We’ll all be going electric when it comes to driving soon… With the announcement in February this year that the EU is banning sales of new petrol and diesel cars by 2035[1], the shift to Electric Vehicles (EVs) is going to gather pace. Many of us are probably driving the last combustion engine car that we will ever own.

The shift has to happen. About 18% of Ireland’s total emissions come from road transport, so this is a crucial sector to support in the transition to a more sustainable future. In Ireland, the Government has a vision of 1 million EVs on the road by 2030, but even though there have been rapid sales pick-ups in the past year, experts say it is not nearly fast enough to reach the ambitious target.

So people will need to be encouraged to make the shift, and where better than in their pocket? That’s where financial planning meets the road…

As we’re always at pains to point out when we stray into topics that are broader than our financial planning and investment advice expertise, you should definitely consult experts in the world of cars and energy grants. After all, we don’t really know our tappets from our engine valves…

It might be helpful to know that grants are accessed via car dealers, but information about which vehicles are eligible and where dealers are located is available from the Sustainable Energy Authority of Ireland’s website here. For more information on electric cars, check the dedicated page on gov.ie here.

But we’ll focus on the financial side of switching to EVs.

BIK Changes

As part of Budget 2022, the Dept of Finance announced the phasing out of the 0% Benefit-in-Kind on Electric Vehicles over the next 4 years. While this sounds counter-intuitive in seeking a switch towards EVs, the rationale is that BIK charges for cars is now based on the original market value (OMV) of the car, its annual business mileage and, for the first time, its CO2 emissions. The 0% rate was never going to persist indefinitely, but now there is a clear signal to employers that providing combustion engine vehicles is more expensive for the employee than providing electric cars.

It is recognised that there could be unintended consequences of employees not wanting company EVs in the short-term due to the BIK increase, and may instead opt for a car allowance and holding on to their gas guzzler for now. But the medium to longer-term shift will be to these cleaner vehicles, and the new BIK rates for EVs will be tapered in over a four year period to help ease any short-term pain. It’s also important to note that Ireland is doing more to encourage company car users to switch to electric power than any other European country, according to a new survey by an eco think tank[2].

We know there are practical challenges with the shift to electric vehicles for some employees. People who do high mileage in rural areas will face challenges around the range of their vehicle and access to fast charging points along the way. Important goals of the EV sector have to be to increase the range of vehicles, the proliferation of charging points and to get charging to a similar duration as that of stopping for petrol.

Financial benefits of EVs

The financial benefits of purchasing an EV include:

• Charging can be mainly done at home and timed to use the cheapest electricity rates. 80% of EVs are charged at home for convenience and most single-trip journeys are under 80kms.
• Electric cars are more than 70% cheaper to run than diesel or petrol cars.
• Budget 2022 has seen a significant funding increase in supporting the switch to electric vehicles and improving the associated recharging infrastructure.
• There will be no tax due on workplace charging, so long as the chargers are made available to all employees[3].

There are also several supports available too, to incentivise the purchase of EVs including,

• Grants towards the purchase of an EV
• A grant towards installing a home charger unit
• Partial relief against Vehicle Registration Tax
• Lower road tax
• Lower motorway tolling fees

So get ready. If you’re planning to continue to own a car, you’ll likely be going electric soon. It’ll be good for the planet and good for your pocket too.

[1] https://www.breakingnews.ie/ireland/eu-agrees-to-end-sales-of-new-petrol-and-diesel-cars-by-2035-1432624.html

[2] https://www.irishtimes.com/business/economy/2022/12/31/ireland-comes-top-in-european-electric-vehicle-tax-survey-for-company-cars/

[3] https://www.fleeteurope.com/en/financial-models/europe/article/ireland-end-company-car-tax-advantages-evs?a=JMA06&t%5B0%5D=Taxation&t%5B1%5D=Emissions&curl=1