Autovista chief economist thrashes out EV incentive schemes, as pandemic halts automaker battery plans

However, they should avoid focusing solely on stimulating demand for new cars and other common mistakes such as:

• Up-front, transparent and long-term incentives give the impression that new cars are overpriced without them, and so lower transaction prices of new cars will result in the same happening for used cars. For example, in France many years of a bonus system have depressed the used-car price of battery-electric vehicles (BEVs);
• The German government reduced company-car taxes for plug-in hybrid electric vehicles (PHEVs) by 50% and 75% for BEVs, making them highly attractive as company cars. However, due to a lack of a similar benefit for a used car buyer to choose PHEV over petrol, it is likely they will not meet the same demand;
• Even though government programmes mostly stimulate alternative powertrains, the support which is granted delivers negative spill-overs on all used-car prices. The higher the stimulus is, the higher the spill-over effects become;
• Reducing VAT for used cars directly lowers the signalled retail used car price. For example, Germany implemented this measure for July and December 2020 whereby VAT rates are reduced from 19% to 16%, driving signalled retail used-car prices on internet portals down by 2.52%;
• An exhausted incentive scheme creates a bigger demand gap. Many push the purchase of their vehicle forward because of a scheme, currently observed in France where used-car prices are rising because their purchase is incentivised by the government. There is the risk that further schemes need to follow, as was the case in Italy during and after the financial crisis 2009.

Taking these issues into account, Engelskirchen concluded that the incentive schemes are still a necessity to compensate for an expected loss of private purchasing power as part of the economic crisis. Although, the schemes may result in an oversupply of EVs towards 2022, and due to the schemes being largely targeted towards new EVs, the expected negative impact on residual values is higher for them.

He said: “We are less concerned about pressure building up for used internal combustion engine (ICE) vehicles across Europe, as they receive less attention in government schemes. France is the only counry that substantially incentivises the purchase of used ICE vehicles which effectively compensates for some of the discount-induced pressures.

“Germany’s company car tax benefits may drive too many PHEVs into the market and Germany’s VAT reduction, which covers also used cars, creates a direct reduction of signalled retail used car prices of around 2.5%.”

The UK has not yet adjusted their scheme post-COVID-19, but discussions are ongoing. So far, the UK’s scheme is creating the least risk for RVs.

Engelskirchen has a wealth of experience in the automotive sector, having spent a total of five years working for Autovista Group, initially as managing director consulting & TCO solutions from April 2015, and then gaining the additional role of chief economist in July 2019. He is currently seeking to understand more about how the auto industry will reshape in light of the macro-, microeconomic and disruptive trends it faces,
Prior to this, he was appointed the manager consulting services at EurotaxGlass’s in April 2009 before quickly progressing to director manufacturing and importer products. In total, he spent six years with the company.

Pandemic halts automaker battery plans

The joint venture between Suzuki Motor, Toshiba and Denso has reported it has been forced to delay the first phase of its project to manufacture batteries for electric vehicles (EVs) by a few months as a result of operating and logistical hurdles posed by the pandemic.

With the name Automotive Electronics Power (AEPPL), the partnership is also likely to put plans for a second phase of the project on the back burner for the foreseeable future. According to ET Auto.com – a subsidiary of the Economic Times – reported that this was a result of a lack of well-defined EV policies and a slowing market for such vehicles.

AEPPL stated that the company was “making efforts to achieve commissioning early” although it refused to respond to a question regarding the second phase of the project, said ET Auto.

The joint venture, based in India, is aiming to manufacture and supply lithium-ion batteries to Maruti Suzuki. The operation will be derived by the automaker’s expertise with contribution from Toshiba’s cell technology and Denso’s module technology.

Some £137 million has been invested between all three companies for a lithium-ion battery manufacturing plant that was hoped to be ready by 2020. However, with the delays and expected halting of the second phase, it is unknown when the plant will be ready to begin production.

Furthermore, some ₹5,000 crore (£510 million) has been invested with more than ₹3,700 crore (£377 million) for the second phase, which would in turn provide employment to over 1,000 workers over five years. However, in the first phase the company now plans to set up a single assembly line.

One individual commented: “It would be more advisable to complete the project and commence production of batteries in order for all three companies to be part of the faster adoption of EVs. However, this unfortunately displays the semi-reluctance of Suzuki Motor in the drive of electrification in the automotive market.”