Daily Management Review

Denmark loses interest to electric cars


Denmark, the pioneer in renewable energy, has lost interest in electric vehicles Last year, the country’s government cancelled tax benefits for electric cars, and right after that their sales in the country collapsed. Now the government intends to return tax breaks for a short while.

Nicolás Boullosa via flickr
Nicolás Boullosa via flickr
Denmark is considered one of the world's leaders in the clean energy development. And yet, it is in the Danish market where electric cars feel particularly bad. As follows from the report of the European Association of Automobile Manufacturers on the market’s state in the first quarter of this year, sales of electric vehicles collapsed at once by 63.5%, while all major European markets are showing a reverse trend (growth of almost 30%). Moreover, the current decline is only a continuation of what began last year.

The reason for the decline lies in the Danish authorities’ decision on gradual abolition of tax incentives for the electric car market. Automotive taxes are unusually high in Denmark. When buying a car, a Dane must pay a vehicle registration tax of 105% for cars valued at DKK 79 thousand and 180% for cars more expensive than this amount. Until last year, the only exception to this rule were electric vehicles or cars with a hybrid engine. There was a zero tax rate for them. Manufacturers of conventional cars were outraged by the unequal rules, and the new Danish government that came to power in 2015 agreed and decided to equalize the market. In January 2016, the authorities introduced a tax on the sale of electric vehicles. Since then, the tax’s volume has been gradually growing (currently it is 40% of a car's price). The reaction was immediate. Tax breaks for electric vehicles have been greatly reduced. As a result, the market crashed in the first quarter of last year, and only 221 electric vehicles were sold, as opposed to almost 2.5 thousand a quarter earlier. For the first three months of 2017, only 85 recharged cars were sold in the country. Head of the Alliance of Electric Vehicles of Denmark, Laerke Flader believes that the new tax regime has "completely destroyed the market", and admits: consumer behavior shows that it is "price really matters" - not different kinds of beautiful thoughts about protecting nature.

Aware of the severity of the consequences, the Danish government decided to adjust its plans for electric vehicles. However, there is no obvious logic in its actions. According to the government's plans, the current 40 percent tax on electric cars will be cut by half. However, from the middle of 2019, a 40% rate will be returned, and if the experiment with a reduction in the tax rate proves successful and the number of electric vehicles purchased in the country reaches 5,000 before 2019, then they will refuse the policy again. As for the future of electric vehicles in Denmark, it looks sad. In 2020, buyers will pay 65% of a car’s price to the treasury, in 2021 - 90%, and in a year the amount of the electric car tax will be equal to any other type of car. Then, many experts believe, it will be possible to speak absolutely definitely about the death of the Danish electric vehicle industry, which, for a moment, appeared 20 years earlier of Tesla cars.

The first Danish electric car, Hope Whisper, was introduced to the general public in 1983. And two years later, the authorities decided to exempt electric vehicles from a new car registration tax, which had been levied and taxed until now on all other types of vehicles. Nevertheless, the number of cars sold with electric motors did not change due to banal lack of an acceptable model range among manufacturers and, of course, problems with the infrastructure. By 2009, the country has sold less than 500 electric vehicles. After that, the government adopted a program to promote electric vehicles, which were to be recharged at the expense of energy received from renewable sources. Sales have really increased dramatically. For example, 1616 electric vehicles (including hybrid brands) were sold in 2014, and in 2015 dealers managed to sell more than 4600 cars of this type. In 2015, Denmark was one of the five countries with the largest market share of recharged vehicles (2.29%). The leader in this area was Norway, where such cars in the same year occupied almost 23% of the market, and in the past - 29.1% (according to the website HybridCars.com). The Norwegian authorities do not intend to change their procedures (there is also a program to stimulate sales of electric vehicles), as other Scandinavian countries - Sweden and Iceland do not intend to do. As a result, Denmark will be the only Scandinavian country not included in the top five world leaders.

source: bloomberg.com