Economy
AI
Estonia's Auto Tax Sparks EU's Worst Car Market Collapse
New vehicle registrations in Estonia plummeted by nearly 49% in 2025, the most severe drop in the European Union, as a controversial auto tax decimated sales across all fuel types and pushed smaller dealerships toward insolvency.
- —Estonia has recorded the most significant drop in new car registrations among EU countries in 2025, with a nearly 48.6% decrease compared to 2024, totaling approximately 13,000 new vehicles.
- —The decline in Estonia's new car market is attributed in part to the impact of auto taxes, which have led to a 11% drop in the combined turnover of vehicle sellers and caused significant hardship for smaller dealerships.
- —Across all segments in Estonia, registrations fell sharply: gasoline cars by over 57%, diesel by approximately 73%, hybrid by over 40%, and even electric vehicles saw a decrease of about 34%, contrasting with growth trends in most other EU countries.
- —The Estonian government is collecting nearly 84 million euros in auto taxes from car owners in 2026, with the tax structure including a registration fee and an annual tax based on vehicle age and engine power, which has undergone several revisions.
Recap
Estonia's auto market downturn is a direct consequence of a fiscal policy prioritizing state revenue over industry stability. The sharp, universal decline across all vehicle types, including electric, reveals the tax's powerful and blunt impact, overriding broader green transition trends. This serves as a clear case study of policy-induced market shock, where smaller businesses bear the immediate cost of the government's financial strategy.