If you are a reservation holder of a Tesla Model 3, I guess you would be pretty excited these days following news of the ramp up of production. Unless you live in Denmark. Then you should be worried if you will get your car at all.
Incentives actually work
Lower tax rates for automobiles were announced by the liberal Danish government a few days ago. The motivation was to strengthen the incentive to buy safer cars with longer mileage, and for gas and diesel cars, they have certainly succeeded. People are literally rushing to auto dealers now, after a month of standstill due to the uncertainty of the outcome of the political talks. Unfortunately, they are not rushing to buy EVs. The loss of revenue in the state finances will be covered with higher yearly ownership taxes and road taxes applied on foreign traffic. Go figure.
The price for a midsize family sedan has been lowered as much as 10%, but EVs are not mentioned at all in the calculations on the government’s website. The newspaper information has tried to crunch the numbers, and has found that a midsize EV — like the Nissan LEAF — will be about 1% cheaper.
See the problem? Some of you are already aware that EV sales in Denmark plummeted at the beginning of 2016, due to the introduction of a sales tax on EVs*. In 2015, Denmark was a large market for Tesla. When the government planned that full sales tax would be phased in over a 5 year period, effective from 2016, Elon Musk warned in a very interesting interview that EV sales in the country would consequently grind to a halt. But that did not make an impression on the lawmakers, and thus, the market collapsed.
This graph from an analysis presented by Bloomberg says it all:
*Earlier this year, the tax break phaseout was halted until 5,000 units are sold, but it extends no later than 2019.
Cleantech leadership in jeopardy
It is ironic that Denmark — being a leader in clean energy technology like wind — is the only country in Europe where EV sales are slowing down.
Lærke Flader, director of the Danish Electric Car Alliance, put it this way shortly after the new tax announcement: “This new law makes gas and diesel cars cheaper. Which makes the price gap to EVs even bigger.” In other words: polluting is now cheaper than not polluting.
So, what will happen now? Well, as I said, people will rush to buy bigger ICE cars with this hefty new discount, and the result will be more cars on the already congested roads. Even if new cars spew less carbon dioxide individually, this will hardly outweigh the rise in total number of vehicles. Everybody will forget about EVs for a couple of years. Thankfully, Denmark is a small country, so the impact of this taxation model will not be significant in a global perspective — unless the country serves as an example to others, which, in this case, I hope it won’t.
I just hope Tesla won’t shut down its Danish operations, because I actually reserved a Model 3 last year….