Motoring outlets, especially their sales and aftersales departments, had better watch their weight if a new tax regime is adopted by government.
There is a real prospect of new cars being partially taxed according to their weight and join two other VRT-based tax. Back in September 2023, the Joint Oireachtas Committee on Climate and the Environment suggested applying a weight tax to new registrations (via VRT) at: 1800 kg (the 2022 French level); to include hybrids as well as ICE, but exclude battery electric vehicles (BEV) (for 2024)
It stated that 2021 registration data had suggested a threshold of 1800 kg would affect the heaviest – 10 per cent of new ICE and hybrid sales. It added with regards timing that the measure would not be ready for 1 Jan 2024, and to instead use Budget 2024 to apply from 1 July 2024. It didn’t happen then, but it is report- ed by those that know, to be back on the agenda now.
It also suggested back in 2023 that in follow-on phases in future budgets, the Irish Government should lower the ICE / hybrid threshold and extend to full electric but at a higher threshold (e.g. 300 kg more) than ICE / hybrid to allow for the heavier EV powertrain. It was sending a signal – a flag to buyers that Government will move further against the heaviest & largest new passenger vehicles in the coming years.
Should it be part of the 2025 Budget announcements this autumn, it will put a strain on those selling new cars, for sure. Not least because they could find it difficult to shift current-stock production heavy- weights due to the increased taxation on their large frames. In other words, they would cost more.
It is to be hoped that the industry is given sufficient time to flush current large petrol/diesel/hybrid through the system and order lighter models thereafter.
Maybe, just maybe, after-sales might see a way to doing profitable business with older heavies whose owners opt to steer clear of the new-car market and are looking for repairs to keep their current car fit for purpose.
What if, however, the secondhand market blows cold on SUVs and heavy saloons? Who is to say what kind of environment would prevail for sales and after sales? There is a desire on the part of governments to cut SUV numbers on the road. Here is an opportunity to slow the surge.
Some people in the industry fear there could be a danger of a fall in the value of big secondhand SUVs especially – while brand-new heavy arrivals might need to be discounted to move on until lighter replacements come along if the government doesn’t afford them due notice.
In the short-term it is possible that you could have a double whammy for garages and after-sales outlets left with higher-cost new and lower-value older cars in stock as people look for slimmer, less-costly models. It would take money to discount but it wouldn’t be the first time a dealer had to grin and bear it.
Or customers might go elsewhere and buy electric SUVs. The EVs probably would not be weight-taxed immediately. EVs are often heavier than their equivalent petrol/diesel car due to the weight of the battery pack. So, holding off a weight tax on EVs for a while, would give them a strong advantage.
But as EV sales gain more ground over fading petrol/diesel sales, tax revenues would actually fall given the lower taxation of electric vehicles.
That is hardly likely to last too long. So, the weight tax will then find a new EV home, because it’s all about money.
The prospect of a weight tax looms a little larger, following developments over the past few weeks. The idea of adding weight as another element of vehicle taxation was put forward by the Tax Strategy Group (TSG) government think-tank in its annual report.
They say that a weight-based tax could be introduced as a surcharge alongside the current emissions-based calculations. They would all be rolled into one VRT basket. Effectively it would mean a three- piece suite of current charges for CO2, the NOx surcharge and the weight surcharge.
Strangely quite a few people we spoke to were not aware of such a plan but those who knew were, as you’d expect, less than positive.
One head of sales manager put it simply: “If it means prices going up we don’t want it.”
In the longer term such a development would surely lead to a quicker swing away from internal combustion engines (ICEs) to EVs.
New-car sales figures for the first seven months of the year suggest there is a quickening of pace. What can be gleaned from that other than the obvious is, I think, that very little would tip the steady flow of sales into a stronger current.
That could be especially the case if, as outlined in the TSG proposal, new-EV weight taxation will be more favourable than that for ICEs.
It would undoubtedly take the markets (new and used) a while to settle down. Against that backdrop, and in the normal course of events, you wouldn’t rule out the cost-of-weight being increased as the years go by as a response to partially off-set the widening gap between income from a dwindling volume of ICE vehicles and the steady rise in EV buying.
The TSG said the weight tax would apply to combustion and hybrid vehicles for now. They advocate a phased extension to fully-electric vehicles as the volume of EVs shifts into higher numbers.
Latest CSO figures show that the number of new electric vehicles (EVs) licensed in July increased by 64pc compared with July 2024 (3,973 v 2,421).
That brought the share of EVs among new private cars from January to July last from 17pc compared with 14pc for the corresponding period of 2024.
The combined share of petrol and diesel cars – the one’s most likely to bear the brunt of the proposed new tax regime – licensed from January to July fell in comparison with 2024 (44pc v 56pc/). So, there is already a fair-sized swing to EVs.
Important to note that it wouldn’t take the government too long to set up the system: the weight tax is similar to one currently operating in France and could be introduced in the Budget in October.
The reason for its introduction is simple (isn’t it always?). In a word: money. The TSG says long-term growth in EV sales “will inevitably” mean a reduction in motor tax, fuel excise and VRT receipts in the years ahead. To maintain Exchequer receipts “tax structures must be amended over time in line with the changing vehicle composition”.
TSG quoted data from the International Council on Clean Transportation claims the average weight of passenger vehicles in this country increased by approximately 28pc between 2001 and 2022.
It blames heavier vehicles for traffic congestion, air pollution, road infrastructure degradation/space/safety. Right now, these are the cars being serviced, repaired and checked by families.
They number a lot of cars which, individually, need care constant by after-sales. Should they opt for a new EV 4×4 how with what will the repair shop replace ICE work?
A weight-based tax has been operated in France, since January 2022. Initially they pitched the weight threshold at 1,800kg, with a tax of €10 per kg over this limit. The threshold came down to 1,600kg in 2024. At that stage the rate of taxation ranged from €10 to €30 per kg over the threshold.
The French government will further lower the threshold to 1,500kg by 2026. Full electric cars are still exempt.
The TSG says the French system would be easy to work here as it is designed to cause minimal disruption (except to our pockets) while raking in more cash.
Some dealers and sales people see more taxation on the horizon as yet another challenge to an industry
already heavily laden by tax.
Cathal Sheridan, head of sales at Western Motors, Galway summed up lots of people’s views when he said: “Due to the cost of VRT and NOx, prices are on the rise. They are putting up prices. And people can’t afford them.”
He added: “This is not good news. If it affects pricing we don’t want it.”
Echoing industry sentiment, he warned that it is going to be difficult for many people because the cost to change is growing and growing.
David Kavanagh, director Simon Kavanagh Motors, Enniscorthy told me. “They are talking about punishing the owners and buyers of family SUVs, just like they did back in 2008 (when taxation became emissions based and posh cars such as the BMW 5-series costs thousands less.”
He sees nothing to reassure him of a similar outcome, if and when the new system takes over.
We’ll have to wait what unfolds over the coming weeks but it is such an easy system to set up, it must be seen as a real possibility.
