Car dealers: Looming vehicle tax not driving a sales boom

Legislation to introduce a car tax in Estonia passed the week before last has not reflected in sales yet, while interest in environmentally friendly vehicles is up.
On June 12, the Riigikogu passed the Vehicle Tax Act to introduce two-pronged taxation of motor vehicles from the start of next year.
In addition to an annual tax, made up of a base amount, CO2 emissions and weight components, there will also be a one-off registration fee.
No sales growth yet
Data from the Estonian Vehicle Dealers and Services Association (AMTEL) suggests that while car sales have been growing from one month to the next this year, May sales still fell 16.8 percent short of last year's result.
Dealerships do not report soaring sales either and say that people who were planning to buy a new car anyway are the ones going through with transactions today.
"There is no notable effect [of the car tax] yet. The news is probably too fresh, and people haven't yet realized there will be a registration fee," said Margus Viileberg and Siim Tael, heads of sales for BMW and MINI and Mazda, Jaguar and Land Rover respectively at dealers Inchcape.
"We've noticed only a few customers who were long on the fence committing to purchases in light of the car tax news," they added.
Keijo Kaasik, member of the board of Mercedes-Benz dealer Veho, said the same. "It is difficult to forecast whether sales will pick up, while those who have been hesitant seem to be taking an interest today."
Interest believed to spike in the second half-year
"Sales might be expected to spike come autumn when people return from summer vacations and activities," said Tiit Lillipuu, marketing director for Ford and Volvo dealer Info- Auto.
Viileberg and Tael from Inchcape also believe sales will grow by a couple dozen percent before the year is out, but added that high interest rates remain a constraining factor.
Margus Nõmmik, member of the board of Toyota dealer Amserv, said that they are not expecting a sales boom as the tax rates that made it to the final version of the law are lower than what was initially considered. "If we were initially debating when the boom might hit, the question today is whether there'll be a boom at all."
People prefer hybrids and second-hand vehicles
The vehicle age multiplier starts to fall off for vehicles 5-15 years old and drops to the base component for vehicles 20 years and older. Magus Nõmmik believes this recent change might liven up the used cars market.
Keijo Kaasik said that interest in second-hand vehicles seems to be up already, with Veho selling as many used cars as it does new ones.
The new tax's CO2 component motivates consumer to go for more environmentally friendly vehicles. AMTEL data suggests hybrid vehicles made up nearly half of all cars sold. Full EVs counted for 6.8 percent of sales.
All dealerships feel there is more interest in hybrid vehicles and the environmental impact of vehicles.
According to Nõmmik, hybrids have accounted for more than half of Amserv's sales in recent years. "Over 65 percent of vehicles we sell have been full hybrids in the last few years. Toyotas has been promoting the technology," he said, adding that Amserv carries very few non-hybrid vehicles, with the exception of commercial vans.
While Margus Nõmmik said there is an interest in lighter vehicles, Lillipuu suggested that since vehicle mass does not factor in too much when calculating a vehicle's annual tax sum, consumers are not affected.
Car tax not what's driving environmentally conscious choices
Vehicle dealers in Estonia say that interest in environmentally friendlier vehicles has been around for a few good years as part of a wider trend.
"The transition to environmentally friendlier vehicles has been going on for years, and pure ICE vehicles are increasingly rare," said Lillipuu from Info-Auto.
Margus Nõmmik also said that questions of ecological footprint and being friendly to the environment have been on consumers' minds for a while. People increasingly consider these aspects, think of plug-in hybrid or full electric vehicles – we're slowly going along with global trends."
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Editor: Marcus Turovski