher.

Having been on a slow but steady growth trajectory, from 1.9% in 2014 to 5.2% in 2018, sales of all electrically chargeable vehicles (including hybrids) more than doubled in Belgium from January to September 2020, rising from 12,383 in the same period 2019 to 26,480 – a 114% hike.

Companies are increasingly reviewing their car policies to analyse which diesel and petrol models could and should be replaced by electric equivalents and what other greener mobility solutions they could offer their employees.

To meet this increased market demand, more electric car models are being introduced every month with the BMW X5 eDrive plug-in hybrid (PHEV) leading sales, followed by the locally made Volvo XC40 PHEV and the Tesla Model 3.

The Flemish Minister of Mobility, Lydia Peeters, is investing 30 million euros in 30,000 extra EV charging points over the next five years. A fast charging station will be built every 25 kilometres along the major traffic routes, adding significantly to the 3,920 public charging points and 96 public fast charging points already existing in Flanders.

In a recent report, “Future of Mobility – A New Deal for Mobility in Belgium”, Deloitte predicts that by 2030, nearly a third (31%) of all mileage driven in Belgium will be shared, and that nearly 20% of all passenger cars will be electric.

With the future now looking a lot greener for Belgian fleet managers, the evolution from a traditional car policy to an e-mobility policy is posing many challenges from the initial analysis of which vehicles to replace, through to roll-out and implementation.

Tax set to get more taxing

Another core challenge facing Belgian fleet operators in 2021 is the increasing complexity of vehicle taxation.

From 1 January 2021, the NEDC value will be replaced by the corresponding WLTP value in tax calculations for all new cars.

As this figure is likely to be up to 25 per cent higher (because the new test is longer and more rigorous), fleet managers can expect correspondingly higher vehicle taxes and may need to adapt car policies by raising the allowed CO2 limit to allow employees access to the same number of vehicle options.

The move also provides a good opportunity to move to more all-electric vehicles or plug-in hybrid models. Given the devastating economic impact of the pandemic, cost control remains one of biggest challenges facing fleet operators in Belgium and the lower fuel running costs and vehicle taxes of greener models will offer fleet managers significant cost savings in the long run.