Selling vehicles to private companies in Luxembourg has become increasingly difficult, as many businesses are diverting funds to other priorities. The country’s car industry is drawing a mixed mid-year picture for 2025, shaped by the transition to electric mobility, the revised eco-incentive schemes, and changes in the taxation of company cars.
Particularly in the private sector, signs of strain are evident. RTL reached out to the Federation of Automobile Distributors and Mobility (FEDAMO) for insight.
According to Philippe Mersch, President of FEDAMO, while the annual Autofestival had a strong turnout earlier in the year, activity in showrooms has since slowed considerably. He noted that a significant proportion of newly registered vehicles this year – over a quarter – are fully electric, a positive development that puts Luxembourg ahead of many neighbouring countries. However, he warned that the upward trend in electric vehicle registrations is losing momentum, with numbers now levelling off rather than continuing to rise.
Mersch pointed out that the real difficulty lies in corporate sales, traditionally a key driver of the automotive market. He explained that many companies appear more cautious than in the past, potentially lacking the financial means or prioritising other investments. For once, it is actually the private consumer market that is proving more stable, a situation he described as unusual, as fleet sales have historically sustained the sector.
He also highlighted the broader economic environment, which remains fragile in certain industries such as construction. In some branches of the private sector, turning a profit has become genuinely challenging, Mersch noted. Recent changes in taxation have also played a role, particularly those affecting company vehicles: since the beginning of the year, only electric models are now fiscally viable for business fleets.
According to Mersch, this shift has not been easy for companies to adapt to. Many businesses are still hesitant to automatically switch to electric vehicles for their company fleets, and as a result, many vehicle renewals are being reconsidered or postponed altogether, he said.
The operational leasing segment has seen a 20% drop over the past two years. Despite this, company cars still account for nearly half of all vehicle registrations in the country.
FEDAMO welcomes the continuation of eco-incentives, even if they have been reduced since last autumn. The federation also supports the introduction of subsidies for second-hand electric vehicles, which it sees as a helpful boost to that segment of the market. Mersch also noted that since the start of this year, the number of used electric cars being re-registered has shown a clear increase compared to the previous year.
Looking ahead, the EU’s ban on new internal combustion engine vehicles from 2035 remains a critical milestone. Mersch stressed that it would be important for industry players to receive clarity on whether this date will be upheld or postponed by the European Commission, as it would greatly influence strategic planning.
While the recent US tariff measures have not yet had a tangible impact on Luxembourgish car distributors, Mersch acknowledged that the poor performance of the European car industry as a whole is a worrying sign.
Finally, he raised concerns that brand contracts with dealerships are becoming increasingly strict and restrictive, a trend that many distributors view with growing unease.
