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M&G Article on Electric Cars, taxes


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This snippet from the article:

"they are expected to be competitive by 2024 and reach parity by 2029 on an unsubsidised basis"

They are already competitive, and borderline close to parity already, case in point the Nissan Leaf.

In the UK the 40kWh Leaf costs 28K Euros (Without any govt grants, there is a 3.5K grants available for the UK though), and has a healthy range of around 250KM, more than enough for the average run around.

Now lets look at say a similar sized VW Golf 2.0 Tdi in the UK costs around 25.2K, that means with the govt grant in the UK they are already at price parity, and even without price parity sits only around 12% away, one could already make the case that, due to the savings in running costs the current premium will already be made back in no time.

Edited by PJJ
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37 minutes ago, PJJ said:

They are already competitive, and borderline close to parity already, case in point the Nissan Leaf.

I disagree. Well, for some people this will be the case, but not for me. For me the electric car works out double to three times more expensive PER KILOMETER.

That capitalised bit is what kills it for me.

When you buy a car there is something called opportunity cost (or interest, if you have to finance). That's the cost of taking money out of an interest bearing vehicle and investing it in a wheel-bearing vehicle (grin). On an electric car, we're talking around 400k worth of capital that's taken out of savings. Then there is the higher insurance (cause insuring a 400k car costs more than insuring a 200k car, and electric cars aren't cheaper to insure). Then there's the devaluation, which seems to be on par with their ICE counterparts, but again: on 400k that's more than what it would normally be for a local runner.

Basically my argument comes down to this: It's a 400k electrical local runner. It is a local runner by its very nature. I won't spend 400k on a local runner (even an ICE one) because I don't do enough local running. And for me, that means the electric car costs around R8/km and up, whereas my nice ICE vehicle is comfortably below R4/km.

The sole problem is the price. Make an electric car under 200k that's good for the intended purpose (local running... so it needs an AC and a radio and nothing more!), and then we can talk.

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A 200k car is possible, but unlikely.

 

Currently taxes + duties on an electric car make up 60% on top of the sales cost.

25% duty on electric cars (vs 0% on < 1.2L Petrol)

20% ad valorum duty on electric cars (sliding scale up to 20%, but electrics will be the far end of the scale..)

15% VAT

= 60% on top.

Reasonably, electrics should be taxed like the < 1.2L petrol cars - no duty, and no ad valorum tax.  We don't have a local electric industry to protect.  The government is basically charging electric vehicles an upfront cost of what they recoup back from petrol /diesel vehicles in taxes.

Fair?  No.  Good for the environment?  No.   

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51 minutes ago, plonkster said:

I disagree. Well, for some people this will be the case, but not for me. For me the electric car works out double to three times more expensive PER KILOMETER.

That capitalised bit is what kills it for me.

When you buy a car there is something called opportunity cost (or interest, if you have to finance). That's the cost of taking money out of an interest bearing vehicle and investing it in a wheel-bearing vehicle (grin). On an electric car, we're talking around 400k worth of capital that's taken out of savings. Then there is the higher insurance (cause insuring a 400k car costs more than insuring a 200k car, and electric cars aren't cheaper to insure). Then there's the devaluation, which seems to be on par with their ICE counterparts, but again: on 400k that's more than what it would normally be for a local runner.

Basically my argument comes down to this: It's a 400k electrical local runner. It is a local runner by its very nature. I won't spend 400k on a local runner (even an ICE one) because I don't do enough local running. And for me, that means the electric car costs around R8/km and up, whereas my nice ICE vehicle is comfortably below R4/km.

The sole problem is the price. Make an electric car under 200k that's good for the intended purpose (local running... so it needs an AC and a radio and nothing more!), and then we can talk.

I don't think you are comparing apples to apples here, but you admitted as much :P

This is definitely only applicable to new cars.

You and I are not Joe average, we buy and hold cars (secondhand) for years, to squeeze that cost per KM down to as low as we can.

Joe average however buys a brand new ICE car every 60 months/72 months and he will buy the most expensive one his budget allows, once again, I will use the Golf as my example, a 1.4TSI Golf Comfortline looks to be around R440K now (WHO BUYS THIS? Anyway), a Leaf will probably cost around R500K

So there is a nice R60K premuim, on the Leaf, financed at say R12%, that will cost you R7.2K P.A in interest.

