Budget dissected Car makers perplexed by new tax
Frustration at diesel tax hike that sets car makers unattainable emissions standards
Car makers will find it impossible to sell cars that are exempt from the new diesel taxation rules announced in last week’s Budget.
Chancellor Philip Hammond said that any diesel car that meets a certain testing standard, called Real Driving Emissions Step 2 (RDE2), would not be subject to a first-year increase into the next tax band, applied from April next year.
However, in reality, no cars are able to meet that standard because it is not due to be introduced until 2020, meaning car makers have only just started working on the technology to achieve these targets in three years’ time. Even if a vehicle did meet these emissions limits, the certification for RDE2 does not exist, so it is impossible to avoid this new taxation.
RDE2 is the second stage of the new real-world driving emissions tests, the first of which was introduced in September. With RDE standards only being agreed in the summer, car industry sources have told Autocar they are frustrated at the Budget announcement, which creates an insurmountable task for manufacturers.
The move also fails to address the issue of older, more polluting diesel cars. SMMT chief executive Mike Hawes told Autocar: “We know the government wanted to raise revenue to pay for the Air Quality plan. We recognise they didn’t want to penalise existing diesel owners who bought in good faith. But we want to encourage the latest, cleanest diesels.”
He added: “There is nothing in the budget about getting older vehicles off the road.”
The other issue compounded by the additional taxation is CO2 levels. When abandoning diesel engines, many consumers will naturally turn to petrol (rather than electric or hybrid) cars, which have higher CO2 levels. In addressing air-quality issues and focusing so heavily on particulates such as NOX, the government has seemingly abandoned the original issue: CO2 levels. Hawes said the move will hinder “the ability of the industry and government to achieve CO2 limits”.
“The industry needs diesel to achieve CO2 targets, and there is a statutory requirement to reach climate-change targets,” he added.
The Budget added another cost for company car buyers; the diesel supplement on company car tax has been increased from 3% to 4%, based on the same rules around the RDE2 standard.
Other major motoring news from the Budget included the allocation of more money to encourage the uptake of electric and hybrid vehicles. The government will invest £200m in charging infrastructure alongside £200m of private investment.
In addition, £100m will be provided to guarantee the continuation of the Plug-in Car grant to 2020. However, the government stated that this funding will help people buy “a new battery-electric vehicle” rather than battery-electric vehicles and plug-in hybrids like the current scheme. At present, there is a £4500 grant for electric vehicles and a £2500 one for plug-in hybrids.
With petrol/diesel drivers more likely to switch to hybrid than electric cars, the decision could discourage the adoption of alternative fuels.
Hawes said: “There should be additional [funding] for both [electric and plug-in hybrids]. We need to encourage the uptake. There are two factors here: the grant makes the cars more affordable and government money acts as endorsement for this technology.”
Plans to allow self-driving cars without a human behind the wheel on our roads by 2021 were also revealed.