By William Boston
Auto makers in Europe eager to boost sales of their electric
vehicles have a new strategy: Demanding higher taxes on
conventional vehicles that burn gas and diesel fuel.
The top executives at several car and truck makers are calling
on European governments to introduce the new taxes on
carbon-dioxide emissions from gasoline- and diesel-powered cars and
trucks as a way to help their EVs better compete. They say the
levies should take the form of highway tolls or higher fuel
"We need to tax carbon at the pump," Markus Duesmann, chief
executive of Audi AG, said in an interview.
Traditional auto makers face a dilemma. The bulk of their
business is still building and selling cars with
internal-combustion engines -- including family cars, big
sport-utility vehicles and sports cars. Raising fuel taxes could
hurt sales of those vehicles. But unless EVs can compete on price
with conventional cars, it will be hard for auto makers to lure
customers to them and recoup the vast investments manufacturers
have made in the technology.
One avenue for the tax hikes is through carbon pricing -- a
dollar price on carbon emissions that sets a base for levies and
taxes on emissions -- which is one of the tools governments have
deployed to fight greenhouse-gas emissions. Higher carbon pricing
ultimately leads to higher prices for fossil fuels.
Herbert Diess, chief executive of Volkswagen AG, which owns
Audi, has been calling for higher carbon-dioxide emissions for some
time. He says the EUR25 price (about $29) Germany sets per ton of
carbon emissions is too low and suggests Germany should price
carbon more in line with Sweden, which sets the price at
Taxing emissions from polluting vehicles, he and other
executives say, would help ensure electric vehicles remain
attractive for buyers after the expiration of subsidies that are
now sustaining sales.
Germany's main automotive lobby, meanwhile, has called on the
European Union to provide tax exemptions for vehicles that run on
biofuels and EVs -- another way to use the tax system to nudge
consumers toward low- and zero-emissions vehicles.
Particularly vocal in seeking an overhaul of fuel taxes have
been European truck makers who are investing billions of euros in
developing a new generation of battery electric and
hydrogen-powered trucks and vans.
In December, the CEOs of Daimler Truck, MAN, Scania, DAF, Volvo
and Ford's European truck unit published a joint appeal calling on
European leaders to end support for diesel fuel. As long as the
costs for operating diesel trucks don't reflect the full cost of
carbon emissions, they will remain less expensive to operate than
electric vehicles and discourage freight companies from switching,
the executives said.
The truck companies called on the EU to include road transport
in the bloc's emissions-trading system, base all tolls and fuel
taxes in the future on CO2 emissions and to tax energy based on its
Daimler Truck Chief Executive Martin Daum said that the best way
to create a level playing field for electric and diesel trucks in
long-haul freight would be to exempt electric trucks from road
tolls while raising tolls on diesel trucks to reflect the cost of
the impact of their carbon emissions.
"We need cost parity between hydrogen and diesel trucks," Mr.
Daum said. "You have to switch to [charging for] CO2 and then you
can play around with the rate."
The auto makers' push comes as the European Union is preparing
to beef up its anti-emission rules. New EU rules to be proposed
this summer are expected to restrict emissions for a swath of
industries. A further reduction in greenhouse-gas emissions from
passenger cars, trucks, buses, airplanes and other forms of
transport is a central part of the bloc's emissions-reduction
The notion of using fuel taxes to spur a transition to EVs is
unlikely to gain traction in the U.S. This month, President Biden
rejected calls from the U.S. Chamber of Commerce to increase
gasoline taxes instead of raising corporate taxes to help pay for
his $2.3 trillion infrastructure plan, which includes a shift to
alternative energy and support for EVs.
The Biden administration said raising fuel taxes would unfairly
burden low-income households. Mr. Biden's plan also calls for
replacing fossil-fuel tax subsidies with electric-vehicle
Calls for higher fuel taxes are surprising to some, considering
that the industry still generates most of its revenues and profits
from conventional cars. EVs remain a small part of the market for
most car makers and make up less than 1% of sales for European
truck makers. The most profitable consumer cars on the market are
SUVs and high-end sedans, which could be threatened if fuel taxes
rise too much.
Auto executives say those profitable vehicles would continue to
generate the money they need to invest to develop electric
vehicles. Daimler CEO Ola Källenius in March called the company's
legacy business the "cash machine" that is financing the
In Europe, the fastest-growing SUV segment is that of smaller
and more fuel-efficient SUVs. And European auto makers are rolling
out electric and hybrid versions of their SUVs and high-end sedans.
This week, Audi launched its Q4 e-tron, a fully electric SUV, and
Mercedes-Benz rolled out its EQS, the all-electric version of its
flagship S-class sedan.
Markus Schäfer, a Daimler board member in charge of technology,
said the new sedan wouldn't be as profitable as its gas-burning
cousin. But the company's EV margins were sufficient and would
increase as the company drove down costs, he added.
"We will have a good starting point with profit margins," Mr.
Schäfer told reporters on a call ahead of the EQS launch. "We
believe the future is electric and aren't clinging to the past. We
will work on getting the fixed costs down."
Some environmental lobbyists say auto executives want higher
fuel taxes -- instead of, say, more onerous CO2 emission standards
-- because they want consumers to foot the bill for the transition
William Todts, an analyst with the Brussels-based environmental
lobby group Transport & Environment, said fuel taxes might not
be the best instrument to persuade consumers to switch to EVs.
To be effective, the taxes would have to be painfully high, and
that could lead to a backlash among consumers -- like the
yellow-vest protests in France in 2018 that were sparked by rising
fuel prices, he said.
"The thing about setting emissions targets on the auto industry
is that it works," he said. "Look at the impact on EV sales last
year, they exploded."
Write to William Boston at email@example.com
(END) Dow Jones Newswires
April 16, 2021 07:14 ET (11:14 GMT)
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