Changes in vehicle taxation boost growth of cars with small engines and low emissions

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Fresh sales figures indicate that car sales in the first part of the year have concentrated on models with small engines and low emission levels. In practice, the change means lower fuel consumption and less emissions of carbon dioxide.
      The car tax went down at the beginning of the year in Finland, and was pegged to emission levels. The more carbon dioxide a car emitted, the higher the tax. The specific aim was to reduce carbon emissions, which researchers say accelerate climate change.
      The proportion of diesel cars grew in the first two months of the year to half of all cars sold, whereas a year earlier it had been just a third.
     
Among diesel vehicles the proportion of those with engines of more than two litres declined from about 40 per cent to less than 28 per cent, while that of small engines between 1.301-1.600 litres grew from more than 13 per cent to 20 per cent. A completely new classification to appear in the statistics was that of diesel cars with engines of less than one litre. Ten such vehicles were registered early this year, according to the figures of the Finnish Vehicle Administration AKE.
      On the petrol (gasoline) side, the proportion of cars with engines of over two litres went down from more than 11 per cent to less than 7 per cent, while the proportion of smaller models with engines of 1.301 to 1.600 litres rose from 40 per cent to more than 50 per cent.
      The full impact of the change in car taxation is not yet fully reflected in registration figures, as the most recent statistics include cars that were put on order before the upcoming change in taxation had been announced.
     
In January and February of this year 33,541 cars were registered. A year ago the number was 27,467. The figures for early this year are boosted by the fact that the delivery of about 8,000 cars ordered last year had been postponed to this year in order to take full advantage of the tax cut.
      Surprisingly, the AKE statistics reveal that imports of used cars grew from the first two months of last year. The average age of used car imports went down to by five months to 9.2 years.
     
At the Finnish Central Organisation for Motor Trades and Repairs, Managing Director Pentti Rantala and chairman Matti Pörhö warn against excessive enthusiasm for diesel cars, which actually outsold petrol vehicles in February.
      According to Rantala and Pörhö, those who drive between 10,000 and 15,000 kilometres a year would do better to get a petrol car rather than a diesel car. Although diesel engines consume less, they are still subject to a considerable tax on their power output.
      The negative side of diesel engines are the emissions of nitrogen compounds and small particles. The particles can be eliminated with filters, which are installed on half of all vehicles sold. In 2009 filters will become mandatory for all new models, and in 2011 they will be required on all cars sold.
     
Petrol consumption declined by a few per cent in January, while consumption of diesel fuel remained almost unchanged, says statistician Jyrki Pohjolainen of the Oil and Gas Federation. He believes that many people hoarded fuel before the higher fuel tax came into effect at the beginning of the year. "That is why it is not possible to draw any long-term conclusions on the basis of January's figures."
      The Finnish Central Organisation for Motor Trades and Repairs and TNS Gallup have surveyed attitudes of Finnish motorists, finding that 16 per cent said that they would increase the use of public transport, while seven per cent said they planned to use less public transport.
     
Pekka Aalto, executive director of the Finnish Public Transport Association, expressed doubt that the use of public transport would actually decline.
      Aalto feels that the tax reform favours private use of cars, and that the status of public transport should be upgraded by allowing employers to give their employees public transport tickets as a tax-free benefit.


Previously in HS International Edition:
  Changes in car tax bring down resale prices of used cars (7.2.2008)
  Number of new car registrations soars after tax cuts (4.1.2008)
  Emission-based car tax to bring down price of new vehicles next year (2.11.2007)

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