Spain will need tax reforms to drive EVs roll-out

The Spanish government says it wants to have 5 million electric vehicles on the country’s roads by 2030, which T&E says can only be achieved with a tax reform. 

Achieving European climate goals requires governments to direct investment towards carbon neutrality by 2050. In the automotive sector, this translates into phasing-out cars with a combustion engine and accelerating the transition to zero emission vehicles. T&E says that company cars, commercial fleets and public transport are particularly suitable for electrification, and that taxation should be the mechanism to drive it. With 17 manufacturing plants and more than 1,000 suppliers, the Spanish automotive industry will benefit from the transition to electric mobility.

T&E and its Spanish member organisation ECODES have proposed a set of tax reforms designed to accelerate the transition to electric mobility:

Redesign registration tax

As the current system is based on obsolete tables, six out of 10 cars sold in Spain are exempt from the registration tax despite emitting up to 120 grams of CO₂ per km. This means that vehicles with real-life emissions of up to 35% more than declared levels are allowed to get tax exemptions. In order to guide consumers towards the purchase of zero-emission vehicles, a redesign of tax rates is needed so exemptions are applied only to the registration of cars with zero emissions.

Reform road tax

The current system allows fossil fueled vehicles (hybrids running on petrol or diesel, and gas vehicles) to have a bonus identical to that of zero emission vehicles. It is therefore recommended to update the design of the road tax to have it based on emissions with more local impact, such as NOx and PM emissions.

Support EV use in companies

Spain and governments across Europe should follow the example of the Netherlands and the UK and reform the benefit-in-kind taxation of company cars to steer the market more forcefully towards zero-emission cars, electric carsharing, and electrifying Light Commercial Vehicles for urban delivery systems.

Boost charging infrastructure

Spain needs to (1) develop a national plan for fast and ultra-fast charging infrastructure (more than 100 kW) for the highways network, simplifying the administrative process for the installation and commissioning of charging stations; (2) promote the installation of charging points at companies, adding incentives to ensure they are used, and (3) create charging hubs in urban areas, targeting mainly zero-emissions passenger transport services, urban distribution of goods, last mile delivery, and carsharing services.

Apply a bonus-malus system to purchase subsidies

The purchase subsidy system for the zero emission and low emission vehicles must be implemented within a “bonus-malus” scheme where a penalty is applied to the most polluting vehicles at the time of registration to internalise environmental costs, according to their level of CO2 emissions, and to apply the ‘polluter pays’ principle.

Improve vehicle labeling

Spain needs to improve the car labeling system, since it currently includes CNG vehicles and large PHEV SUVs within categories 0 and ECO, when the actual emissions of those vehicles are higher than those of smaller vehicles which get labels C or B under the current system.