22 Jun 18

How WLTP could hit RVs

The new vehicle testing regime is expected to record higher carbon dioxide emissions, which is bad news for fleets and leasing companies selling cars in countries with CO2-based motoring taxes.

The introduction of the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) from September will have profound implications for Europe’s used car market, according to a leading automotive industry expert.

Dean Bowkett, managing director of Bowkett Auto Consulting, said the new emissions test will change demand in the new car market, with knock-on consequences for the secondhand sector.

The WLTP programme is widely expected to increase the recorded levels of carbon dioxide emissions compared to the current New European Driving Cycle (NEDC) system. The actual increase varies not simply from car to car, but model to model and specification to specification, and early indicators suggest that official CO2 ratings under the new system will be 20% to 25% higher.

CO2-based acquisition taxes

This will have an impact in any market where acquisition taxes and annual road taxes are based on emissions. Across the 28 member states of the European Union, 14 countries apply a registration tax based wholly or in part on CO2 levels and fuel consumption, both of which are likely to deteriorate with the switch to WLTP.

Furthermore, a dozen countries also use CO2 as a basis for calculating annual ‘ownership’ taxes.

The European Automobile Manufacturers’ Association (ACEA) argues that the increase in CO2 ratings under WLTP is simply due to more rigorous testing, and that the actual performance of a car is not affected.

But if national governments do not take account of this testing change in their tax systems and maintain current CO2-tax bands for the new WLTP values, then motoring taxes will rise significantly. Each member state can decide when WLTP will replace NEDC for tax purposes, and as they make the transition, Erik Jonnaert, ACEA secretary general, said: “Governments must ensure that the transition to WLTP will not negatively impact vehicle taxation. A failure to do so could increase the financial burden on consumers.”

WLTP will hit demand 

Ireland provides one of the more extreme examples, with vehicle registration tax (VRT) ranging from 14% of the acquisition price for cars emitting less than 80g/km of CO2, up to 36% VRT for cars with emissions in excess of 226g/km. A car with fairly modest CO2 ratings of 81-100g/km would incur VRT of 15%, but this figure rises to 17% for a car with emissions of 111-120g/km, the type of increase to be expected in the switch from NEDC to WLTP and amounting to €400 on a €20,000 car.

“In those countries where WLTP significntly increases the acquisition price, those vehicles are no longer going to be viable because people will choose lower emission vehicles,” said Bowkett.

“In Germany, has already said there are a number of manufacturers which have told it that certain models will no longer be available because the WLTP rating is so high. Instead, they will just withdraw the model.”

Lower specification company cars

This has direct implications for fleets, leasing companies and company car drivers, especially because WLTP will take account of the environmental impact of any extra specification or options fitted to a vehicle.

“Any options that affect the rolling resistance, such as larger alloy wheels, the weight of a vehicle, such as air conditioning or climate control, and aerodynamics, such as rear spoliers and skirts, will have to be assessed,” said Bowkett.

“There is every possibility that fleet drivers will actually start choosing vehicles with fewer options - good news for them, but bad news for the secondhand car market because fleets and leasing companies could find themselves selling cars that are less attractive to the used car buyer.”

He added that used car buyers will not favour secondhand models whose levels of CO2 mean significantly higher annual road taxes. Depending how substantial this difference becomes, there may even be a temporary two-tier used car market, with buyers prepared to pay a premium for used cars with a lower NEDC rating than a higher WLTP rating.

“One of the things that most impacts used car buyer decisions is anything that hits them in the pocket, so if road tax is going to be heinously high, then people will stop choosing them,” said Bowkett.

Image: car undergoing testing for WLTP type-approval

Authored by: Jonathan Manning