Rebates for Buyers of Energy-Efficient Motor Vehicle

Introduction

The era of electric vehicles, hybrid vehicles and vehicles that run on alternative energy sources is just starting to develop. By 2020, electric vehicles and hybrid cars may take up to 15% of all new sales in the four main markets: the United States, EU, China and Japan. However, this forecast comes from the fact that the government regulation will increase and become more rigid with respect to the energy efficiency of cars. In addition, consumers’ preferences tend to change. Today, shoppers prefer to spend more money to buy more “green” cars if they receive certain rebates which should be charged from gas-guzzlers cars owners. Thus, regulatory requirements are the main driver forces of innovation.

The Reasons for Implementing the Rebates Funded by Fees Levied on Gas-Guzzlers for Buyers of Energy-Efficient Motor Vehicles

There are certain problems with selling energy-efficient motor vehicles. The price for vehicles on alternative energy sources is higher than for the ordinary ones. In fact, the infrastructure is not always debugged for them. For those buyers who just want to drive for the lowest price, cars with gasoline engines will remain the most attractive option for a long time due to the decrease of oil prices.

Moreover, to trace the ways to improve energy efficiency, it is necessary to keep in mind the ways it affects consumers’ financial situation – they need to pay a lot. However, they have neither money nor the desire to do so. Therefore, if consumers are mostly not willing to pay today for the future reduction of energy consumption, then the manufacturers of energy-using cars are not interested in development and production of cost-effective technologies and devices. Buyers should be stimulated by certain advantages. These benefits could be rebates, achieved by potential buyers.

Thus, in order to renew the fleet and to stimulate the production, it is necessary to implement rebates for buyers of energy-efficient motor vehicles. The success of similar measures, conducted by a number of countries, can be considered as another reason for implementing the rebates. For example, the U.S. government provides compensation from $3,500 to $4,000 to buyers of new more energy-efficient vehicles for a trade-in their old cars. Buyers of electric vehicles can receive subsidies of up to $7,500 by the federal law. Moreover, in the state of California, where the authorities want to achieve zero emissions by 2030, additionally, one can get approximately the same sum. The government of California presented the program with the purpose not only give impetus to the development of the automotive industry crisis but has also become one of the most successful fiscal stimulus measures, conducted by the Obama Administration.

Nowadays, a new car is 25% more efficient than it was 10 years ago. Thus, an increase in their sales may significantly improve the ecological situation, which is an extremely important issue currently. Moreover, there should be unfavorable conditions for the possession of gas-guzzlers cars. Therefore, the best option to cover these two aspects at the same time is to implement rebates funded by fees levied on gas-guzzlers for buyers of energy-efficient motor vehicles.

The Levy Mechanism and Calculation

To establish levy mechanism’s additional charges for “dirty” vehicle technical data which do not allow the use of fuel above EUR 2 should be imposed. Moreover, to figure out the sums of rebates for buyers of energy-efficient motor vehicles, a law on the federal level laying down  increased rates of vehicle tax for old cars and not harmless should be developed. The main purpose of this law would be to force entities to replace their old cars with new ones.

Two kinds of coefficients can be proposed; first, depending on the environmental class and the second, on the age of the vehicle. Coefficient, depending on the environmental class should be applied as follows: 1.5 – for vehicles complying with environmental class lower than acting on the territory of the state; 1 – for vehicles complying with applicable environmental class; 0.7 – for vehicles complying with the environmental class above acting on the territory of the state. Coefficient, depending on the age of the vehicle, should be applied as follows: 1 – for vehicles with a production year of less than 5 years; 1.75 – for vehicles with a production year of more than 5 years but not more than 10 years; 2 – for vehicles with a production year of more than 10 years but not more than 15 years; 3 – for vehicles with a production year of more than 15 years.

The law, protecting the environment from old cars, should be universal to all organizations and citizens. Both coefficients can be used at the same time. The older the vehicle and lower its environmental class is, the higher are the rates and, consequently, the greater is the tax burden. Dividing the physical and legal entities in terms of environmental damage, the state thus will provide an opportunity to get away from high-tax to representatives of small and medium businesses. The sum of the rebate will be calculated according to these coefficients.

Explaining the way the mechanism would work, it can be said that if a car has lower class “Euro-4” and made up before 2006, its owner will have to pay from a half to two times more. For car owners made before 2006, which are not actually related to any environmental class, the highest rate of vehicle tax must be applied. Owners have to pay twice the basic rate of tax. The tax rate will not change only for the class of “Euro-4” car owners. For owners of vehicles with the “Euro 5” and above, the tax should be decreased. However, owners of vehicles of lower than “Euro-4” class will have to pay more: the tax rate for the class of machines “Euro-3” can be increased by 1.2 times, “Euro-2” – 1.6 times. Owners of cars produced prior to 2006, relating to the environmental class above “Euro 1” must be certified in a special center, where the environmental class will be determined and recorded in the car passport, in order to avoid paying double rate of vehicle tax. Only, in this case, the rate can be reduced.

The mechanism of calculation can be explained by the following example. If there is a new base rate of vehicle tax for a 1.5-liter internal combustion engine and two Toyota Corolla with an engine of the same size, but different years of release – a new Euro-5, and the second is the used Euro 3 or even with a blank column of environmental class. The owner of a new car will pay four times less than the owner of the old one. This mechanism will be designed to encourage people to buy environmentally friendly cars. Each region retains the right to raise or lower the basic rate of tax. It can increase its maximum of 10 times, and reduce to zero for the machines with the power of less than 150 liters.

Conclusion

Concerns of buyers and regulators about unstable oil prices, dependence on it, global warming have forced automakers to seriously engage in the development of cars on alternative energy sources. Buyers of new cars should be encouraged and stimulated. At the same time, the possession of gas-guzzlers cars should become uncomfortable. For this purpose, the mechanism that allows buyers of energy-efficient motor vehicles to receive rebates, funded by fees levied on gas-guzzlers, should be implemented.

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