The tax on Tesla cars is crony capitalism in the polder

mathijs boumanCrony capitalism in the polder exists. Just look at the tax on Tesla electric cars, writes economist Mathijs Bouman.

In the American state of Michigan you’re not allowed to buy a car on the internet. As of last year, car buyers have to use an existing car dealer. A lot of car manufacturers have dealership networks so it doesn’t present much of a problem. But there’s one make that only has showrooms and an internet shop. Electric car maker Tesla is the only car manufacturer which sells directly to clients.

Other American states, such as New Jersey, Colorado, Texas, Arizona and Virginia, have adopted anti-Tesla laws and put the kibosh on direct car sales.

It’s what Daniel Crone, professor at the University of Michigan, calls ‘crony capitalism’ in a recent scientific report. It’s traditional car makers and dealers using their political influence to put one over on a new and potentially dangerous competitor. As a result the consumer suffers and the technological advances of electrically powered cars are being sabotaged.

Here in the Netherlands we take a much more liberal view. It’s all go with the electric revolution. Fully electric cars – the so-called zero emission cars – will remain subject to the low 4% additional tax liability for lease cars, junior finance minister Eric Wiebes announced last week. The owners of hybrid cars will be paying more but, says Wiebes, the ‘early adopters’ who choose to go electric all the way can count on the undiminished support of the cabinet.

‘Undiminished’ is a relative term in this context. The 4% additional tax liability only covers electric cars under €50,000. Cars over €50,000 are subject to a much higher rate. And there’s only one make that sells electric cars of over €50,000. That’s right, it’s Tesla. The cheapest online model costs €83,000. Driving a Tesla would add thousands of euros to the annual lease car bill.

The €50,000 cap is not something Wiebes himself came up with. It was the motor trade sector organisations such as Bovag (dealerships) and Rai (manufacturers and importers) who put it to him and the cabinet was happy to oblige. Crony capitalism the Dutch way. When asked, a Bovag spokesperson denied the cap is meant to foil a newcomer and his superior product. On the contrary, it promotes a level playing field because without the cap luxury electric cars would profit from a more advantageous tax break than cheaper cars.

I’m not convinced. There’s another expensive zero emission made by an established car maker with a dealership network: Toyota’s hydrogen Mirai. It’s not for sale in the Netherlands yet but in Germany it’s priced at €79,000. It’s pure luxury, but there’s no €50,000 cap on hydrogen cars, Wiebes said. It makes sense.

Mathijs Bouman is an economist and journalist

This article appeared earlier in the Financieele Dagblad