So the question becomes, will your Leaf save you more than R7.2K P.A on fuel? Or R600 pm.

Lets say your Golf averages around 12KM/L and you drive 1200KM pm (Nice round numbers :P)

We get 100L pm @ R16.5 L = R1650 pm

1200KM / 5.5KM/kWh = 218 kWh @ R1.85 = R403 pm

So in my hypothetical the saving is R1247 pm.

So to repay the R60K premium Incl the associated interest with fuel savings according to my compounding interest calculator will take 65 months (5.5 years), also this assumes the cost for both fuel and electricity stays exactly the same as now, not bad if you ask me.

Edited by PJJ
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57 minutes ago, PJJ said:

I don't think you are comparing apples to apples here, ...

In both cases where is the cost of the 15k services, being apples for apples and all that?

But I agree with you and Plonk, we don't buy new cars every 5 years as it is seriously cheaper to keep the old "truck" going whilst driving wisely with a Midas just around the corner. 🙂

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32 minutes ago, The Terrible Triplett said:

In both cases where is the cost of the 15k services, being apples for apples and all that?

Well, for the first 5 years I assumed the ICE car should have a service plan included.

The EV however doesn't need expensive services beyond brake pads and would definitley over the lifetime of the car work out in orders of magnitude cheaper in maintenance and service costs, but it would need a replacement battery pack at some time, so to be conservative I only based it on the quantifiable fuel savings.

44 minutes ago, The Terrible Triplett said:

But I agree with you and Plonk, we don't buy new cars every 5 years as it is seriously cheaper to keep the old "truck" going whilst driving wisely with a Midas just around the corner. 🙂

Definitely, so for us cheapskates, we need 6+- years to past so that we can have some secondhand EV's to pick from :P 

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1 minute ago, PJJ said:

.. us cheapskates, we need 6+- years to past so that we can have some secondhand EV's to pick from :P 

Naa, we let them keep those 2nd hand EV's whilst we continue with our ICE chuggers.

We are only interest in the 2nd life battery banks from those 2nd hand EV's. 🤣

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1 hour ago, PJJ said:

Joe average however buys a brand new ICE car every 60 months/72 months and he will buy the most expensive one his budget allows

Joe average is an idiot 🙂

But yeah, there is a segment of the market for whom an electric car will make sense. The kind of guy who buys new cars twice a decade (or so), and uses it primarily to commute to the office and back. I buy a good second hand car once a decade and the furthest I've worked from home in the last 17 years is 30km. I won't even spent 400k on my main long-distance vehicle... you can have plenty of nice second-hand SUVs for 300k or less.

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1 minute ago, plonkster said:

Joe average is an idiot 🙂

But yeah, there is a segment of the market for whom an electric car will make sense. The kind of guy who buys new cars twice a decade (or so), and uses it primarily to commute to the office and back. I buy a good second hand car once a decade and the furthest I've worked from home in the last 17 years is 30km. I won't even spent 400k on my main long-distance vehicle... you can have plenty of nice second-hand SUVs for 300k or less.

Joe average is most definitely a idiot, the sad thing is seeing banks and car dealerships working together to get Joe Average in a car he most definitely can't afford.

72 month repayment period + Balloon payments etc.

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21 minutes ago, PJJ said:

Balloon payments

Yeah residuals are from the devil! There's a small portion of the market that it's useful for, someone who knows exactly how long he needs the vehicle for and/or that his future will be better than his present. Someone who is just out of school/university and needs a car right away for that first job (and then the residual must be carefully balanced with the expected depreciation on the vehicle).

Man, I have this story of this former friend of mine (tossed his toys over something I said on social media one day and before I could apologise I had already been unfriended and blocked). So he had this old Japanese car from the mid 80s. It was a car that had done very little mileage and had been very well maintained.

But it was old and it was ugly, and then one day he lent the vehicle to a family member without a license and the family member hit a guard rail with it and it was lightly damaged. So he decided he needed a new one.

His friends told him to buy a good second hand vehicle. He wanted a new one.

His friends also told him to stop smoking. Not only would his stained teeth look better, it would save money too.

