According to fresh figures, the size of the illegal e-cigarette market in the EU has reached €6.6 billion, with one in two products failing to qualify for tax treatment.
According to the head of the study, head of risk analysis at Fraunhofer IIS Institute Uwe Veres-Homme, the key task was to determine the real scale of the vape industry. “We encountered a problem: there are practically no official statistics on the shadow market. So we had to build an econometric model that compares the demand for e-cigarettes in Europe and the actual supply volumes through international trade,” he said.
The results showed a significant gap between official imports and real consumption, which allowed us to estimate the scale of the illegal segment. Almost half of the European vape market is outside the regulatory system, with 35% entirely classified as illicit trade and 13% as unapproved or untaxed goods.
The vape market in Europe is no longer a niche market
According to the study, 3.1% of EU residents over the age of 15, or about 11.9 million people, use e-cigarettes, and this share is growing. At the same time, the distribution of demand by country is extremely uneven: while in Portugal the share of users is only 0.5%, in Estonia it reaches 8.8%, in France – 7.4%, in Latvia – 7.9%. Germany and the Netherlands are at the lower end of the average range with 2.2%. The largest markets in terms of expected total demand are France, Poland, Italy, Germany, the Netherlands and Spain.
This geography of demand is superimposed on an even more variegated fiscal map. Several countries have no excise taxes on nicotine liquids, while others have quite high excise taxes. For example, in Hungary the rate is €0.09 per milliliter, in Greece €0.10, in Lithuania €0.63, and in Slovenia €0.70. Such a difference automatically creates an economic incentive for re-exports, cross-border purchases, undervaluation and other schemes to circumvent the rules. It is this heterogeneity within the EU that becomes one of the structural reasons for the growth of illegal trade.
Another peculiarity of the vape market is its huge assortment. Experts note that about 470 thousand different products – devices, cartridges and liquids containing nicotine – have already been registered in European registries. At the same time, more than 1 thousand different ingredients are used in the composition of liquids, some of which are of unclear origin and status. Control over the composition of fillers in many countries is weak, especially for products sold via the Internet or parcel trade.
The geography of production is also problematic. According to the study, about 90% of e-cigarette imports to the EU come from China, with 70% produced in Shenzhen, the world’s largest center of the vape industry. Officially, there are about 700 registered vape manufacturers, but actual estimates from Chinese sources suggest about 11,000 enterprises.
Ironically, China’s regulation of flavors for e-cigarettes is much stricter than in Europe. Many flavored products are banned for the domestic market there, but are actively produced for export.
Vape logistics cannot be controlled
The vape logistics system is comparable in scale to the largest e-commerce flows. The European Commission estimates that in 2024 alone, about 800 million parcels will be sent from China to the EU countries. Many of them contain e-cigarettes and related products. In Belgium, for example, customs services process up to 4 million parcels every day. Even relatively small and prosperous Switzerland receives about 500,000 parcels from China every day.
According to MRU spokesman Horst Manner-Romberg, such a scale precludes meaningful control. “No customs office in the world is physically capable of checking millions of parcels a day. The checks are carried out randomly, which means that a huge volume of goods pass through the system without detailed control.”
The main supply routes are sea and rail logistics. About 30 million containers of sea transportation pass through the largest European ports – Rotterdam, Antwerp and Hamburg – every year. At the same time, railroad communication is also developing: only in 2024, about 20 thousand container trains arrived from China to Europe, which is almost 30 thousand containers per week.
In fact, e-commerce and international delivery have become for the vape market what offshore schemes are for tax optimization. Illegal goods no longer necessarily take clandestine routes. It often moves through the same channels as legal, in the same boxes, through the same operators, only with a different set of documents, a different classification or a different tax status. In this sense, Fraunhofer’s study defines the shadow market not as classic smuggling of the old type, but as a product of the global supply chain, where the line between legal and illegal goods is not drawn by container, but by regulation.
Logos Press note: These processes are of direct importance for the countries neighboring the EU, including Moldova. The Republic of Moldova has had a ban on online trade in e-cigarettes and related products since 2022. The law was adopted to limit the access of minors to such products and to strengthen control over the market. However, in practice, most of the illegals have moved to social networks. Today, sales are carried out through Instagram and Telegram channels, without any interference from the authorities. The lack of effective control in online commerce, as well as limited opportunities to check parcels at customs, create conditions in which the black market develops in parallel with the official sector. In fact, the situation in Moldova reflects a broader European problem – the growth of cross-border e-commerce and the difficulty of regulating a rapidly changing market.
What is the solution proposed by experts
According to the authors of the study, a set of measures is needed to solve the problem. Among them – unification of regulatory rules in Europe, creation of a single system of tracking shipments, as well as digital registration of producers and export batches of products. In addition, control should start already at the level of the countries of production, primarily in China.
According to analysts’ estimates, the vape segment will continue its growth. In the coming years, the market may exceed 10 billion euros, and the annual growth rate is estimated at 5% to 12%. This means that without systematic regulatory measures, the share of the illegal sector will increase.
That is why the authors of the study call on European governments and regulators to tighten control. In their opinion, it is not only about tax losses of the states, but also about product safety and protection of consumers, especially young people – the main audience of the e-cigarette market.
