WLTP makes vehicle taxation very complex

The introduction of the WLTP test procedure in September 2018 caused quite a stir. Although the date had been set for a long time, new cars could not be delivered to customers for weeks because recalculated consumption and CO2 figures were not yet available for numerous model variants. This is a prerequisite, as in some European countries vehicle taxes are levied according to emission levels. The result has been a slump in sales, for example in Finland.

But the consequences are much more far-reaching than they appear at first glance. WLTP may result in even more costs. JATO Dynamics has therefore examined the vehicle taxation currently in force in various countries and analyzed the various directives and possible effects for manufacturers, dealers or leasing companies.

Small change – big impact

Every new vehicle sold in Europe has its own WLTP value. But any change to the standard version of this model – for example through the choice of options – can have a direct impact on CO2 emissions. A trailer coupling or panoramic roof, for example, increases the emission value by around 2 g/km of CO2. Therefore, each change to the vehicle specification must be calculated separately. In addition, WLTP may affect national taxation in Europe – including sales, ownership or company car taxes. Since each country has its own tax regime, manufacturers and leasing companies have to constantly pay attention to the national changes that may occur for their models and fleets.

For example: the CO2 emissions of an average gasoline vehicle (120 g/km CO2, 5.3 l/100 km, 1,400 kg total weight, 20,000 euros) increase by 5 g/km when larger rims and a panoramic sunroof are fitted for 1,000 euros, while fuel consumption rises to 5.5 l/100 km and weight to 1,450 kg.

What does this mean for taxation under WLTP? Here is a comparison of four countries:

GERMANY
In Germany, the new price of the vehicle would only increase by the price of the extras, but without additional taxation of the option. The annual vehicle tax would be 11 euros higher. This calculation applies to a vehicle with a 1.5 liter gasoline engine.

FRANCE

In France, no additional tax would be due on the vehicle because its CO2 emissions are below 133 g/km. Only at an emission value of 133 g/km, the tax for the purchase of the vehicle increases by 50 euros, for each additional gram another 25 euros are added.

IRELAND

In Ireland, the tax on the purchase of the vehicle increases by 107 euros due to the options. With the additional options worth 1,000 euros, the total price is therefore 21,107 euros. Special feature: taxation in Ireland increases more sharply with higher CO2 emissions. While an increase in emissions from 120 to 125 g/km raises taxes on the purchase by 107 euros, an increase from 170 to 171 g/km on the same vehicle would mean a tax surcharge of 126 euros right away – just for that one gram.

NETHERLANDS

Our neighbors already charge a whole 3,146 euros in CO2 taxes for the vehicle without the mentioned options. With the extras, another 660 euros would be due. That makes a total of 3,806 euros in taxes for the purchase of the vehicle. Similar to Ireland, the vehicle tax increases with higher emission levels – each gram above 172 g/km costs 432 euros. Diesel owners are hit even harder: for a vehicle that emits more than 77 g/km of CO2, another 83.59 euros per gram is added to the CO2 rate for a gasoline vehicle. This means that if a diesel model is purchased, 515.59 euros in taxes must be paid for each additional gram of CO2 above 172 g/km.

Individual calculation takes time

Considering the infinite number of ways a vehicle can be modified, and with 15 million new cars sold in Europe each year, the problem quickly becomes clear: calculating the individual WLTP value for each vehicle takes time and precision.

For leasing companies, however, having accurate WLTP values that meet their customers’ requirements and their fleet policies is critical to staying in business. And manufacturers cannot compare respective vehicle prices without accurate WLTP figures. But they need them to ensure their vehicles are competitive in every market. Without accurate information, they risk their models not selling and becoming too expensive for their customers.

The text is based on the report “Unpacking WLTP” on CO2-based vehicle taxes in Europe. JATO Dynamics provides individual and combined data on the CO2 emissions content of a vehicle’s individual options and option packages.

More information on JATO can be found here.

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