The Dutch electric car market is in decline. The incentives that are offered now are not so attractive anymore. People are delaying replacing the battery electric vehicles (BEV) they got a few years ago with lavish incentives until those incentives wear out since there is hardly any financial incentive to get a new BEV today. There are also not enough usable models for the market of company cars.
Most electric car markets in Western Europe show huge growth. But the Dutch electric car market could not reach the same market share as it did in 2020. It declined to 19.8% compared to 20.5% in the previous year. In absolute numbers, it was far worse. In 2020, there were 72,858 BEV sold; in 2021, that number was only 64,027, or a drop in volume of nearly 14%. That the drop in market share was only 0.7% was due to the comparable drop in the sale of cars with a tailpipe.
While most countries are increasing their incentive schemes to get more BEVs on the roads, the Dutch are lowering their incentives to a point where gasoline and diesel cars are more attractive than electric cars. The Dutch BEV incentives are mainly for the company cars. That is about 60% of the new car market. There is a small incentive for private car buyers, but that was too insignificant to play a role in 2021.
The incentive for company cars is a fixed income tax break for 5 years based on the year of registration and the price of the car. That incentive for new sales (registrations) is lowered each year. In 2020, it provided a deduction of taxable income by a maximum of €6,300 per year for 5 years; in 2021, by a maximum €4,000/year; and in 2022, by a max €2,100/year. This makes cars registered in 2021 more valuable than the same cars registered in 2022.
Until Christmas, the sales of cars were at a normal level for a December month. Between Christmas and New Year’s Eve, a time of low activity in other years, the threat of EU CAFE fines changed that. Twice the number of registrations occurred during this last week compared to the first three weeks of December. For companies that did not reach the mandatory average for CO2 levels, each extra BEV that was registered lowered the fines by €15,072. A few brands dumped a huge number of cars on lots to register them in 2021 but then sell them in 2022. Likely over 10,000 cars were pre-registered in the last days of 2021, avoiding over 150 million euros in fines. The same thing happened in 2020, even more so. That overhang of unsold, pre-registered vehicles caused very low registration totals in the first half of 2021. The Dutch sales numbers were already skewed because of the yearly decline in incentives. Now it is even worse because of the EU fines.
A company car is normally replaced after 3 years. Thus, a company car from 2018 is replaced in 2021. A company BEV from 2018 can lower one’s taxable income by as much as €27,000/year. Replacing it with a 2021 model with only €4,000/year in taxable income deduction is not very attractive. There were over 20,000 BEV company cars eligible for replacement in 2021. For about 60,000 company cars leased in 2019, eligible for replacement in 2022, the incentive numbers are €9,000 and €2,100. Less frequent replacement of the cars is not what the car industry is wanting, but at least it is great for the environment.
Another reason for stalled BEV growth is the lack of BEV options in the market segment with the most potential demand for them.
It is often said that Europeans drive on average only 8,000 miles per year. But the average car is 10 years old. Carmakers do not make 10-year-old cars. They make and sell new cars.
The 60% of new sales that are company cars are used for both private and professional use. These company cars are often used over 20,000 miles per year. Many of those miles are to visit customers, sometimes half a day driving away. The market segment that was receiving the most help from the 2021 incentive was the segment with models below €40,000. Most of these models just do not have enough range for many professional drivers. Spending half an hour at Fastned at the end of the working day is really not attractive.
The incentive is now addressing about 30% of the total market. It is only the lower half of the company car market. Smaller cars like the VW ID.3 and Peugeot e-208 still have an incentive that is attractive for the lower paid employees that drive them. But the range is too big of an obstacle for many. The very popular mini cars that were often the first new cars for junior employees now have electrified versions, like the VW e-Up! and Renault Twingo Z.E., but they are frequently unusable as company cars.
For the more expensive models with longer range, the incentive is now ignorable. They have to compete with BMW and Audi diesel models. The diesel models are winning on price and usability, the BEVs are winning on driving quality and doing the right thing.
Looking at it this way, about 70% of the market is without a compelling option or a financial incentive. BEVs still have 20% of the total market. This means that people are willing to do something extra for the environment and to fight the climate crises. Only, not too much, and not when it is significantly more expensive and creates a daily burden. BEVs are more expensive, and charging, when not done at home, is a recurring burden.
The prospects for 2022 are better. There is less competition from registered but unsold 2021 cars. There are new models with more range and competitive price coming. The penalty for replacing the 2019 company car with a newer model is a lot smaller than it was in 2021. This will also make a lot of cars available in the used car market. And last but not least, the incentive for private purchase of a BEV in 2022 of €3,350 is available for 21,000 BEVs. In January, about 8,500 people already applied for this subsidy.
With all of these electric car sales drivers, I expect a recovery of the Dutch market to at least 120,000 BEVs in 2022.
P.S. The company car incentive of €10,500 taxable income reduction is for 240,000 potential BEV sales available. The Netherlands is a company and company–employee tax heaven — that is very clear.
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