The Arithmetic of Electrification

Misleading Numbers

The European EV transition has a headline problem and a maths problem. The headlines say 19%. The maths says 2.2%. Both are correct. Neither tells the full story.

In 2025, battery-electric vehicles captured 17% of new car registrations in the EU — or 19% including Norway and Iceland — up from 14% in 2024. The share hit a record 25% in December 2025. In January–February 2026, it held at 19%, with France reaching 27% and Germany 22%. Transport & Environment declared the transition "on track." ACEA reported the market share with quiet satisfaction. The press wrote about tipping points.

But the EU does not drive new cars. It drives a fleet of 260 million registered passenger cars. Of those, battery-electric vehicles totalled approximately 5.8 million at the end of 2024 — roughly 2.2% of the fleet. Include plug-in hybrids and you reach perhaps 5–6%. Even Sweden — one of Europe's most electrified markets, where plug-in vehicles were 61% of new registrations in 2025 — has reached only 15% of its total passenger car fleet in plug-ins (BEV + PHEV combined). Germany, the continent's largest car market, crossed 2 million BEVs in early 2026 — impressive as a milestone, but that is 2 million out of approximately 49 million registered passenger cars. Roughly 4%.

The EU sells about 11 million new cars per year, still well below pre-pandemic volumes. At 19% BEV share, that means roughly 2 million electric cars flowing annually into a pool of 260 million. The average car on EU roads is 12.3 years old and rising. The fleet turns over with glacial slowness. Even at current growth rates, EVs will not reach 20% of the fleet — the cars actually driving on roads, the thing that determines what you see on the motorway — until the mid-2030s at the earliest.

And that assumes the current sales trajectory holds. It will not. Here is why.

The Corporate Fleet Illusion

This is the dirty secret of EU EV sales. Corporate fleets — company cars, dealer registrations, and short-term rentals — accounted for 58% of all new car registrations in the EU in late 2025. Private buyers were just 42% of the market. This is not a fringe phenomenon. It is the market.

EVs are massively over-represented in the corporate channel. In Belgium, 89% of new BEV registrations in 2025 were company cars. In Portugal, corporate buyers accounted for 84% of BEV purchases. The reason is not environmental conviction. It is fiscal optimisation. Benefit-in-kind tax treatment in Belgium, the Netherlands, and several other member states makes electric company cars dramatically cheaper than combustion equivalents — for the employer. The employee often has no say in the matter; the fleet manager selects the vehicle, the tax code determines the incentive, and the headline BEV statistics inflate accordingly.

When Belgians spend their own money — the roughly 172,000 cars purchased by private individuals in 2024 — just 10% were electric. Nine out of ten private buyers still choose combustion or hybrid. This is not ignorance. This is a revealed preference — millions of informed consumers weighing range, charging access, resale uncertainty, and total cost of ownership, and arriving at a conclusion the state refuses to accept.

The pattern is not uniquely European. In the United States — with cheaper energy, deeper capital markets, and a more flexible labour force — the same mandate-to-wreckage pipeline has produced the same results. GM's Factory Zero cut to a single shift. Ford laid off 1,600 workers at a brand-new battery plant in Kentucky and converted it to manufacture batteries for data centres. Hyundai's EV sales fell 50% after federal incentives expired. Industry analysts predict a wave of supplier bankruptcies in 2026. Brussels or Washington, the mechanism is identical: the state directs, industry obeys, the consumer demurs, the bill arrives.

This distinction matters enormously because the corporate channel is the one most vulnerable to policy reversal. Belgium is already tightening company car BIK rates. The deductibility of combustion-engine company cars is being phased to zero by 2028 — which looks like it accelerates the transition but actually just front-loads demand that would not exist without the tax wedge. When the fiscal pressure reverses — and it will, because the revenue base from fuel excise is eroding — the corporate incentive structure that drives the BEV headline numbers will weaken. Private demand will need to carry the transition.

The data says it cannot.

