State of emergency. That is how the car brands and automotive businesses contacted by Automotive Reason describe the situation. In a year when the sector’s turnover falls have exceeded 35%, expectations were for help for an industry that employs more than 150,000 people in Portugal and accounts for 21% of the State’s tax revenue. Instead, the 2021 State Budget points in a very different direction.
As well as the lack of support, the affected companies and trade bodies argue that a proposal from PAN - People Animals and Nature, approved by the Socialist Party and the Left Bloc, to restrict tax incentives for hybrid and plug-in hybrid vehicles, is damaging for the country both economically and environmentally.
2021 State Budget: PAN proposal tightens hybrid incentives
The sector says the new limits on hybrid and plug-in hybrid tax breaks arrive at the worst possible time, adding uncertainty to an industry already under severe pressure.
Unexpected change of plans
With less than a month and a half left in the year, and annual plans already finalised, automotive companies now find themselves having to revisit everything.
Orders, sales forecasts, investment decisions and vehicle stock levels are being affected by the proposal put forward by PAN - People Animals and Nature and approved by the Socialist Party and the Left Bloc.
The change caught ACAP’s secretary-general, Hélder Barata Pedro, off guard, who says the Association was not consulted during this process.
The strongest objections to the decision have come from the National Automotive Trade Association (ARAN). The organisation calls PAN’s proposal “fundamentalist” and says it cannot understand the Government’s stance. “This is a bad Budget for the sector that became awful in order to guarantee its approval. This is a measure that seems to prefer an old and more polluting vehicle fleet. The Government is destroying a sector to secure supporting votes for the 2021 State Budget”, said Rodrigo Ferreira da Silva, ARAN’s president.
The same representative adds: “This is a setback in the environmental targets established by the Government. The approval of this proposal is several steps backwards in the Government’s strategy, with a very negative impact on the automotive sector”.
Portugal out of step with Europe
One of the missing measures ACAP most regrets is an incentive scheme to scrap end-of-life vehicles, which has been in place in Spain, France and Italy since June.
Scrappage incentives and the projected ISV shortfall
According to Hélder Pedro, ACAP’s secretary-general, the scheme would be “an opportunity not only for the automotive sector, but for the Government”, stressing that “with this measure, it would be possible, for example, to minimise the falls of more than 270 million euros that the executive estimates in ISV alone”.
It is worth recalling that a recent study published by the European Automobile Manufacturers’ Association (ACEA) concluded that in Portugal, taxes linked to the automotive sector generated more than 9.6 billion euros of tax revenue in 2019 alone - the equivalent of 21% of the State’s total tax take.
From ARAN’s perspective, the case is not purely economic. “This proposal is mortgaging the environmental footprint, because the national vehicle fleet is very old and, with the incentive to purchase hybrid vehicles, investment in more environmentally friendly vehicles was being encouraged. Not to mention the higher accident risk, as older vehicles are less safe. This proposal runs against all the investment that was being made at this level. The importance of hybrid cars in reducing pollution in city centres is being overlooked, particularly during stop-start periods at peak traffic times, when pollution emissions are very harmful for pedestrians”, argues Rodrigo Ferreira da Silva.
According to 2019 figures, Portugal’s vehicle fleet has an average age of approximately 13 years, which is higher than the European average of 11 years.
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