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Hot hatches could become an endangered species

By Andy Enright, 20 Jan 2021 News

Renault Megane RS cornering on a race track

Could Australia adopt France’s crippling tax on performance cars?

France has announced that its already severe emissions based taxation system will be revised for 2021, with duties more than doubling in certain cases. The result is that combustion-engined hot hatches could prove to be financial non-starters.

The country that spawned greats like the Peugeot 205 GTI and the Renault Clio 182 has seen increases result in a new Megane RS costing its first owner as much as €10,488 (A$16,523) in carbon dioxide emissions tax above its €40,700 (A$64,121) price tag.

While this might not seem to affect Australia’s market in the short term, it puts a very unambiguous end stop on traditional hot hatch development, and means that new F1 team Alpine will need to commit to ultra-low emission plans.

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Starting down that path already, Alpine recently announced it has signed a “memorandum of understanding” with Lotus to co-develop an EV sports car.

French cars have traditionally overperformed in their domestic market. Remove that strong local element from the business case and it’s likely that many models wouldn’t stand up purely on export sales.

Peugeot has already withdrawn its performance hatches from sale in Australia and Peugeot Sport has made a commitment to electrification, taking its cue from the technical showcase that is the 508 PSE hybrid.

It’s expected that next-gen 208 and 308 GTI models will offer the same hybrid tech to side step emissions taxation.

Plug-in hybrids that can travel 50km on electricity alone also avoid the emission tax.

France has declared war on the big SUV as well, with a tax on vehicle weight set to be introduced in 2022, charging €10 (A$15) for every kilogram over 1800kg. That’d be around a surcharge of €10,000 (A$15,759) on a Nissan Patrol, added to the €29,070 (A$45,811) charge for emitting over 218g/km of carbon dioxide.

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Still, it could have been worse. The rate was slated to be €40,000 (A$63,052) for cars producing 225g/km of CO2 which would then rise to €50,000 (A$78,815) in 2022. A rethink by the French government has seen the most punitive taxation put on hold.

Indeed, the French model is one that is being scrutinised in Canberra. An Australia-Europe free trade agreement was due to be finalised in 2020, but Australia’s Luxury Car Tax (LCT) proved a notable bone of contention.

Officials close to the process, which has been set back to 2021 due to the ongoing effects of the coronavirus, claim that abolishing LCT and replacing it with an emissions-based taxation system is one of the European Union’s non-negotiables for a free trade agreement.

On the plus side, any deal would theoretically abolish the five per cent tariff currently levied on European vehicles imported into Australia.

Senior EU trade negotiator Cornelis Keijzer has gone on record claiming the removal of the car tariff and luxury car tax is “one of the key demands on our side”.

Mr Keijzer claimed that the luxury car tax hits European car-makers more than any other exporter and acted as “an extra customs tariff”.

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While that could be great news if you’re looking to buy a Porsche Taycan, it would add thousands to the price of a Ford Mustang GT.

Negotiations are ongoing, but given global pressures on vehicle emissions, Australia may find its policy dictated by market forces.