The Taxation Time Bomb

Road taxes, fuel excise duties, and VAT on fuel represent 5–8% of total government revenue across EU member states. Every EV on the road is a car that pays zero fuel excise. This is a structural fiscal problem that worsens with every BEV sold — and it is happening in countries that are already running deficits and carrying debt loads that leave no fiscal margin.

Belgium levies excise of roughly €0.60 per litre on petrol. Add VAT at 21% on everything (including on the excise itself — yes, Belgium taxes the tax). Total government take from a litre of petrol is approximately €0.93, or about 52% of the pump price.

Consider a Belgian driver doing 15,000 km per year:

Petrol car tax revenue to the state: 15,000 km at 6.5 L/100 km = 975 litres. At €0.93 in taxes per litre = ~€907/year.

EV tax revenue to the state (current): 15,000 km at 18 kWh/100 km = 2,700 kWh. Belgian electricity is already ~40–45% taxes and grid levies. Estimated tax take: ~€400–450/year.

Government shortfall per EV: ~€460/year. For a single car. Now scale it.

Germany collected €35.1 billion in energy tax (Energiesteuer) in 2024 — of which €15.3 billion came from petrol and €18.2 billion from diesel. Add the emissions trading system (€18.5 billion), KFZ-Steuer (~€9.5 billion), VAT on fuel (~€15 billion), and VAT on vehicle purchases, and the total automotive-related tax take exceeds €70 billion per year — roughly a fifth of federal tax revenue.

France collects approximately €25 billion per year from the TICPE alone. A CEPR study using French Treasury data projects that full road transport electrification would reduce excise tax revenue by €30 billion — offset by only €3 billion in additional electricity tax revenue. A net fiscal hole of €27 billion per year. For a country running a deficit of 5.8% of GDP, this is not a rounding error.

Belgium is smaller but proportionally just as exposed. Fuel excise alone runs to roughly €3.5 billion per year. Add VAT on fuel, registration taxes, and annual road tax, and the total automotive-related fiscal take is estimated at €8–10 billion. The Federal Planning Bureau has separately calculated that the company car regime costs the state €5.2 billion per year in forgone revenue compared to taxing the equivalent as wages. This is the hidden subsidy that makes the Belgian BEV headline statistics possible.

Stack the losses for a scenario in which 50 million EU cars (roughly 20% of the fleet) are BEV — the minimum to claim the transition is working:

• Fuel excise and VAT shortfall: €23–30 billion/year
• Vehicle tax exemptions: €7.5–10 billion/year
• Lost aftermarket VAT and employment tax: €4–6 billion/year
• Annual charging infrastructure and grid spending: €5–10 billion/year

Total fiscal impact: €40–55 billion per year — across Germany, France, and Belgium alone, at just 20% fleet penetration. For context, France's entire 2024 deficit was €88 billion. Germany's was €48 billion. The EV transition, at scale, threatens to blow a fiscal hole comparable in magnitude to half the deficit these countries are already running.

And the offset? Electricity taxes and grid levies from EV charging generate approximately €3–5 billion at that fleet share — less than a tenth of the losses.

The Circular Trap

This is the arithmetic that nobody in Brussels wants to name.

Governments will close the fiscal gap described above. They have no choice. But the only way to close it is to shift the tax burden from ICE vehicles to EVs — through km-charges, electricity surcharges, registration fees, or road pricing. Every euro of lost ICE revenue that is recovered from EVs directly increases the cost of owning and operating an EV. The very act of closing the fiscal hole destroys the running cost advantage that was supposed to justify the transition in the first place.

Let us do the arithmetic that the EV industry prefers to skip.

As of March 2026, petrol in Belgium costs €1.80 per litre. Household electricity runs at €0.35/kWh — already 254% of the world average and 172% of the European average, making Belgium one of the most expensive places on earth to charge an electric car. Public DC fast charging costs €0.55–0.65/kWh (Fastned, Ionity, TotalEnergies). Some operators charge above €0.70/kWh during peak hours.

A typical petrol car consumes 6.5 L/100 km. A typical EV consumes 18 kWh/100 km in real-world conditions — considerably more in winter with cabin heating (22 kWh/100 km is common at 5°C).

