MOTORING:Diesel cars will be the big beneficiaries of a new emissions-based car tax regime announced in the Budget yesterday.
The new seven-band system, which will be introduced from July 1st, is based entirely on CO2 emissions rather than engine size. Rates start at 14 per cent for cars with less than 120 grammes of CO2 per kilometre, rising to 36 per cent for cars emitting more than 226 g/km.
Diesel engines in general have lower carbon dioxide (CO2) emissions than their petrol counterparts. For example, a 2-litre BMW 320 diesel with emissions of 128g/km currently priced at €47,800 will see its price fall to €40,764, according to Michael Nugent, sales and marketing director at BMW.
The big losers will be larger-engined petrol cars, particularly those with emissions levels in excess of 191g/km.
This would equate to many petrol cars with engines of 2-litre or above.
In the short term, the real change in the Irish market is likely to be a significant growth in diesel sales.
Currently diesel cars represent close to 27 per cent of overall sales every year, but this could well rise to 50 per cent by 2009, says Eddie Murphy, chairman of Ford Ireland.
It's unlikely the full effects of the tax changes will be felt in the market prior to 2009, as our registration system is biased towards January sales.
However, it is likely to lead to some buyers cancelling their orders for new cars until the new regime comes into effect.
The Minister for Finance also announced a six-month continuation of the 50 per cent tax rebate on the more fuel-efficient and cleaner biofuel and hybrid cars, although this will be removed when the new CO2-based system comes into effect in July.
It will be replaced with a single rebate of up to €2,500 per car.
While this will not unduly affect the price of mainstream models such as the Toyota Prius, it is likely to have a detrimental effect on the bigger-engined hybrid cars, such as the 3.5-litre Lexus GS450h, which enjoys a rebate of €13,568 under the outgoing system.
Mr Cowen also announced the removal of all VRT payments on electric cars and motorcycles.
One particular target for public ire recently has been SUVs. While there was no specific tax on these vehicles, many will see prices rise due to higher CO2 ratings than regular cars. Land Rovers, for example, are likely to see price rises of between 2.5 per cent and 9 per cent, according to the company.
David Harpur, managing director Land Rover Ireland, said he believes the car industry is being unfairly targeted.
"It would take 37 years running a diesel Discovery SUV to generate the same emissions as one return flight from London to New York."
The Automobile Association (AA) welcomed the changes, saying VRT in general was "far too expensive" but the Government had taken into account "completely" its submission on how the tax should be tiered.
"At least it is now calculated more sensibly," AA public affairs spokesman Conor Faughnan said.
"While the AA feels that the changed system will make cleaner cars relatively less expensive and will see more motorists choosing diesel engines, it is nevertheless the case that VRT makes Ireland one of the most expensive countries in Europe to buy a car."
Environmental groups also welcomed the changes to VRT, but criticised the failure to introduce a carbon tax.
Friends of the Earth said a carbon tax needs to be introduced at the next budget if the Republic is to meet its commitments to reduce climate-changing pollution by 3 per cent a year.
"Today was just the curtain raiser, we need to see the main act in a year's time," said Friends of the Earth director Oisín Coughlan.