Donohoe casts doubt over scrappage scheme to promote electric cars

Minister for Finance Paschal Donohoe has cast doubt on a new car scrappage scheme to promote the take-up of electric vehicles that would be based on vehicle registration tax (VRT).

A scrappage scheme to increase the take-up of electric vehicles is one of the key recommendations of the Government’s Climate Action Plan to Tackle Climate Breakdown, which was published last month. The plan aims to have 950,000 electric vehicles on the road, with 100 per cent of all new cars and vans falling into that category, by 2030.

In reply to a parliamentary question from Fianna Fáil's John Lahart, Mr Donohoe said this action to examine "an alternative to the current grant regime" is "directed to my department".

However, he pointed to the difficulties in bringing in such a scheme modelled on a similar initiative, which operated between January 2010 and July 2011. He said the “current situation is different”.

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“VRT relief of up to €1,500 was available upon registration of a new vehicle, subject to the scrappage of a qualifying old vehicle,” Mr Donohoe said of the old scheme, for which cars had to be at least 10 years old to qualify.

Selling price

“There are currently significant Government-backed incentives in place for electric vehicles including VRT relief of up to a further €5,000. Based on this existing relief, a person purchasing an electric vehicle with an open market selling price of under €36,000 would currently pay no VRT.

“This suggests that any car scrappage scheme that was based on the provision of VRT relief would be ineffective because no VRT is paid on the registration of most battery electric vehicles (BEVs) to begin with.

“The principal effect of any such VRT relief would be to gift taxpayers money to reduce the acquisition costs for buyers of higher-end BEVs.

“In that regard it is unlikely that there would be a high volume of motorists with 10-year-old cars who would be in the market for higher-end battery electric vehicles.

“In addition, the market is more complex than in 2010 with the emergence of PCPs [personal contract plan cars] as a popular method of acquiring a car for use and potentially purchasing it. The default position is that the legal owner of the vehicle, generally the car financing company, would be the direct beneficiary of any such VRT relief.”

Budget matter

It is understood that Mr Donohoe’s reservations are about the model previously used rather than the idea of a scrappage scheme itself. His spokeswoman said “any decision around a car scrappage scheme will be a matter for the budget”.

Mr Lahart’s question, however, did not ask about the model of any plan, but asked Mr Donohoe “if he is considering a scrappage scheme in the context of the Climate Action Plan 2019 for diesel cars”.

The Fianna Fáil Dublin South West TD said: "For people with older cars, it's going to be a huge leap to assemble the money to buy an electric car. All the incentives come after you buy.

“I don’t think that around this, or any other of their climate targets, the Government has given any consideration to how difficult and challenging it’s going to be for the man and woman on the street.”