At least in France.
Global governments are currently examining additional ways to reduce carbon emissions. Pushing automakers to engineer and produce more efficient vehicles, specifically electric vehicles, is certainly one method. Creating more taxes is another. But the question is this: what exactly needs to be taxed and how much revenue should this generate? The French government is one of the first to come up with an answer.
According to Bloomberg, the French parliament has adopted a new law where vehicles emitting carbon dioxide above a certain threshold will be subject to a 20,000 euros fine, or roughly $22,240, beginning next year. The tax was previously 12,500 euros. Needless to say, automakers are not exactly thrilled, and their anger is about to become worse. These new measures could also be aimed at SUVs, one of the most polluting passenger vehicles.
In France alone SUVs made up 30 percent of sales in the first 11 months of this year. Some of the most popular models have been the Volkswagen Tiguan and Toyota C-HR. The government is also considering an idea to reduce cash incentives towards the purchase of electric vehicles, which really makes no sense. But the SUV tax kind of does and the idea could potentially spread to other countries within the EU and elsewhere.
The French finance ministry estimates this SUV penalty could yield 50 million euros annually. In turn, that money will be used to help carmakers build more efficient passenger vehicles. France's new taxes really could not come at a worse time for automakers doing business in Europe.
Additional new EU emissions rules taking effect next year will see automakers fined if their total annual vehicle sales exceed an average carbon limit. Combined with France's new SUV tax, and automakers have a right to be concerned. EVs currently make up a small fraction of car sales not only in France and the EU, but also in the US. Taxing the type of vehicle that does sell well will likely hurt profits, at least in the short term.
Automakers are on board with EVs, but it will take additional time to convince consumers to adopt them as well. It's that gap period automakers are worried about, profit-wise.