Shortly afterwards he had a brand new Polo Vivo. I'm not sure what the finance deal on that was, but it must have had the largest possible balloon value, and in all likelihood it was one of those 0% down things. This guy was always borrowing money from co-workers even before this happened. The car was insured (finance requires that), but again, I'm sure it was the cheapest crappiest insurance with a nice big excess, and no gap cover to account for devaluation in the first few years.

Then he lent the vehicle to the same unlicensed family member again. This time another vehicle crashed into it, so it was technically the other guy's fault. Car was technically written off, but he was over 30k short on the settlement (and he had to lie about who was driving at the time). So he convinced the insurance company to repair it.

So now he had a repaired vehicle on which he owed more than it was worth, and he's stuck with it for at least a decade cause there's no money to pay off that balloon value.

Now much as I shook my head at this guy... our government is full of people like this, at least by the looks of it.

Edited by plonkster
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23 minutes ago, plonkster said:

But yeah, there is a segment of the market for whom an electric car will make sense.

But yes, that is how I drew my conclusion to say that EV's are already competitive (T's and C's apply :P)

The good thing for EV adoption is I think the Joe average market is the bigger market segment.

Personally I will wait till Tesla releases something like the Model Y (Or maybe a model 2), they have touted a 25K USD Tesla.

And then wait till that model is 4 years old, and boom, sub R200K EV :D

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2 minutes ago, plonkster said:

Yeah residuals are from the devil! There's a small portion of the market that it's useful for, someone who knows exactly how long he needs the vehicle for and/or that his future will be better than his present. Someone who is just out of school/university and needs a car right away for that first job (and then the residual must be carefully balanced with the expected depreciation on the vehicle).

Man, I have this story of this former friend of mine (tossed his toys one day over something I said on social media one day and before I could apologise I had already been unfriended and blocked). So he had this old Japanese car from the mid 80s. It was a car that had done very little mileage and had been very well maintained.

But it was old and it was ugly, and then one day he lent the vehicle to a family member without a license and the family member hit a guard rail with it and it was lightly damaged. So he decided he needed a new one.

His friends told him to buy a good second hand vehicle. He wanted a new one.

His friends also told him to stop smoking. Not only would his stained teeth look better, it would save money too.

Shortly afterwards he had a brand new Polo Vivo. I'm not sure what the finance deal on that was, but it must have had the largest possible balloon value, and in all likelihood it was one of those 0% down things. This guy was always borrowing money from co-workers even before this happened. The car was insured (finance requires that), but again, I'm sure it was the cheapest crappiest insurance with a nice big excess, and no gap cover to account for devaluation in the first few years.

Then he lent the vehicle to the same unlicensed family member again. This time another vehicle crashed into it, so it was technically the other guy's fault. Car was technically written off, but he was over 30k short on the settlement (and he had to lie about who was driving at the time). So he convinced the insurance company to repair it.

So now he had a repaired vehicle on which he owed more than it was worth, and he's stuck with it for at least a decade cause there's no money to pay off that balloon value.

Now much as I shook my head at this guy... our government is full of people like this, at least by the looks of it.

I think tragic stories like this happens more than you think.

I have a friend that is emigrating to NZ and he also got a little surprise from his car, 3 years ago I pleaded with him to buy a small economical car and to save up, what did he do?

Went and bought a secondhand Audi Q5.

Also with the complete package of bad financing options Balloon 72 all wrapped up into one debt based death spiral.

And after 3 years of payments he now still owes R50K more than its worth 😕

I think at this stage he would love it if someone crashed into him and wrote off his debt XD

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1 minute ago, PJJ said:

I think tragic stories like this happens more than you think.

I have a friend that is emigrating to NZ and he also got a little surprise from his car, 3 years ago I pleaded with him to buy a small economical car and to save up, what did he do?

Went and bought a secondhand Audi Q5.

Also with the complete package of bad financing options Balloon 72 all wrapped up into one debt based death spiral.

And after 3 years of payments he now still owes R50K more than its worth 😕

I think at this stage he would love it if someone crashed into him and wrote off his debt XD

If he's emigrating, may as well say why bother, emigrate and write it off.  Bank isn't going to chase him to the other side of the world.

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