The Italian incentive for eco-cars? Not for all

The Italian incentive for eco-cars? Not for all

March 8, 2019

Claudia Sensi, Livia Simongini

Income, environmental awareness, and the existence of adequate infrastructure affect the preference for electric cars. Consequently, we believe that the Italian Governments’ incentive for eco-friendly cars will be exploited either in areas with an already established “green” attitude or, largely, by car rental companies and dealers seeking to expand their fleets of hybrid and electric cars

 

Since the beginning of March, new rules included in the Italian Budget Law for 2019 were aimed at subsidising cars with a low environmental impact have come into force.

The new rules consist of both a tax for registering new cars with emissions exceeding 160 g/km of CO2 (about 6% of total sales in 2018) and an incentive (the so-called "ecobonus") to buy cars with emissions below 70 g/km (a reduction in the purchase price ranging from 1,500 euros to 6,000 euros, depending on the CO2 emitted by the car).

Only electric and hybrid cars comply with the emissions limits given by the incentive, but not all of them fall within these boundaries. As reported by Quattroruote magazine, 18 hybrid plug-in models would be within the parameters, starting at a purchasing price below 50,000 euros (excluding VAT). The allocated resources, 60 million euros in 2019 and 70 million euros in each of the two following years, will encourage the purchase of electric and hybrid cars. In 2018, these two types of vehicles, equal to 90 thousand units, accounted for about 5% of the whole market (0.5% and 5 thousand units considering the electric cars only). 

Assuming an average incentive of 3,000 euros, the allocated fund would be depleted after 20 thousand cars, hence not even satisfying the demand already present in 2018 in the abovementioned segments.Let us move to the areas with a concentration of eco-friendly cars sales last year. According to Unrae and focusing on the private buyers, data on registrations in 2018 showed a disequilibrium in favour of Northern Italy. With more than 9% of electric and hybrid cars on total registrations, the provinces of Aosta, Vicenza, Bologna, Varese, and Milan ranked at the top, while the Southern provinces of Agrigento, Lecce and Enna, with less than 1.5%, laid at the bottom. In regards to business buyers, the North still prevails, although the picture of registrations is more nuanced, due to different provincial taxes on registration (IPT).

 
The Italian incentive for eco-cars? Not for all
 

Northern households’ greater purchasing power partly explains the North-South gap, especially bearing in mind that the vehicles under consideration cost significantly more than traditional ones. Furthermore, Northern local authorities seem more responsive to environmental issues due to European infringement procedures for exceeding pollution thresholds in the Po valley. Therefore, measures aimed at preventing the traffic of polluting cars and, in some cases, local incentives to eco-friendly vehicles have been taken. 

The supply of charging infrastructure also influences the territorial distribution of demand for “green” vehicles. According to ISTAT data on the provincial capitals, in 2017, the North-West area displayed 2.7 charging points for electric cars per 10 square km, compared to 0.2 in the South. Among Italian largest cities, Milan performed best (21.9 charging points per 10 square km), whereas Messina took the wooden spoon with no charging points at all. Provisional data for 2018 show that the creation of recharging infrastructure throughout Italy is still not enough to close the North-South divide.

 
The Italian incentive for eco-cars? Not for all
 

A further issue involves potential beneficiaries of the ecobonus between private and business customers. In 2018, 68% of electric and hybrid cars were registered by private individuals. However, if we isolate pure electric cars, which are more expensive and show limits when used for long journeys and outside urban centres, the percentage of purchases by private individuals drops to 19%. Therefore, we believe the aforementioned percentages will be considerably modified to the advantage of the business customers (mainly car rental companies and dealers), who will use the incentive to increase their fleets of eco-friendly cars, quickly depleting the funds allocated by the Government. Negative data on registrations at the beginning of this year confirm the signal of a patient attitude of the market waiting for the incentive to take force, the latter’s implementation procedures are still rather unclear.

To sum up, from the analysis of the market context, we believe that the incentives will boost the diffusion of eco-friendly cars, which will replace traditional ones, especially diesel, burdened by traffic restrictions and, in some cases, by the imposition of the new tax. Finally, since structural and environmental factors affect the territorial distribution of "green" car purchases, we confirm, at least in the short term, that the demand will affect the North to a greater extent.

 
 
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