Auto industry statement regarding used cars

14.03.2008
Auto industry statement regarding used cars
The associations representing car manufacturers and importers in Bulgaria, Cyprus, the
Czech Republic, Denmark, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland,
Portugal, Romania, Slovenia, Slovakia and Turkey as well as the European Automobile
Manufacturers Association (ACEA) call upon the governments of the countries
concerned and the European Commission to take all necessary measures to address the
negative environmental and road safety implications of the current trend towards the
ageing of the car fleet in many EU Member States. We urge the authorities, within the
boundaries of Community law, to adopt appropriate administrative, technical and tax
measures to discourage the sale and use of the most polluting and unsafe cars. Without
such measures, it is clear that the European Union's ambitious objectives regarding
CO2 emissions, fuel efficiency, air pollution and road safety are bound to fail.
1. Issues at stake
The European Union is making strong efforts to address climate change and improve air
quality and road safety. For the automotive sector, this implies a continuous strengthening of
technical requirements for new cars. In recent years, the EU has amongst others adopted new
rules regarding pedestrian protection and exhaust emissions (Euro 5 and 6). Requirements
relating to CO 2 emissions from passenger cars are due to be adopted in the very near future.
The theory goes that as and when more cars meeting all these requirements make their way in
to the existing car parc, the latter will gradually become safer, cleaner and more fuel-efficient.
The problem is that in many EU Member States, the opposite is happening today.
An old car parc
The situation is most acute in the Member States that joined the EU since 2004. Whereas the
average age of the cars on the road in most of the "old" Member States is about 7 to 8
years, it is approximately 15 years in most of the "new" Member States. This means that
at a time when the EU is adopting some of the most stringent environmental standards
for new cars in the world, the vast majority of the cars on the road in a significant
number of Member States is not even equipped with a catalytic converter. In some
Member States, this is the case for as much as 75% of all cars. Given that cars meeting Euro 6
standards emit 90% less nitrogen oxide and particulate matter than cars without catalytic
converter (Euro 0), it is clear that the European Union will not achieve its objectives any time
soon if current trends continue.
Regulation makes cars expensive
Part of the problem is that regulatory costs are increasing continuously. Our estimate is that
the cumulative impact of various recent and pending EU regulations will be to add another
€ 3,800 to 7,000 to the price of an average car. The affordability of new cars is rapidly
becoming a crucial issue.
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Used car imports aggravate the problem
Indeed, the car parc in most new Member States is ageing even further. This result from a
massive increase of used car imports since these countries became members of the
European Union in 2004. Several governments are or were forced to abolish existing
restrictions on used car imports and modify their tax regimes in order to ensure the free
movement of goods within the EU and prevent discriminatory taxation. In Poland, for
example, used car imports increased from 36,000 in 2003 to almost 1 million in 2007.
Unsurprisingly, new car sales decreased by about 15% over the same period, from about
350,000 to approximately 300,000. Thus, used cars currently dominate the car market in most
new Member States. Whereas the ratio between new and used cars in Poland is 1 to 3, it can
be as high as 1 to 10 in Lithuania, for example. As many of these used cars are very old, the
car parc is getting even older than it already was.
Several Member States also experience significant imports of used cars form third
countries. In the case of the Baltic countries, the cars usually originate in the United States
whereas in the case of Cyprus and Malta, they mostly come from Japan and other Asian
countries. In Lithuania, for example, about 25,000 used cars were imported from the US in
2007. Whereas about half of these cars were merely transiting through the country on their
way to other destinations inside or outside the EU, approximately 12,000 used cars from the
US were registered locally. Considering that the new car market represented less than 20,000
units, it is clear that US imports are a very significant factor in countries such as Lithuania.
One of our main concerns regarding used car imports from third countries is that these
cars are often registered without proper verification of their compliance with EU
technical regulations. Member State authorities misuse the single vehicle approval procedure
- initially designed for private imports of individual vehicles - to validate imports of vast
numbers of used cars for commercial purposes without checking that these cars comply
effectively with the applicable EU standards. More often than not, the declared customs value
of these imported cars is set artificially low, resulting in unduly low customs duties and
registration taxes.
In addition to worsening the air pollution and road safety situation, the import of very
old used cars on a massive scale will saddle the Member States concerned with a huge
problem of recycling these cars at the end of their life in the not too distant future. This
will be a much more serious issue for the new Member States since they import also large
numbers of old cars from the old Member States. Also in this respect, corrective measures are
needed urgently.
