Some European Union member states are considering subsidized leasing schemes for electric vehicles in an effort to prop up Europe’s auto industry and promote an equitable transition to clean-driving cars. 

A pillar of the EU economy, the automotive sector’s value chain accounts for more than 13 million direct and indirect jobs and 7% of the EU’s gross domestic product. As recently as 2019, the EU dominated the global auto market. 

Even so, the sector has lost some of its competitiveness, declining by 13 percentage points in market share since 2017. At the same time, Europe’s automakers are investing big in the electrification of their products as China’s low-cost, battery-powered vehicles gain a foothold in the European market. 

Replacing internal-combustion cars with battery-electric ones is essential to fighting climate change. But the transition is also a challenge for automakers facing down a possible slide in demand due to the Trump administration’s barrage of auto-related tariffs. 

“Social leasing,” as the strategy is often called, could be the key to unlocking a policy hat trick by providing low-income or otherwise marginalized consumers with access to zero-emission cars, creating demand certainty for automakers producing EVs, and reducing the carbon imprint of one of the planet’s most polluting sectors. 

Recent Initiatives Show Demand for Social Leasing

Simply put, social leasing schemes offer electric vehicles to low- and middle-income households at subsidized lease rates while creating new markets for the automotive industry by ensuring that the vehicles leased are made domestically. 

According to Transport & Environment, an advocacy organization for clean transportation and energy, millions of Europeans, particularly those living in rural areas, are car-dependent and vulnerable to volatile fuel prices. People driving older, less efficient gas cars are hit especially hard when fuel prices spike. 

France initiated a social leasing program that ran for less than two months at the beginning of 2024. The subsidy targeted commuters, and eligibility was based on income and the number of individuals in a household. The brevity of the program stemmed not from failure but from its success. Some 90,000 applications were submitted, out of which 50,000 orders of battery-electric vehicles (BEVs) were approved. It was so popular that funds were exhausted within six weeks of the program’s launch.

Washington State in the United States ran a similar program last year through its EV Instant Rebate Program. As in France, uptake was enthusiastic. More than 4,000 residents took advantage of the leasing option. Over the course of three months in 2024, Washington’s Department of Commerce offered US$45 million in rebates to lower-income residents to help them buy or lease zero-emission vehicles. Eligible recipients could receive $9,000 to lease a new EV for three years, $5,000 to buy a new EV, or $2,500 to buy or lease a used EV.

Ryan Bird, a director at Energy Solutions, which played a central role in implementing the Washington rebate initiative, says that “the goal was really focused on accelerating equitable adoption of EVs. We wanted a program design that would lower as many barriers as possible.”

The funding was dispersed to 6,200 Washingtonians, and the average rebate was $7,400. Based on the Commerce Department’s calculations, the switch from gas to electric vehicles reduced carbon dioxide emissions by 16,783 tonnes and nitrogen oxides by approximately 5,700 kilograms. The department estimated that more than $18 million was saved in avoided costs associated with air pollutants.

Car dealers saw a welcome bounce in sales during the program’s short life. EV sales rose by 30% for an annual increase of 7% over the prior year. “We’re very pleased with the program’s reception and success,” says Amelia Lamb, a spokesperson with the Department of Commerce, via email. “The funds ran out months before we thought they would, which shows that the demand is clearly there for clean transportation and EVs, if people can get help with starting costs.”

Questions Raised Over Who Benefits From Social Leasing

An investigation by PBS into the Washington rebate program found that the initiative was not entirely trouble-free. The Washington effort struggled to meet its targeted number of vulnerable populations and overburdened communities, according to the PBS account, and some beneficiaries failed to meet the low-income criteria.

Nevertheless, preliminary results from an audit show that more than 90% of recipients were genuinely eligible for the program, which was conducted on a self-reporting assessment system.

Bird notes that there was “incredibly high demand at every incentive level, and particularly among low-income customers,” adding that uptake was “a huge validation of the market potential for EVs throughout the entire market. EVs are not just for rich people; everyone wants to have an EV. Everyone wants to reduce their transportation emissions, wants to have clean air.”

Another knock on the program was that it did not foster long-term access to an electric vehicle among the program recipients. Because the rebate’s largest incentive of $9,000 could be used only to lease a new EV, compared to $5,000 to purchase one, rebates made leasing a more affordable option. But after three years the lease would expire, and the car had to be either purchased or returned.

Bird counters that when vehicles are not purchased by the customer once the lease has ended, the EVs enter the secondary market. “There’s a lot of really great data out there that shows that more vehicles on the secondary market are going to lower the prices for everyone,” he adds. A fact sheet put out by the Commerce Department notes that vehicles coming off leases are a key source of used car inventory.

EU Moves Forward With Lease Subsidies, While U.S. Stalls

In an op-ed published in Euronews, Krzysztof Bolesta, Poland’s deputy minister of environment, and Thomas Pellerin-Carlin, a member of the European Parliament, argue that, over a 10-year period, a social leasing scheme could benefit up to 10 million European families while also increasing the automotive sector’s competitiveness. Furthermore, such a program would stimulate the market for used battery-electric cars. 

By pooling demand among member states, the authors note, as many as one million EVs could be sold in the EU every year for the next decade. The surge in volume would cause unit costs to go down, making the social leasing schemes cheaper.

But while enthusiasm grows in Europe, the future of Washington’s EV rebate program is murky, despite its success as measured by every applicable metric. “It’s an unfortunate situation,” Bird says. “Like other states, Washington is facing a challenging budget situation. A lot of actions at the federal level are creating a lot of chaos for state legislatures and the economy at state level.” 

Bird reports that funding for the rebate effort has been reallocated and there are currently no plans to relaunch the program. “The actions taken by the federal government right now are only increasing barriers to EV adoption, especially for low-income residents. We’ll have to wait and see what’s next. We’re certainly very proud of our partnership with Department of Commerce. It’s just been a really exciting program to be a part of.”

This article originally appeared on Corporate Knights July 17, 2025, and is republished with permission.