Electric car subsidies largely benefit ‘rich’ Tesla and Jaguar drivers

Erasmus School of Economics

A large part of the car subsidies for electric cars has ended up with wealthy Dutch Tesla and Jaguar drivers’. Moreover, the run on this subsidy leads to a setback of hundreds of millions of euros. Peter Kavelaars, Professor of Fiscal Economics at Erasmus School of Economics, gives his opinion in BNR Nieuwsradio about the news that almost half the 25,000 electric cars bought in the Netherlands in 2018 were Teslas and Jaguars with a price tag of €80,000 to €120,000, according to the Dutch daily newspaper de Volkskrant. The paper bases its claims on answers to MPs’ questions given by tax minister Menno Snel in parliament on Tuesday 29 January.

The Dutch government is aiming for that in 2025 50% of the newly sold cars are equipped with an electric drive line and plug and that at least 30% of them - which means 15% - are fully electric. By 2020, the ambition is that 10% of newly sold passenger cars have an electric drive line and can be charged. That by 2020 75,000 consumers drive electric vehicles, of which 50,000 used cars and 25,000 new vehicles.

According to Kavelaars, it does indeed sound a bit unsatisfactory that society is paying taxes to let wealthy people drive in expensive electric cars. ‘However, some reservations could also be made. As electric cars are in general more expensive cars anyways, and that normally those non-electric expensive care have more CO2 emissions, it is a nice bonus if this CO2 emission can be converted into driving electric. On the other hand, if the government wants to have as many people as possible driving in electric cars, the subsidy should end up with the lower prices cars. That is where the emphasis should lie.’

The news in de Volkskrant refers to the system prior to 2019, according to Kavelaars an improvement has been made to the system as of this year. ‘A maximum has been set on one of the subsidies, car expenses allowance (autokostenforfait), in terms of the car price. As this is set on 50,000 euros, it does no longer cover very expensive cars. Now, the first part will at a low additional tax rate and above the maximum the normal additional tax rate will apply.’ However, Kavelaars is of the opinion that this is not yet the solution. ‘There are still other subsidies, and the question is whether all in all this is not too much and if it could be used more efficiently.’