2. Suggested measures
We urge the authorities, within the boundaries of Community law, to adopt appropriate
administrative, technical and tax measures to discourage the sale and use of the most polluting
and unsafe cars. Without such measures, it is clear that the European Union's ambitious
objectives regarding CO2 emissions, fuel efficiency, air pollution and road safety are bound
to fail.
We believe that national governments should seriously consider moving towards CO2
based taxation. To date, a majority of EU Member States have already switched to some
form of CO2 taxation for cars. Such a CO 2 tax should greatly contribute towards achieving
the climate change targets that the EU and individual Member States have set themselves. In
particular, it should help to achieve the significant reduction in CO 2 emissions from
passenger cars that the EU is trying to achieve. Indeed, it would provide car buyers with an
incentive to choose the more fuel - efficient models that manufacturers are offering in rapidly
increasing numbers. In our view, this CO 2 tax should be linear, i.e. it should set tax rates that
are directly proportionate to the level of CO 2 emissions. In addition, it should be
technologically neutral and not discriminate against any specific car types, segments or
classes. It should also be revenue neutral.
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National governments should also seriously consider using the current Euro exhaust
emissions standards (Euro 0 – 4) as a basis for their car taxation system. If appropriate,
they could apply the new tax basis to all cars in the parc by raising the tax rates progressively
or, alternatively, by extending the scope of the new tax system progressively to more age
groups of older cars. This would prevent owners of older cars from facing a significant
increase in their tax burden. Germany used this formula successfully in the 1990s in order to
remove a very substantial amount of cars without catalytic converter from the car parc. In our
view, this type of tax would not discriminate against used car imports nor hinder the free
movement of goods within the EU. We are convinced this tax modification can and should
occur without reducing revenue losses for the government and without increasing the overall
tax burden for motorists.
As regards the above-mentioned tax measures, it is clear that the high registration taxes that
exist in various EU Member States slow down the much needed renewal of the car parc. We
therefore urge the authorities of the countries concerned to abolish these registration taxes
gradually and replace them with annual circulation taxes.
Another possible measure that national governments could adopt in this respect is the
provision of scrappage incentives for the most polluting cars. Various Member States did
this successfully in the 1990s, without negatively affecting government revenue, and France,
Italy and Romania are doing it again at present.
At the administrative and technical level, national and EU authorities should avoid that
procedures regarding single vehicle / individual approvals are misused to permit large - scale
imports of used cars by professional traders without proper verification of their compliance
with EU technical regulations. We suggest that whenever national authorities grant
individual approvals to used cars imported from third countries, i.e. an exemption from
one or more of the technical rules applicable in the EU, they should be obliged at the
very least to ensure that these cars meet alternative, equivalent requirements. We urge
the European Commission to put forward legislative proposals defining these alternative
requirements as soon as possible. Finally, we suggest that national authorities consider
increasing the severity of the vehicle inspection tests with a view to improving air quality and
road safety in their countries.
We look forward to discussing these proposals with the responsible national and EU
authorities in an open and constructive manner in the near future.
This statement is supported by:
- The European Automobile Manufacturers Association (ACEA)
- The Union of the Importers of Automobiles in Bulgaria (UAIB)
- The Car Importers Association of Cyprus (SEMO)
- The Automotive Industry Association of the Czech Republic (AIA CR)
- The Danish Car Importers Association (De Danske BilimportØrer)
- The Union of Estonian Car Sales and Service Enterprises (AMTEL)
- The Association of Motor Vehicle Importers – Representatives in Greece (AMVIR)
- The Association of the Hungarian Automotive Industry (MGSZ)
- The Lithuanian Auto - Entrepreneurs Association (LAA)
- The Latvian Authorized Automobile Dealers Association (LAADA)
- The Association of Car Importers Malta (ACIM)
- The Polish Automotive Industry Association (PZPM)
- The Automobile Industry Association of Portugal (ACAP)
- The Association of Automobile Manufacturers in Romania (ACAROM)
- The Association of Automobile Manufacturers and Authorized Importers of Slovenia
(ADS)
- The Automotive Industry Association of the Slovak Republic (AIA SR)
- The Automotive Manufacturers Association of Turkey (OSD)
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