The future CO2 targets change the conditions of the automobile market in the long term
As part of the IAA, JATO Dynamics invited its customers to the business networking event. This year’s theme: “The Automotive Industry and its CO2 Challenges – is the industry ready for the CO2 emission targets 2020/21 and beyond? First of all, some of the most important aspects of the development from 2020 onwards, the influence of WLTP and the trends for strategy adjustment were outlined. This was followed by an outlook on the situation from 2025 with tighter CO2 limits. And finally, questions about the consequences of vehicle taxation according to WLTP were addressed. Using the example of Finland, where this type of taxation already applies: What happened after September 2018, when the introduction of WLTP led to an increase in average CO2 emissions? What are the effects and findings of WLTP-based taxation? And which countries plan to change their tax system next?
Things are starting to get serious for the automotive industry. The European Union (EU) is demanding that CO2 emissions from new cars be reduced by 37.5 percent by 2030 compared to the base value of 2020/21. This means that the model fleet will then only be allowed to emit an average of 59.4 instead of 95 g/km CO2. This is quite ambitious, however, as the average for the first half of 2019 was still 123 g/km. An interim target of 15 percent CO2 reduction by 2025 has been agreed. But these CO2 targets can be reduced by up to five percent if the proportion of low-emission vehicles (< 50 g CO2/km) is already over 15 percent in 2025 and over 30 percent in 2030. The EU plans to review the targets again from 2023.
Vehicle tax according to WLTP slows down sales in Finland
What are the consequences of a vehicle tax calculated according to the WLTP? We have analysed this using Finland as an example. The Scandinavians have a two-part vehicle tax system: Firstly, there is a property tax based on CO2 emissions. In addition, all vehicles that are not powered by petrol are still taxed according to weight and type of fuel. This may still make sense for heavy vehicles such as SUVs with diesel engines because of high nitrogen oxide or fine dust emissions.
It can be clearly established: The introduction of the WLTP has caused a significant drop in sales in Finland. Between January and August 2018, new vehicle registrations still increased by around ten percent compared to the same period last year. In August they even rose by 24 percent compared to July. Then in September 2018 the crash: minus 28 percent compared to the previous month. To date, the Finnish market has not yet recovered – minus 11.4 percent in the second quarter of 2019.
Eight more European countries with WLTP tax in 2020
This is all the more surprising as the change in the basis of calculation from NEDC to WLTP has led to lower tax rates. For example, while the rate for 115 g/km CO2 emissions was still 18.2 percent in 2016, it is now only 8.6 percent. Some manufacturers who had already calculated their CO2 emissions very accurately after NEDC have benefited. Their vehicles were rated the same or even better after WLTP. This is why Skoda, for example, suddenly sold more Octavia models again, against the trend. Some manufacturers even benefit even more. Despite increased net prices, their vehicles became even cheaper in the final price under the new tax system. That brings more margin. Taxation according to WLTP therefore has its advantages. After Finland, Portugal introduced WLTP-calculated vehicle tax at the beginning of 2019. And at least eight other European countries will follow from 2020.
Want to know more about JATO? This way.