Why bigger electric car discounts are likely in 2020
Car makers face billions in fines for failing to hit EU emissions targets, meaning car buyers can expect increased incentives for going electric...
UK car buyers are likely to be offered bigger discounts on electric cars and plug-in hybrids in 2020, as manufacturers attempt to avoid EU fines brought about by tough new emission rules which were introduced on 1 January.
Across 2020 and 2021, manufacturers who sell more than 300,000 cars per year are required to meet an average CO2 figure of just 95g/km (albeit with 5% of the highest-emitting vehicles not included in 2020), with a fine of €95 (£81) per car applied for each gram per km by which they miss the target.
Ratings agency Moody’s has calculated that the biggest car manufacturers in Europe are in line for fines totalling €2.4bn (£2bn).
The threat has been exacerbated by the recent decline in the popularity of diesel models, which have lower CO2 emissions than petrols; diesel engines are now favoured by just a quarter of UK car buyers, compared with more than half prior to the diesel emissions scandal.
One way for car makers to make the EU target more achievable is to sell large numbers of zero or ultra-low emissions vehicles to offset all the petrol and diesel models that don’t meet the required standard. Indeed, every car with CO2 emissions of less than 50g/km that's sold in 2020 is counted twice when the EU is working out a manufacturer's average; in 2021 these models will be counted 1.67 times.
Despite sales of fully electric cars growing exponentially in recent years, they still represented just 1.5% of total UK car sales in 2019 – a figure that manufacturers will need to grow significantly, even if it means offering bigger incentives.
This is good news for car buyers looking to go electric, but conversely it could mean smaller discounts on higher-emitting petrol and diesel models.
Even though the UK is due to leave the EU at the end of January, UK new car registrations will continue to count towards each manufacturer's average CO2 during the transition period, which is scheduled to run until the end of 2020.
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