Are new diesel car taxes accelerating dealer migration to Alternative Fuel Vehicles?

The Society of Motor Manufacturers (SMMT) has pinned 2017’s 31.1% fall in total UK sales of new diesel cars (to 57,612) on HM Treasury’s decision to tax new diesel models in Vehicle Excise Duties (VED) changes announced last year. New tax rates brought higher first-year fees for new diesels and replaced subsequent rates with a blanket first year fee of £140 from 4th April 2017.

That's not all: the Chancellor snuck in a new five-year supplement £310 per year for cars costing more than £40,000. This starts in the second year of registration and runs for five years. Hammond added insult to injury for diesel lovers in last Autumn’s Budget, by announcing that from this month, all new diesel cars will be going up a VED band if they fail to meet the latest Euro 6 standards under real-world testing. New cars will have to meet the Real Driving Emissions Step 2 Test.

All this translates into a head on assault on the larger new 4x4 diesel market which has been a mainstay of new sales for many dealerships for years. According to the Treasury's estimates, less than 2m cars will be subject to this VED band jump, though some higher-polluting models like the Porsche Cayenne are expected to see their first year rates go up by £500 and then be hit by the supplement in the second. It’s a double kick in the guts for buyers of larger and more expensive diesel cars. I’ve read about some tax-hit horror stories in which the total increases over the first three years of life for some new diesel cars have risen by over 900%! The VW Passat 1.6 TDI S goes up from £40 to £560 over the first three-years of ownership.

Somewhat counter-intuitively, these changes don’t apply to diesel vehicles already on the road if they were registered before 1st April 2017. If the Government was really trying to reduce damaging pollutants it would not be killing the market for new diesel cars which, if well-maintained and built to the latest standards, have very similar emissions to new petrol vehicles.

No, if you really want to tackle the NOx particulate levels which promote cancer and heart disease, then you’ve got to get old diesel vehicles –those more than eight years old – off the road.  To this end, a new national scrappage scheme, akin to the one that ended in 2010; financed by government and automakers, would be a better way forward. The 2010 initiative offered new car buyers a £2,000 discount if they scrapped a car older than 10 years. This successful scheme generated upwards of 350,000 new car sales at the time. It would be a win-win here – potentially boosting flagging new car sales which interestingly began tailing off significantly from, you guessed it, April 2017; while also boosting new car sales of less-polluting new petrol and diesel vehicle as well as AFVs.

In the meantime, because we are stuck with the impact of this huge tax grab, is it time for dealers to look more seriously at hybrids and AFVs, assuming your OEMs even have a solid enough range of vehicles to offer at the right price (most do not yet)? It’s clearly time for dealerships to begin putting Combustion Engine-to-AFV stock migration plans in place.

This article originally appeared in Car Dealer Magazine