Denmark Planned Tax Increase For BEVs Scrapped — Hurray!
Tax Increase For ICEVs Scrapped Too — What?
While not getting anywhere close to Norway, or even Sweden, electric vehicle sales in Denmark have in fact increased, and 2019 is on track to be the first record year since 2015. Fully electric vehicles (BEVs) have risen to 4,618 sales in 2019, while plug-in hybrids have risen to 3,623. We will just be looking at BEVs for the remainder of this story.
Up until 2015, BEVs where exempt from registration taxes in Denmark, and sales where climbing steadily, primarily due to the first real-world, long-range, pure-electric vehicle, the Tesla Model S. The government at the time considered this a threat to the comfortable yearly income of about DKK 50 billion ($7.4 billion) it received in taxes from internal combustion vehicles, so a scheme was implemented over a handful of years to gradually increase tax levels of BEVs to the same levels as internal combustion engine vehicles (ICEVs). That started in 2016, and the BEV market crashed accordingly.
Tesla CEO Elon Musk had visited the country in September 2015 and warned that this would happen, and then he went on to visit Norway…
The Good News
This year, we were well into the new tax scheme, but since cars with a price tag below DKK 400,000 ($59,000) are still exempt (e.g., the base Tesla Model 3 SR+ can be acquired for DKK 373,000), sales seemed to grow slowly. However, the tax rate was meant to double beginning in 2020 from the current 20% to 40% of ICEV taxes, and here are some examples from the Danish Motorist Association (FDM) on what that would do to the prices of the more expensive EVs:
A Tesla Model 3 Performance with a current price tag of DKK 505,000 ($75,000) would increase DKK 18,000 ($2,700), a Tesla Model 3 Long Range Dual Motor with a current price tag of DKK 457,000 ($68,000) would increase DKK 4,500 ($670), and a Tesla Model X Long Range with a current price tag of DKK 823,000 ($122,000) would increase a hefty DKK 104,000 ($15,500). Jaguar, Audi, and Mercedes where looking at similar high-end price bumps on their electric vehicles.
I am not at all sure if this would have been a problem for the cheaper crowd of BEVs about to hit the market, like the Opel Corsa-e, VW ID.3, and Peugeot e-208. Furthermore, current offerings like the BMW i3, Renault Zoe, and Nissan Leaf would probably be fine. But Tesla would take a hit on the high-end models for sure. Note: we do want to promote cheap BEVs, but the signal of increasing BEV taxes at all poses a problem in my opinion.
But look and behold, the plan has just been scrapped! The government’s national budget for 2020 was finalized this week, and it maintains the current 20% tax rate and DKK 400,000 limit. What this means in the short term is that the growing trend of BEV sales should continue, except of course for the few who rushed to buy a high-end BEV this year to be safe, since this will probably skew sales a bit in favor of 2019.
Also, a government placed commission is now getting to work figuring out how to completely revamp the passenger car tax system in the country, and hopefully this will result in a technical/environment/emission-based tax system instead of the current primarily value-based tax system.
The Bad News
So, now we can all cheer about the news that these increasing taxes have been scrapped, right? Not so fast. You see, in order to get rid of the BEV tax increase, a planned increase in ICEV taxes is scrapped too. Actually, according to dr.dk, it was not a planned increase per se, but an unintentional consequence of the failure to implement an agreement from 2017 that should have favored long mileage on ICEVs, but it capped tax increases across the board. For technical reasons (that I’m sorry to say I have no chance of understanding), this failure means that ICEVs would all have had a tax increase in the beginning of 2020. Examples from the Danish ministry of taxes:
A Volkswagen Golf with a current price tag of DKK 298,000 ($44,000) would increase DKK 6,000 ($900), an Audi A5 with a current price tag of DKK 537,000 ($80,000) would increase DKK 5,600 ($830), and a Volvo XC90 with a current price tag of DKK 1,025,000 ($152,000) would increase DKK 8,400 ($1,250).
Increases not as hefty as the BEVs would have suffered, but still. Now that these increases will not happen, the signal is very unfortunate: Planned to buy a fossil fuel burning car, did you? Go ahead! Don’t let anyone stop you!
The Real World
However, I get out there in the real world every day, and the signals I’m getting from ordinary people are unambiguous: If at all convenient (we’re not at possible yet), they will consider a BEV. So, my message to all of you out there driving any kind of electric vehicle: spread the word, answer questions diligently, be humble, give rides, and if you’re brave enough, let people know that cobalt is also used in fossil fuel refineries, not just batteries.
Even setting all talk of climate change aside, when the global consensus emerges that BEVs simply are better and cheaper (in the long run), it’s the end of ICEVs. Let’s get this done, before the Danish government gets any more funny ideas, except from the highly anticipated legally binding climate law due before Christmas, which will be a make or break for the 2030 emission targets.
All images and graphs by the author
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