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How the motor industry has reacted to Budget 2021

From within the Irish auto industry, there has been varying reaction to Budget 2021 – which is worth €17.75bn, the largest giveaway in the history of the state!

Covid-19 related supports, survival defences, and recovery planning initiatives account for a lot of expenditure, but far from it all.

What is exercising many in the auto industry is the delivery of the expected €7.50 increase in carbon tax. Legislation has been provided in the Finance Bill to increase the tax every year by €7.50 up to 2029, and by €6.50 in 2030 to achieve €100 per tonne of carbon dioxide.

This has added to the current retail price of petrol and diesel to rise as of last night. This carbon tax increase is expected to raise €108m for the Exchequer in 2021.

The planned increases over the next decade are part of Ireland’s contribution to the fight against climate change. The Minister for Finance Paschal Donohoe yesterday announced €27m has been made available for tackling climate change through investment in carbon reduction schemes.

A 2021 allocation of €15m will support up to 750 taxi and hackney drivers in scrapping their older vehicles and replacing them with zero-emission capable electric alternatives. The scrappage scheme will be open for taxis and hackneys reaching their maximum permissible age limit in 2020/21.

Up to €20,000 will be made available for eligible drivers switching to a new all-electric vehicle and up to €32,500 for those moving to a  wheel chair accessible full electric vehicle.  The roll-out of dedicated EV Taxi Recharging Points will also be stepped up to support the transition of this key sector, helping to encourage the wider vehicle transition and supporting cleaner air in Irish cities and towns.

In addition, the Department is providing the necessary funding to the NTA to enable it to waive annual vehicle licence renewal fees for 2021.

The Irish Car Carbon Reduction Alliance (ICCRA), which represents the majority of new car dealers, states that the Budget 2021 changes to Vehicle Registration Tax (VRT) are “anti-motorist, anti-rural and anti-climate”, and likely to lead to an increase, rather than a reduction in car carbon emissions.  

Denis Murphy, ICCRA spokesperson said that no other sector has been hit with such sweeping tax hikes, which he described as an unjust attack on the sector and the thousands of livelihoods it supports. “Today’s hikes are a disproportionate response given that cars account for just 12 per cent of the emissions in Ireland.”

Mr Murphy said that the changes in the VRT bands will mean price hikes on many popular family models. “Penalising motorists for driving conventional cars is not going to lead to an increase in Electric Vehicles. Rather than incentivising the wide scale adaption of newer, more carbon-efficient cars, people are going to hold onto their current car for longer, resulting in hundreds of thousands of older less carbon-efficient models remaining on Irish roads for years to come.

He added: “With Covid-19 having decimated the new car market and with Brexit on the horizon only adding to uncertainty, the tax increases further threaten the future of the motor sector Ireland. The Ministers for Finance and Public Expenditure and Reform both spoke today about protecting jobs in small and medium enterprises and creating some certainty in these uncertain times. Yet, they have proceeded to do the exact opposite with the retail car sector in Ireland. Jobs will be lost and livelihoods devastated by their decisions.  We will now consider what options are available to us including legal avenues to challenges this.”

The Society of the Irish Motor Industry (SIMI) director general Brian Cooke as also had his say on Budget 2021: “In the context of the current economic climate, Covid, Brexit and an already depressed new car market, the Industry is disappointed with the increase in VRT announced in Budget 2021.

“Overall, the changes to the VRT system result in an average €1,000 increase on the price of a new family car. This will make the new car market even more challenging for next year, reducing demand and slowing down the replacement of the oldest cars in the national fleet with newer lower emitting cars, which in turn will make it more difficult to drive down emissions.”

Toyota Ireland meanwhile has welcomed the introduction of the new tax bands.  Steve Tormey, CEO of Toyota Ireland, which predominantly sells hybrid cars, said: “I welcome the introduction of the new tax bands for passenger cars proposed in today’s budget.

“They clearly indicate the future policy direction for Government, whereby motorists will now be increasingly rewarded for purchasing lower emitting vehicles, such as hybrid and electric, while paying more if opting for higher emission vehicles, such as diesel. We see the new VRT system as a positive impact on the car market for 2021, by giving consumers clarity about Government intentions for car purchases.”

“This budget is, I believe, a statement of intent from the Government of its increasing commitment to delivering policy led behavioural change in the National effort to meet reduced CO2 and NOx emission targets. It incentivises motorists, in a very practical manner by reducing the purchase price, to opt for lower emitting vehicles and in so doing provides them with a realistic opportunity to play their part in delivering improved air quality in our communities.”

Mr Tormey added: “While we recognise society’s move to full electrification there’s no silver bullet. Hybrid electric vehicles offer the best choice for the majority of consumers who want to pay less tax but aren’t yet ready to move into full battery powered electric cars for practical reasons. Thus, the recognition in today’s budget for the critically important role of hybrids in the new car mix, as part of the transition to zero emissions.”

Businesses hit by Covid-19 could get up to €5,000 per week

The new Covid Restrictions Support Scheme (CRSS) is being introduced for businesses that have been damaged by the pandemic restrictions. Payments of up to €5,000 per week will be available.

The scheme will operate while Level 3 restrictions or higher are in place, as part of the current Government plan.

Currently, the auto industry is excluded. However, if higher levels of restrictions are brought in, other sectors may qualify.

The sectors that qualify from the start of this new scheme are the decimated accommodation, food and the arts, recreation and entertainment businesses.

The level of payments that qualifying businesses will get will be based on the average weekly turnover that a business has done in 2019. Again, a business will have to show that their turnover has been very negatively impacted.