Motor Industry News
Buy now while stocks last? At first glance, the Chancellor's decision to defer the extra £950 first-year road tax on the highest CO2-band cars until 2010 seems like an incentive to go and buy that Range Rover or BMW X5 you've always promised yourself and save a grand in the process. The Chancellor took £1.7bn from road users in his budget.
An SUV sales boom was probably not what Alistair Darling intended by his motoring measures in Wednesday's budget, but there's been a fair bit of rumbling about it on the web. There are even those who think the extra Vehicle Excise Duty (VED) might add to the cachet of certain luxury cars, like a barrier to entry for the plebs.
"There might be something in that for a small minority," says Nigel Wonnacott from the Society of Motor Manufacturers and Traders (SMMT), "Possibly from the same people who welcomed the £25 congestion charge in London. But on a serious note, this isn't a VED change; it's a sales tax that's been bought in under the cloak of environmentalism."
Alistair Darling says that the extra VED charges, which alone will take an additional £735m from motorists (the total budget take from road users is an additional £1.7bn) are a signal to car makers, but Wonnacott has little truck with that. "As if we weren't already getting a very clear message from the EU on this subject," he says. "Does he really think that manufacturers operating on five- to seven-year product lead times are going to completely change direction because of a punitive local sales tax? Not a chance."
As usual, individual car makers distanced themselves from outright hostility to the Chancellor's measures by bigging up their own environmental efforts. "Jaguar and Land Rover are ahead of the Chancellor's stated intent to encourage manufacturers to introduce technology to reduce CO2 levels," said a sniffy spokesman, perhaps forgetting that his company still sells a 2.3-tonne family car that struggles to better 27mpg in diesel form.
Perhaps the industry needs to remember that the addition of six new CO2-based VED bands gets closer to what they themselves have been calling for, which is that each gram of CO2 should be treated equally in terms of taxation. "We do welcome this increase in linearity," says a Vauxhall spokesman.
All the same, the removal of the duty differential on biofuels by 2010 (which saves the Treasury £550m) has been widely condemned by fleet operators and the industry. "This is very disappointing, says John Webb, associate director of fleet consultancy Lex Momentum. "Fleets work to three- or four-year cycles and they need a stable tax regime to make a cost-effective structure."
The Government has blown hot and cold on its support for alternative fuels in the past; disappearing Powershift grants and tax incentives for Liquid Petroleum Gas (LPG) are just two examples.
It would take a brave fleet manager to order a load of ethanol powered cars right now and Saab, which has done so much to get biofuel cars on sale in the UK, is bitterly disappointed. "I fear that the Government has turned its back on biofuels," says Saab GB MD Jonathan Nash.
"This is why petrol-electric hybrid technology is so popular," says John Webb, who in a previous job was responsible for ordering hundreds of hybrid cars for the Inland Revenue. "It's out there, there's no special infrastructure needed and the residuals are good."
But just as the 2p per litre fuel tax increase and the return of an inflation-based fuel tax multiplier have been deferred, so the effects of the budget will be delayed by several years for the vast majority of Britain's motorists. This is because for ever new car sold, we buy three times as many second-hand models, and most of those are former fleet cars.
It's a myth that the public are all hell-bent of destroying the planet with huge petrol engines. More than 60 per cent of BMW sales are of diesel models, for example, and the most popular 5-series variant (46.5 per cent of 5-series sales from January to June 2007) is the 520d that produces only 136g/km of CO2. And Britain's private motorists are buying smaller cars; their wholesale migration into smaller and more economical models at the end of last year held up the total market against all expectations.
It is the UK's fleets that have been slightly slower to react to the environmental tax pressures and successive Labour governments have been determined to reduce their environmental impact. Fleet managers and strategists are still reeling at the Chancellor's surprise change in the write-down allowance threshold for company cars, the percentage of a new car's value that a company can write off against tax.
After widespread consultation with the industry, it had been widely telegraphed that Darling was going to set a CO2 threshold of 165g/km, above which just 10 per cent of the car's value could be written down and below which 20 per cent could be used. In fact the threshold was set at 160g/km and only a foolhardy fleet manager would order 1,000 Ford Focus models that emit 164g/km and could only be written down for 10 per cent of their value, losing millions of pounds in tax rebates.
"This means that fleet managers will be shopping around for the Mondeo that gets under 160g/km," says Ruth Dooley of accountants Grant Thornton. "I think this policy will be successful in driving fleet managers into smaller and more economical cars, because there are so many tax reasons for doing so: benefit-in-kind tax, VED, write-down allowances, fuel allowances and first-year allowances."
If Dooley thinks the changes will work at the big fleet level, with ripples in the private second-hand car market a few years down the line, she is not so certain that the budget will change the habits of Britain's boss class. "The car is still a status symbol," she says, "and with just one or two cars the write-down allowances are not going to be as important. This won't change much at the board level; they'll continue to buy higher emissions cars."
So, just as MPs will neatly circumvent the forthcoming fuel duty rises with their generous mileage allowances, so the bosses will still be drive around in Jaguars. What's that about the rich getting the pleasure and the poor getting the blame?
The Budget: motoring changes at a glance
- Six new VED bands from 2009-10 - including a new top band (M) for cars that emit more than 255g/km of CO2.
- Reduced standard rate, in 2009-10, for all new and existing cars that emit 150g/km or less, and an increased rate on the most polluting cars to £425.
- Extended zero rate of VED, during first year of ownership, to all new cars that emit 130g/km or less, from 2010/11.
- First-year rate for all new cars that emit between 131 to 160g/km equal held to the standard rate in 2010-11.
- A first-year rate of £950 in 2010-11 for the most polluting cars.
- Duty differential for biofuels abolished in 2010/11.
- Company cars with CO2 emissions above 160g/km will attract 10 per cent Writing Down Allowance (WDA) and cars with emissions of 160g/km or below will attract 20 per cent WDA.
- Planned April fuel duty increase of 2p per litre deferred until October 1.
- Main road fuel duty rates will rise by 1.84p per litre on April 1 2009, and by 0.5 pence per litre above indexation on April 1 2010.
Story produced by mycarcheck.com from an article in the Daily Telegraph