Proposed changes to VRT relief on electric vehicles counterproductive to climate objectives

Volkswagen Group Ireland says proposals by the Department of Finance’s Tax Strategy Group (TSG) governing Vehicle Registration Tax (VRT) relief for electric vehicles will have a negative impact on long-term climate goals.

Changes put forward by the Tax Strategy Group would abolish the €5,000 rebate for BEVs costing more than €40,000 and impact BEVs priced in excess of €30,000. If adopted, these measures would eliminate incentives for the vast majority of electric cars*. For instance, the price of a Volkswagen ID.3, the most popular BEV in the country last month, would rise by €2,926.

Volkswagen Ireland’s ID.3 and ID.4 account for 33% of BEV sales in 2021 year-to-date. Brand Director Rodolfo Calixto, said the proposals would have a negative impact on emissions.

He said: “For the second successive year the government seeks to increase the level of VRT on new cars, including fully-electric vehicles, despite ignoring the industry’s advice to replace the current ageing fleet of vehicles with Battery Electric Vehicles and newer lower emitting combustion engine vehicles.

“Volkswagen support the Paris Climate Agreement and efforts to reduce the environmental impact of vehicles. In Ireland, we are the leading brand in terms of BEV sales YTD in 2021 and welcome the rapid electrification of the Irish fleet. However, we strongly believe these proposals will have a negative impact on total fleet emissions.”

Globally, Volkswagen Group has committed more than €73bn to the development of electrification, hybrid powertrains and digital technology through to 2025.

The Climate Action Plan, which aims to have more than 900,000 electric vehicles on Irish roads by 2030, acknowledges that sales of cleaner internal combustion engine (ICE) vehicles will be critical to achieving its targets. Ireland currently has the oldest passenger car fleet in Europe with 900,000 cars more than 10-years-old**.

By raising the VRT rate on passenger cars with CO₂ emissions above 100g/km, and forcing motorists to hold on to older, more polluting vehicles, the Government is undermining its ability to reduce total emissions. Under the TSG proposals, car prices would increase by around €1,294 on average***.

SEAT and CUPRA Ireland Brand Director Niall Phillips says price hikes will impact consumers and are counterproductive to “greening” the fleet.

He said: “Under the current proposals, the price of a popular family car like the SEAT Tarraco would increase by €2,820. The limited consultation between the Tax Strategy Group and the motor industry has resulted in tax proposals that will hamper our ability to persuade customers to change to lower C02 cars and electric vehicles. We need measures that encourage uptake of efficient vehicles and help us achieve the long-term ambitions of the Climate Action Plan.”

Damien O’Sullivan, Brand Director for Audi Ireland, said the proposed measures “deter rather than encourage” customers to make the transition to more efficient vehicles. 

“Audi has dedicated €12 billion of global investment through to 2024 to develop a wide range of EV products. Achieving the Climate Action Plan’s electric vehicle targets requires growth in the overall new car market between now and 2030.

“Cleaner, lower emitting petrol, diesel, hybrid and electric vehicles will play a crucial role in greening the fleet. The transition to a 100% electric car fleet will be an incremental journey over a number of years. In the meantime, we need clarity regarding the Government’s approach to cleaner technologies and renew our ageing fleet.”

*Figures from the Society of the Irish Motor Industry (SIMI) estimate 70% of BEVs currently on sale will experience price increases under the TSG proposals.
** Data from the Society of the Irish Motor Industry (SIMI) shows there are more than 900,000 vehicles on Ireland’s roads aged 10-years or older.
***Figures from the Society of the Irish Motor Industry (SIMI) show price increases of €1,100 on petrol, €1,449 on electric vehicles and €1,866 on diesels under the proposed VRT rate changes.