Current running costs per 100 km:

• Petrol car: 6.5 × €1.80 = €11.70
• EV, home charging: 18 × €0.35 = €6.30
• EV, public fast charging: 18 × €0.60 = €10.80
• EV, public fast charging in winter: 22 × €0.60 = €13.20

The EV advantage is almost entirely a home-charging story. On public fast charging, EVs are already within 8% of petrol in summer — and more expensive than petrol in winter. For anyone without a private garage and a home wallbox, the "cheap to run" promise is already false today, before any tax correction.

Now model what happens when governments close the fiscal gap.

Scenario A — Electricity surcharge on EV charging (€0.17/kWh extra):

• Petrol (unchanged): €11.70
• EV home: 18 × €0.52 = €9.36
• EV public: 18 × €0.77 = €13.86

Home advantage shrinks from 46% cheaper to 20% cheaper. Public charging becomes 18% more expensive than petrol.

Scenario B — Km-based road charge (€0.03/km — the slimme kilometerheffing):

• Petrol (unchanged): €11.70
• EV home + km charge: €6.30 + €3.00 = €9.30
• EV public + km charge: €10.80 + €3.00 = €13.80

And km-charges in Belgium would likely include congestion and time-of-day surcharges — Brussels rush hour could reach €0.05–0.08/km, pushing the effective cost well above petrol.

Scenario C — Full tax parity (matching the €907/year revenue per car):

If the government simply wants €907/year from an EV driver doing 15,000 km, that is €0.06/km, or €6.05 per 100 km in road tax.

• EV home + full tax: €6.30 + €6.05 = €12.35/100 km
• Petrol: €11.70/100 km

At full tax parity, the EV becomes more expensive to run than a petrol car — even with home charging. Even with a more efficient drivetrain. Because Belgian electricity is among the most expensive in the world, and the running cost "advantage" was always a tax subsidy in disguise.

The first private buyers to get burned will be apartment dwellers relying on public charging who bought an EV thinking it was "cheaper to run." In Belgium, with its apartment-heavy housing stock in Brussels, Antwerp, and Liège, a huge proportion of people cannot charge at home. For the company car driver on BIK, none of this matters today because the company pays. But that is exactly the subsidy that is unsustainable.

Here is the doom loop:

The consumer who bought the EV because it was "cheaper to run" discovers that the cheapness was a temporary tax holiday, not an inherent property of the technology. The company that leased the EV fleet because of BIK advantages discovers that the BIK regime is being tightened. The manufacturer that retooled its factory discovers that the demand evaporates when the subsidy does. And the government discovers that taxing EVs to fill the fiscal hole suppresses the adoption that was supposed to generate the environmental benefit that justified the subsidies in the first place.

Every actor in the system is rational. The system itself is incoherent.

The Grid That Isn't There

The EU is not energy-rich. It is energy-dependent. And the grid is not ready for what is being demanded of it.

Wind and solar generated a record 30% of EU electricity in 2025 — overtaking fossil fuels (29%) for the first time. That is real progress. But gas generation actually rose 8% in 2025 because hydro output fell — pushing the EU power sector's gas import bill to €32 billion, 16% higher than the previous year. Price spikes drove wholesale electricity increases across 21 EU countries. The EU agreed to ban Russian gas imports by end of 2027, but new dependencies on US LNG have emerged — replacing one form of energy blackmail with another.

The intermittency problem is structural. Solar produces nothing after dark — precisely when people come home and plug in their cars. The EU needs at least 60 GW of battery energy storage by 2030. Current capacity is a fraction of that. And the infrastructure investment required — grid reinforcement, transformer upgrades, battery storage at scale — is measured in hundreds of billions of euros and decades of construction.

Nuclear — the only proven technology for reliable, low-carbon, weather-independent baseload — tells a story of dramatic divergence.

