The small electric car Renault Twingo ZE will be on sale later this year, but its price is very disappointing.
In Germany, BAFA (Federal Office of Economics and Export Control) manages the “environmental bonus” funding. To be eligible for subsidies, the electric car model needs to be included in BAFA’s “List of Eligible Electric Vehicles”. The latest version of this list also includes the Renault Twingo ZE, in which the basic version “Vibes” costs 20.831,94 euros (VAT excluded).
Including the regular German VAT of 19 percent, the electric Twingo gets a final price of 24.790,01 euros. However, for the remaining months of this year, VAT in Germany was temporarily reduced from 19 to 16 percent as part of the Corona stimulus package.
With the temporary VAT of 16 percent the price drops to 24.165,05 euros.
In Germany, buyers receive 6.000 euros from the state, and a 3.000 euros net discount from the automaker (3.480 euros at 16 % VAT, 3.570 euros at 19 % VAT).
Anyway, cases like this show us that government subsidies are counterproductive and incentive automakers to overprice their electric cars.
With a WLTP range of 180 km (112 miles) from a tiny 22 kWh battery, there’s no good reason why the electric version of the Twingo costs twice as much as the ICE (Internal Combustion Engine) version.
Unfortunately, for legacy automakers electric cars are still just compliance cars required to avoid emission fines and their prices don’t reveal their true cost.
For example, if an automaker decides to sell 100.000 units in a year only to comply with EU emissions regulations, then it just needs to estimate how high the price can be and still find 100.000 customers. If the automaker estimates that 100.000 customers are willing to pay as much as 15.000 euros for this electric car, which receives 9.000 euros of subsidies, then selling price will be 24.000 euros. It’s just business as usual.
Subsidizing private goods or services is a very inefficient public policy, in most cases the tax-payer money goes straight into the corporations’ pockets that keep prices artificially inflated. The best way to force automakers to switch to electric cars is to make it harder to sell polluting cars with higher taxes. Public money should be used to electrify public transportation instead.
Now I’m curious to know if the Dacia Spring will also be such a disappointment. It probably will…