Nearly half of EU vape market ‘irregular’, €6.6bn shadow sector revealed

Almost half of Europe’s e-cigarette market is made up of irregular products, according to a new study that highlights the growing scale of illicit and non-compliant vape trade across the region.

The research, conducted by Fraunhofer Institute for Integrated Circuits IIS, found that around 48 per cent of the EU vape market originates from irregular sources, including illegal trade and unregulated imports.

The study estimates the value of this shadow market at €6.6 billion (£5.71bn), with projections suggesting it could grow to €10.8bn by 2030 if current trends continue.

Researchers defined irregular products as those that breach tax, labelling or approval regulations, or whose origin cannot be clearly traced. Of the total, around 35 per cent is attributed to illegal trade, while a further 13 per cent comes from private imports of untaxed or unapproved products.

“For the first time, we have succeeded in systematically mapping the irregular market for e-cigarettes in Europe – based on trade and supply chain analyses, customs statistics, and market segmentation,” explained Uwe Veres-Homm, head of risk and location analysis at Fraunhofer IIS. “Our analyses show that around 90 percent of e-cigarettes for Europe originate from China.”

The Chinese city of Shenzhen is identified as the dominant manufacturing hub, producing the majority of the world’s vape devices.

Within Europe, Germany, the Netherlands and Belgium act as key distribution hubs, with goods often moving across borders with limited controls once inside the EU’s single market.

The study warns that the scale of the irregular market is creating multiple challenges for governments, businesses and consumers. Lost tax revenues are a major concern, with Germany alone estimated to have missed out on around €119 million in vape-related taxes in 2024.

Legal retailers and manufacturers are also said to be at a competitive disadvantage, while consumers face increased risks due to the lack of quality controls and regulatory oversight for non-compliant products.

“E-cigarettes from irregular sources circumvent consumer protection, quality controls, and are extremely profitable for manufacturers,” says Horst Manner-Romberg, managing director of MRU Beratungs- und Verlagsgesellschaft mbH, which has collaborated with Fraunhofer IIS. “Price differences within the EU internal market create incentives also for smuggling and re-imports from neighbouring countries and put legal suppliers under enormous pressure.”

The report highlights the role of global logistics and e-commerce in enabling the growth of the sector. Millions of small parcels enter the EU daily, making enforcement difficult and allowing illicit products to blend into legitimate supply chains.

“Vape products reach the EU in standard packages. What looks like harmless shipments adds up to a shadow market worth billions,” says Rico Back, managing partner of SKR AG, which commissioned the study. “The consequences for the economy and society are immense, and logistics is involuntarily at the center of the problem.”

The study cautions that outright bans on e-cigarettes could exacerbate the problem by pushing more consumers toward illegal channels. Instead, they call for coordinated action across the EU, including harmonised product standards, improved tax alignment and greater supply chain transparency.

Among the proposed measures are the introduction of digital tracking systems, such as blockchain-based traceability tools, and closer cooperation with countries of origin to prevent non-compliant products entering the market in the first place.

The study was commissioned by logistics consultancy SKR AG and aims to provide the first comprehensive mapping of Europe’s irregular e-cigarette market, based on trade data, supply chain analysis and customs statistics.