France deserves genuine credit. Its fleet of 56 reactors generating roughly 70% of the country's electricity is one of the great industrial achievements of the 20th century. French industrial electricity prices remain well below the EU average. The parc nucléaire is the reason France can talk credibly about electrification at all. But even France's story illustrates the fragility: corrosion shutdowns in 2022 cut output to a three-decade low at exactly the wrong moment. Flamanville took 17 years instead of 5 and came in at triple the budget — because France went two decades without building a reactor and the supply chain atrophied. Six new EPR2 reactors are planned. They will not deliver power until the mid-2030s.

Belgium only repealed its nuclear phase-out law in May 2025. The new coalition aims for 4 GW of new capacity and has extended Doel 4 and Tihange 3 — but restart is not expected until November 2026 at the earliest, at a cost of €15 billion in waste liability transfers. New-build nuclear: no technology selected, no site chosen, no ground broken. Meaningful new capacity: 2040 at the earliest.

The Netherlands planned two new reactors by 2035. In February 2025, the environment minister told parliament that this is "not realistic." No site has been chosen. Realistic timeline: 2040+.

Germany closed its last three nuclear reactors in April 2023 — functional, paid-for, low-carbon baseload — and replaced it with gas and coal on the margin. German industrial electricity prices are now among the highest in Europe.

The political mood has shifted pro-nuclear since 2022. But mood is not megawatts. The EV transition is being mandated on a timeline that assumes the electricity is already there. For most of Europe, outside France, it is not.

The China Contrast

While Europe debates, China builds. The contrast explains much of why China can electrify on a timeline Europe structurally cannot match.

In 2025, China commissioned 78 GW of new coal-fired power capacity — the highest annual total in a decade. Construction began on an additional 83 GW. China now operates 1,243 GW of coal capacity with a further 501 GW under development. Simultaneously, it installed 315 GW of solar and 119 GW of wind, and approved 10 new nuclear reactors in a single State Council decision, investing ¥200 billion (~€27 billion) across five sites. China now operates 58 nuclear reactors (approximately 57 GW) with 33 more under construction — nearly half of all nuclear reactors being built globally. Its draft 15th Five-Year Plan targets 200 GW of nuclear by 2035. The entire EU nuclear fleet is 96 GW and shrinking.

The strategic logic is simple: you cannot electrify an economy on intermittent power alone. So China builds everything — coal, nuclear, solar, wind, storage — simultaneously, at scale, without the ideological purity that forces European policymakers to choose one at the expense of the others.

The coal build-out is not about burning coal. It is about insurance. In 2024, the Chinese government established a capacity payment mechanism — explicitly rewarding developers for adding backup capacity. More than 100 billion yuan ($14 billion) in capacity payments were made to coal plants. Many already run at barely 50% utilisation. Coal generation actually declined in 2025 even as new capacity was commissioned. China is building a grid where renewables carry the base load and coal plants sit idle and ready — ensuring that no drought, no supply chain disruption, no geopolitical crisis can create the kind of energy shock that brought Europe to its knees in 2022.

Credit where it is due does not mean blind admiration. China's nuclear programme missed its own 14th Five-Year Plan target of 70 GW — actual capacity reached approximately 62 GW. The safety regulator had just 1,100 employees as of 2020, a fraction of the US NRC's workforce. The coal overcapacity carries its own long-term costs — utilisation projected to fall to 42% if the full pipeline is built. China's model is imperfect.

But it produces cheap electricity. Industrial electricity in the EU averages €0.199/kWh. In China: €0.082/kWh. In the United States: €0.075/kWh. European industry pays 2.4 times what Chinese industry pays. Belgian households pay roughly $0.427/kWh versus $0.077 in China — a 5.5x differential. Every EV charged in Belgium costs 5.5 times more in electricity than the same EV charged in Shenzhen.

