Several Estonian car dealers find that passing the draft car tax bill in its current state will have a large impact on the Estonian car market: the upcoming year will see a considerable increase in initial vehicle registrations followed by a significant drop in sales numbers.
The car tax bill, introduced earlier this week by Minister of Finance Mart Võrklaev, differs significantly from the version presented in the middle of summer and has raised questions among car dealers.
United Motors sales executive Leino Luik believes some car brands' initial vehicle registration fee to be unexpectedly and unexplainably big.
"For example, on January 1, 2025, two identical cars are sold. The registration of one is taxed with the initial registration tax, as the new bill stipulates, and then an equivalent car is sold next to it, which is registered, for example, in December 2024 and is therefore not taxed. This will create an unfair competition situation on the Estonian car market for a while," says Luik.
The initial car tax bill draft consists of a one-time registration fee and annual payments.
According to Topauto sales executive Janek Eskor, those who can afford it will probably replace their car within the next year.
"There is an expectation that in the spring, in light of the upcoming tax, the purchase of new cars will become active. This, in turn, means that the customer will have to sell their old car, which may create a temporary oversupply in the market and a drop in the price of used cars."
"However, many people will forgo replacing their car and drive their existing vehicles for longer than they would have otherwise," Eskor noted.
Car dealers find the environmental aspect of the new bill to be confusing.
"One of the goals of the new car tax seems to be to direct people to buy more environmentally friendly vehicles. At the same time, based on the current draft, it is financially more affordable to buy cars that are six years old or older, which are obviously not as environmentally friendly as new ones," Leino Luik said.
Eskor expects the tax to make people examine the emissions and mass of their vehicles. "It can be predicted that the Estonian car fleet will become more economical as a result of the tax, because cars with a smaller engine capacity and total weight will start to be bought. The share of SUVs will probably decrease."
Eskor introduced the future of hybrid cars as a separate topic.
"At the moment, it seems that the purchase of hybrid vehicles will become minimal in the future, because the part of the registration tax that is saved on CO2 will return as a mass component due to the weight of the batteries," he noted.
Eskor brought up one of Topauto's mid-size SUVs, the Hyundai Tucson, which has both hybrid and petrol engine versions, as an example. If a Tucson with a hybrid engine and a four-wheel drive has a gross weight of 2,245 kg and its CO2 emissions are 144 g/km, its registration fee will be €2,945. The front-wheel drive Tucson with a petrol engine weighs a maximum of 2,100 kg and its CO2 emissions are 147 g/km, which will make the registration tax €2,485.
"The difference of almost €500 can be a fundamental difference for many customers, as to why they prefer a car that runs entirely on fossil fuel and why. From the customer's point of view, switching to a hybrid does not seem to be a good alternative in the future," he added.
Editor: Mart Siilivask, Mirjam Mäekivi, Sofia Suhhareva