Market and RV impact of Italy’s vehicle tax amendments

03 January 2019

Market and RV impact of Italy’s vehicle tax amendments

3 January 2019

Italy has now amended its vehicle taxation plans in the 2019 Budget, resolving the disagreement between the governing parties that occurred in December. The revised tax system, which applies to all new cars registered from 1 March 2019 onwards, will boost registrations in the short term but have a negative impact on residual values (RV)- especially of diesels - as the used car market is further flooded.

All new cars emitting less than 90g/km CO2 will be eligible for a “bonus” payment, which increases the lower the emissions. Conversely, a financial penalty is levied for all cars emitting over 160g/km CO2, climbing from €1,100 to €2,500. The original amendment to the 2019 Budget planned to simply increase taxes on cars with internal combustion engines (ICE) while subsidising low-emission vehicles. In reality of course, ICE cars will still be most heavily penalised and hybrid and electric vehicles will benefit but the system is now emissions-based, regardless of fuel type.

Moreover, the new tax rate will not apply to all ICE cars as small family cars will be exempt. This will undoubtedly come as a major relief to Fiat Chrysler Automobiles (FCA) as small family cars dominate its line-up. However, FCA does not yet offer any hybrid or electric vehicles in Europe (the electric version of the 500 city car is only available in the US) and this change in its core domestic market may accelerate the Group’s electrification plans.

The effect on the new car market in the months to come is clear, as Stefano Ferruzzi, Country Manager for Autovista in Italy, comments; ‘In the first two months of 2019, we will face a strong registration volume for >160g/km cars, many of which will then be offered for sale as 0km used cars. This will further penalise the used car market, already impacted by the enormous stock of 0km used cars available - 178,000 cars at the end of December, almost 10% of all new car registrations in 2018.

‘As a consequence, I expect an overall decrease in residual values (RV) as the 0km cars will be priced low in order to be sold on quickly,’ Ferruzzi adds. This means that the only cars which will have strengthening RVs in Italy will be hybrids – across all segments and body types – and small/medium crossovers.

Finally, Ferruzzi states that ‘I expect a further penalisation of diesel cars as almost 70% of the 0km stock is diesel and diesel. Demand for new diesel cars dropped by 12% in 2018 with 140,000 fewer cars registered than in 2017 and demand for used diesels is declining similarly – or even more – as a few cities have introduced bans on pre-Euro 5 diesel cars.’

Autovista has amended its 2019 RV outlook for Italy accordingly, with diesel RVs now expected to fall by 2% in both the 12month/20,000km and 36 month/60,000km scenarios. Petrol RVs are now merely expected to be stable in both scenarios but hybrid RVs are now forecast to strengthen by 3%, compared to our previous forecast of 2%.