Driv­ers can bud­get for CO2

Finweek English Edition - - Openers - FRIK ELS frike@fin­week.co.za

TREVOR MANUEL AP­PEARS TO have stolen a march on the world’s leaders in green­house gas emis­sion reg­u­la­tions and stan­dards in Europe and Asia in his re­cent Bud­get. The pro­posed new emis­sions tax on mo­tor ve­hi­cles – to be im­ple­mented in March 2010 – is broadly in line with the Euro­pean Union’s reg­u­la­tions. How­ever, the EU’s tar­geted emis­sions stan­dards for ve­hi­cle man­u­fac­tur­ers has a due date of 2012.

It’s also the sub­ject of fu­ri­ous de­bate be­tween the man­u­fac­tur­ers, which see it as too oner­ous, and the EU au­thor­i­ties. The Euro­pean tar­get set for new ve­hi­cle CO2 emis­sions is 130g/km in 2012 and 95g/km by 2020. Some 17% of global CO2 emis­sions can be at­trib­uted to road trans­port.

In Manuel’s Bud­get ve­hi­cles with emis­sions of 120g/km at­tract no ad val­orem ex­cise duty tax. It’s mainly small en­try-level ve­hi­cles that achieve emis­sions be­low 130g/km: pre­mium per­for­mance ve­hi­cles and SUVs typ­i­cally sit above 200g/km.

Mike Rud­man, au­to­mo­tive leader at con­sul­tants Price­wa­ter­house­Coop­ers SA, says: “South African man­u­fac­tur­ers take their cue from their par­ent com­pa­nies in Europe and Asia. Ve­hi­cles aren’t de­signed and spec­i­fied in SA and this is the first SA-spe­cific leg­is­la­tion on emis­sions. And it has def­i­nite cost im­pli­ca­tions.”

The Na­tional As­so­ci­a­tion of Ve­hi­cle Man­u­fac­tur­ers of SA will be en­gag­ing Na­tional Trea­sury on the im­pact of the new taxes ahead of their im­ple­men­ta­tion date. As is the case in Europe, the big ques­tion is whether SA’s emis­sion stan­dards ap­ply to the av­er­age in a man­u­fac­turer’s en­tire range, spe­cific brands or mod­els or even spe­cific de­riv­a­tives. The im­pli­ca­tions for the per­for­mance of ve­hi­cle man­u­fac­tur­ers such as Mercedes-Benz, BMW – and even more so for a brand such as Hum­mer or Jaguar – are po­ten­tially huge. It’s even been spec­u­lated Porsche’s “takeover” of Volk­swa­gen is in part prompted by the new stan­dards: the think­ing be­ing if man­u­fac­tur­ers are al­lowed to av­er­age emis­sions Porsche will ben­e­fit by tak­ing into ac­count the many small cars VW man­u­fac­tures. Ve­hi­cle man­u­fac­tur­ers such as PSA Citroën and Fiat are al­ready far ahead of the Ger­man com­pa­nies in meet­ing EU tar­gets, with av­er­age emis­sions of around 140g/km ver­sus 180g/km.

Con­cur­rent with the in­tro­duc­tion of SA’s new green ve­hi­cle tax, ad val­orem ex­cise du­ties on lux­ury ve­hi­cles have been re­duced (see ta­bles). For SA’s mo­torists buy­ing a new ve­hi­cle cost­ing be­tween R300 000 to R400 000 with CO2 emis­sions of around 180g/ km the im­pact will be neu­tral (if, in fact, the tax is ap­plied to in­di­vid­ual ve­hi­cles). The new en­try level Mercedes-Benz C-Class – SA’s sec­ond best-sell­ing passenger ve­hi­cle in Jan­uary – in­tro­duced last week would fall into that cat­e­gory. It’s the first ve­hi­cle un­der Merc’s BlueEf­fi­ciency ban­ner (a range of tech­nolo­gies to re­duce fuel con­sump­tion and lower emis­sions) to be launched in SA and re­places the pre­vi­ous C-180 Kom­pres­sor at the same price: R314 000.

How­ever, many ve­hi­cles in the lux­ury and per­for­mance seg­ment – es­pe­cially SUVs – could at­tract higher taxes. For ex­am­ple, a topend Range Rover Sport 4.2l V8, with a price tag of R865 000 and CO2 count of 374g/km, would at­tract a net tax in­crease of al­most 5%.

On the other hand, the du­ties on the hy­brid Lexus RX400h SUV, priced at R661 000, will de­crease by 1% – thanks to it­sCO2 fig­ures of 193g/km.

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