Europe has made a series of commitments that have systematically destroyed its ability to produce cheap baseload. A decade of fossil fuel de-investment — driven by ESG mandates, judicial activism, and regulatory pressure — left Europe dependent on imported LNG at spot prices. When Russia invaded Ukraine and gas prices spiked 1,000%, Europe's response was characteristically European: instead of encouraging production, it taxed profits. The EU imposed a mandatory 33% minimum windfall levy. Individual states went further — Slovenia at 80%, Ireland at 75%, the UK at an effective 75%. Not a single European windfall tax led any oil major to increase production. Not one. The European Parliament's own research concluded that windfall taxes reduce investment. Capital moved to the Permian Basin and the Guyanese offshore, where marginal tax rates are dramatically lower. The supply fragility that caused the 2022 crisis was not resolved. It was entrenched.

China looked at 2022 and said: "We will never allow this to happen to us." Europe looked at 2022 and said: "If only we had gone faster on renewables." The distinction is between strategy and ideology.

The Taiwan Question

There is a final arithmetic that connects the EV transition, the energy crisis, and geopolitics. The EU's entire electrification strategy — EVs, heat pumps, grid storage, wind turbines — depends on critical minerals. And China controls the supply chain.

China accounts for 60% of global rare earth mining and over 90% of refining and processing. It holds a monopoly on the separation of dysprosium and terbium — both essential for the permanent magnets in EV motors and wind turbines. For graphite — the primary anode material in every lithium-ion battery — Chinese dependence is even more extreme. In January 2025, China banned exports of germanium, gallium, and antimony to the United States. In October 2025, it imposed export controls on rare earth elements and manufacturing equipment — controls that extend to products made outside China using Chinese-sourced materials.

The IEA warned that these restrictions "could severely restrict the ability of the rest of the world to produce batteries." Ford shut down a production line in June 2025 due to rare earth shortages. European automakers are developing alternative motor designs — BMW and Renault are deploying externally excited synchronous motors that avoid rare earth magnets — but these are years from mass-market readiness.

Now ask the question that connects all of this: what happens if China moves on Taiwan?

The answer is not merely a semiconductor shortage. It is a complete collapse of the supply chain for every technology the EU has bet its industrial and energy future on. No rare earth magnets means no EV motors. No graphite anodes means no batteries. No LFP cathode technology means no affordable grid storage. The 260 million vehicles that Europe planned to electrify cannot be electrified. The grid storage that was supposed to compensate for intermittent renewables cannot be built.

The EU's entire Green Deal rests on the assumption that a geopolitical adversary will continue to supply the materials needed to execute it. China, meanwhile, has spent two decades building integrated domestic supply chains, subsidised by state banks, protected by export controls it can activate at will.

This is not a plan. It is a prayer.

The Pincer

Europe is caught between two failures of its own making.

On the demand side, the EV mandate has produced a two-tier market — corporate fleets driven by tax optimisation, private buyers who overwhelmingly refuse to go electric at current prices. The fleet turns over at glacial speed. The affordable EV does not exist in Europe — and Chinese manufacturers who could provide one are being tariffed out of the market. The running cost advantage is a tax artefact that will be withdrawn the moment the fiscal hole becomes unsustainable. And the moment it is withdrawn, the doom loop activates: taxing EVs to close the deficit destroys the cost advantage that was supposed to drive adoption.

On the supply side, a decade of fossil fuel de-investment has left Europe dependent on imported LNG at spot prices, a nuclear fleet that was systematically dismantled and will take until the 2040s to rebuild, and a renewables infrastructure whose raw materials are controlled by China. The windfall taxes imposed during the 2022 crisis did not produce a single additional barrel of oil. They produced capital flight.

The mandate created the demand. The de-investment destroyed the alternative. The windfall taxes punished the backup. And the critical mineral dependency gave the leverage to the adversary.

Each decision was made for defensible reasons — climate targets, fiscal fairness, strategic autonomy. But taken together, they form a pincer that leaves Europe with the most expensive energy on Earth, the slowest fleet turnover among advanced economies, the weakest supply chain resilience, and the greatest dependence on a single geopolitical actor for the materials it needs to execute the plan it has mandated but cannot afford.

The arithmetic, as always, does not care about the intentions.

Disclaimer

Please note that Gorgorus does not produce investment advice in any form. Our articles are not research reports and are not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

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