Budget backing for hybrids seen as crucial

Hybrid and flexible fuel car makers are waiting with baited breath to see if the Government renews tax incentives for another year, writes PADDY COMYN

THERE HAVE been calls for the Government to extend a tax remission of up to €2,500 on hybrid electric vehicles and flexible fuel vehicles, at least until electric cars become available in adequate numbers.

Hybrid vehicles such as the Toyota Prius, Honda Insight and Lexus RX Hybrid currently avail of this repayment, but it has also been of benefit to cars that run on E85 bioethanol. These flexible fuel vehicles can use standard petrol or the E85 blend and it is claimed that using this fuel results in a saving in CO2 emissions of up to 70 per cent compared to its petrol equivalent.

The provision for these cars was made at the time the emissions-based road tax and VRT laws came into place and ran from July 1st, 2008, and are due to end on December 31st this year. The Society of the Irish Motor Industry (Simi), as well as representatives for the car brands affected, have made submissions to the Government for inclusion in the upcoming budget.

Simi, in a budget submission, asked for there to be no changes under the tax headings which included Hybrid vehicles.

Toyota, along with Lexus, have the largest hybrid vehicle line-up on the market, so are set to be the most affected by the increase in price which will follow on from the cessation of this incentive for hybrid vehicles.

Toyota’s Prius alone accounts for around half of all hybrid vehicles sold in Ireland. Steve Tormey, deputy managing director at Toyota Ireland, says there are good reasons to keep the grant on some hybrid vehicles for at least another year.

“There has been a tax break made available for plug-in hybrids from next year, but we won’t have any plug-in hybrids next year, so we would hope that they would roll out support on existing technology,” says Tormey.

Some 718 hybrid vehicles have been sold this year – two and half times more than were sold last year and around 40 per cent less than were sold in 2007 – and this, as Tormey points out, is less than one percent of the total market share.

Frank Kennedy, sales and marketing manager of Universal Honda, the distributor of Honda cars, agrees that there is a need to further encourage sales of these vehicles.

“From a Honda perspective, in this market hybrids accounts for 15 per cent of our sales, so when you take a company like Honda that is not devoted to diesel it is very serious. We are not against electric vehicles and there is definitely a place for them, but there is still definitely a place for hybrid technology. We are not seeing the best of hybrid yet and I think it is being dismissed very early from that point of view,” says Kennedy.

“We are waiting with baited breath for the budget announcement because there may well be some respite in there.”

While sales of hybrid vehicles remain low, sales of flexible fuel cars are strong, although there is little consistency in the figures and it is probably fair to say that most cars were bought because they worked out cheaper.

This year, of the 2,967 flexible fuel vehicles sold so far, an amazing 2,943 were the Renault Clio, a car which has also been heavily subsidised by Renault as part of the scrappage scheme.

Renault Ireland is calling for the Government to keep supporting flexible fuel vehicles, but in the case of this car any Government allowance is nothing compared to the €4,080 that Renault has already provided in trade-in and scrappage allowances which has meant that it has been the seventh best-selling car of 2010 so far.

Aside from this car, sales of cars that can run on E85 bioethanol have been virtually non-existent. 14 Renault Méganes, 12 Renault Modus and three Renault Scenic petrol models make up the majority of the rest and it could be argued these vehicles weren’t bought because of their environmental benefits. After that, just 13 Ford Focus Flex Fuel models and single units of the Volvo C30, Saab 9-5 and Ford Mondeo flexible fuel models were sold.

Contrast this to 2007, before the introduction of an emissions-based VRT and road tax system. Back then, 344 units of the Saab 9-5 BioPower model were sold, followed by 161 Ford Focus Flex Fuel models and 133 Volvo S40 Flexifuel models. Of these models, neither the Ford or Volvo models are now offered on those brand’s current price lists and while there is a new Saab 9-5 now launched, with the petrol version capable of running on bioethanol, the fact that it has annual road tax of €630 per year means it will sell in small numbers compared to the cheaper diesel model.

Maxol Ireland are the main retailer for E85 bioethanol in Ireland and, according to Brian Donaldson, general manager of marketing and retailing for the company, while they continue to offer the fuel, they have been disappointed with sales.

“There has been no significant drop in the amount of retailers selling E85. We currently have 29 Maxol stations throughout the Republic of Ireland marketing this product. However, we are extremely disappointed with the sales of E85 since we introduced it over five years ago and our expectations have been further diminished by the removal of consumer incentives such as a VRT concession.”

Maxol have yet to decide fully on whether or not they will continue to retail the fuel in the future, with a decision likely to be based on the content of the budget.

“Maxol supports calls for the re-instatement of a VRT concession in the forthcoming Budget. We have previously placed our views on the record with the Minister for Finance. We will review our future involvement with E85 in light of the Budget announcements.”