The reduction of emissions shoots up the price of cars

The price of new cars has risen seven times more expensive than the Consumer Price Index (CPI) since August 2018. The National Institute of Statistics (INE) collects an increase of 2.25% for new vehicles in this period, which coincides with the entry into force of the new WLTP emissions and consumption measurement test at European level, compared to +0.32% of the general indicator. In the same period, the average price of vehicles has increased by 1,047 euros, to 18,259, according to the Tax Agency.

The entry into force of the new emissions tests in September 2018 forced the registration of a large volume of vehicles, which from September could not be marketed as new. That triggered discounts in July and August 2018, when record enrollment levels were reached. In the following months, however, the new, more demanding test contributed to the increase in average vehicle emissions, with a consequent impact on registration tax.

“In most European countries, including Spain, the registration tax is calculated based on emissions,” explains Stefano Ricci, Head of Spain at JATO Dynamics. The consultancy, specialized in automotive, raises the price of vehicles to 3%, and even to 4% in the case of Premium brands. A rise that has been unevenly transferred to the final price. “The Premium ones have transferred almost all the upload to the client, because it is more receptive, but the generalists have absorbed between 30 and 50%,” says Ricci, insisting that there are great differences both between brands and between models.

The registration tax is levied on vehicles based on the grams of CO2 they emit per kilometer, although most of them are exempt for not reaching, in the tests, the minimum of 120. For emissions between 120 and under 160, 4.75% is taxed, while for those over 160 and under 200 9.75% and 14.75% for those who emit more than 200. Electric and plug-in hybrids, on the other hand, are 100% subsidized.

The Executive of Mariano Rajoy approved a temporary solution, extended in August of last year until 2021, to minimize the impact of the increase. Since the new test is more demanding, the emission values are “corrected” before being applied for the calculation of the tax. Although the solution avoided a drastic rise in prices – up to 20%, according to some estimates – it could not prevent emissions from rising about 6 grams of CO2 per vehicle, according to JATO, which caused many to change their tax bracket. Something that raised the collection of the registration tax by 31% in 2018, also in the heat of the rise in sales of gasoline cars -due to the diesel crisis-, which emit more CO2.

A second consequence of the WLTP is that, by requiring to evaluate each version of each vehicle, it has reduced the commercial offer. That has taken out of the market some urban vehicles, affordable but with little margin of profitability. It has also forced the withdrawal of some engines. It has also increased the standard equipment. “Each option that the customer chooses, such as the electric roof, the value of the car’s emissions will vary. And that adds confusion to manufacturers,” says Ricci. “That’s why the production car comes more equipped, which also makes it possible to justify a higher price to the customer.”

More expensive technologies

The fiscal impact, however, is only one of those derived from the obligatory reduction of vehicle emissions. And it is that in addition to more demanding exams, the European Union has also established more difficult cut-off marks. Manufacturers such as Volkswagen, Seat or Mazda have warned in recent months that, as a result, prices will become even more expensive.

From 2021, the average emissions of each brand will not be able to exceed 95 grams of CO2 per kilometer, when today it is around 120.6. “Such a difference does not recover in three years,” says Ricci. Whoever fails to comply will face heavy fines, which could add, in the most unfavorable case, about 33,000 million euros, according to JATO calculations. “They are more or less 2,000 euros per car,” highlights the expert, an amount identical to that, according to the employer ACEA, the prices of cars will be increased to meet the new objectives.

To achieve this, manufacturers will have to combine in their offer a large number of diverse technologies: from deepening the practice of “downsizing” and the use of turbochargers to improve the efficiency of combustion engines, to extending microhybridization technology (mild-hybrid), and launching new hybrid, plug-in hybrid and electric models. The problem for the consumer’s pocket is that all these technologies have a cost. “The average price of a vehicle with a battery, plug-in hybrid or electric, is 10,000 to 13,000 euros higher than that of its combustion equivalent,” says Stefano Ricci. An extra cost that, for manufacturers, should be minimized with aid plans: “We need an ecosystem that promotes the electrified vehicle. That there is an offer of electric vehicles without people who can access them is useless, “said Mario Armero, vice president of the Employers’ Association Anfac, during a day dedicated to electromobility.

Source: ABC