Electric Vehicles

The Netherlands Leads the Charge
A gleaming Jaguar I-Pace, the maker’s first all-electric car. Sales skyrocketed last year before tax rules made them more unaffordable. Photo © Harry NL

The Netherlands Leads the Charge

By Simon Johns - Dec 03, 2019

The Dutch have taken to electric vehicles like ducks to water. The sector was propelled by generous tax breaks and a high median income. But as the government is slowly rolling back the benefits, driving an EV may lose its appeal.

Upon arrival at Amsterdam Airport Schiphol, you notice something unusual as you set foot outside the terminal. For a busy international hub, it is eerily quiet out in the open. That is because the fleet of taxis awaiting travelers is mostly all-electric. So too are the buses coming and going every few minutes, now numbering a fleet of 100. 

The Dutch have embraced electric mobility, albeit with a little help from their government. The Netherlands is one of only five countries in the world where more than 1% of vehicles in the total passenger car fleet are electrified, along with China, Norway, Sweden and Iceland. The share of battery EVs in new sales is likely to reach 10% by the end of the year, and the government’s stated aim is to ensure all new cars sold are zero emissions by 2030 at the latest.

According to the Ministry of Infrastructure and Water Management, there were 171,155 EVs on the road by Sept. 30, 2019. Of those, 74,961 were BEVs. BEVs are still outnumbered by plug-in hybrid EVs, because of government incentives that existed between 2013 and 2017. For the past two years, these incentives have existed only for BEVs, and demand for them has mushroomed at the expense of PHEVs. 

In September alone, 7,645 new BEVs were registered in the Netherlands, compared with only 450 PHEVs. At 5,768 units, the Tesla Model 3 was not only the bestselling BEV that month, but was also the most popular vehicle overall. It is on track to become the country’s highest-selling vehicle of 2019. 

The success of the Model 3 lifted the share of BEVs in total vehicle sales to 20.1% in September and to 8.9% for the first nine months of the year. 

With a Little Help

Government policy has been a key driver of swelling BEV sales in the Netherlands. Company cars are a popular perk for Dutch workers and are considered part of their taxable income when used privately. The added taxable income rate for conventional cars and PHEVs is 22% of the purchase price. But it is 4% for BEVs costing up to €50,000. However, on Jan. 1, 2020, it will increase to 8% for BEVs priced up to a maximum of €45,000 and up to 22% for cars costing more. 

By the end of this September, BEV sales for the year already stood at 29,811, beating the Dutch Automotive Industry Association’s 2019 forecast.

This is significant, since 53% of all newly sold commercial vehicles and passenger cars are leased in the Netherlands. In total, there are about 1 million leased vehicles on Dutch roads, 68% of which are driven as a company car. 

But the Dutch government’s tinkering with tax policy has had detrimental side effects. The added taxable income rate for PHEVs increased to 7% from zero in 2014, leading to a large spike in registrations by fleet owners in the final months of 2013. It went up again in 2016 to 15% before being brought into parity with conventional cars in 2018. This essentially killed off the attractiveness of PHEVs in the process.

Similarly, BEVs started at a zero taxable rate. So, when the government announced that starting in 2019 the tax would be applied at 4%, with vehicles costing more than €50,000 at an even higher rate, fleet owners rushed to get their hands on higher-priced Teslas and Jaguars in the closing months of 2018 before the new rate was applied.

Such was the effect of the announcement that Jaguar, which until then had a low profile in the Netherlands, became the bestselling manufacturer in December 2018 and its I-Pace, priced at some €80,000, the bestselling car.

A zero rate for vehicles that often cost more than double or even triple the price of a regular company car was criticized from the onset, and soon it became known as the Tesla tax. 

While sales of the expensive Model S and I-Pace have since slumped, the lowered incentives have done little to dent BEV sales overall. 

By the end of this September, BEVs sales for the year already stood at 29,811, beating the Dutch Automotive Industry Association’s 2019 forecast. With a month left to go and another rush-to-register expected, sales may well hit 40,000 units by year end. 

This would likely push the share of electrified vehicles – BEVs and PHEVs – in new passenger car sales in the Netherlands to 10%, in line with the government’s 2020 target. By 2025, half of all new cars sales must be electrified and one-third of that should be BEVs, and by 2030, the goal is to sell only zero-emission vehicles.

The government said on the 2019 budget day that the BEV tax break would be phased out over the next six years, it added that “fiscal measures will continue to stimulate the use of electric company cars above that of cars that run on gasoline or diesel.”

Current Affairs 

An often-cited obstacle to BEV uptake is charging infrastructure, or the lack of it. According to the Netherlands Enterprise Agency, the country has the highest density of charging points in the world. The agency counted 26,317 public charging points at the end of September 2019, plus another 20,290 semi-public chargers. On top of that, there are 1,062 fast chargers spread across the country. To put that into perspective, 9% of all charging points worldwide are in the Netherlands.

In fact, at some 4,600 there are more charging points in Amsterdam than there are petrol stations in the entire country. If the number of private charging points at people’s homes were to be included, the number in the whole country would come out at more than 150,000.

Small surprise, then, that electric driving in the Netherlands has spawned an economically strategic industry. In 2018, it represented a value of €1.3 billion, a 44% increase over 2016, and added value of €420 million. With the continued uptake of BEVs, this will only increase. 

By 2030, there will be an estimated 2.8 million EVs on Dutch roads, and the number of charging points will grow to 1.8 million, according to the Dutch government. This means companies will have to add some 15,000 charger points per month. 

Don’t Plug Out 

As much information as there is about electric driving in the Netherlands, there is little information on the possible impact on the country’s lubricants market. 

“We, like many others, don’t have access to reliable market information. At a conference you’ll hear one thing, whereas a major might tell you combustion engines will still have a 40% share in 20 years’ time,” said Jos Jong, chairman of the Dutch Lubricants Association, or VSN.

“We try and cooperate with other organizations and associations in an effort to keep up with developments but we as VSN cannot make forecasts about market developments. We don’t have policy data for that, and the majors are notoriously tightlipped about market information,” said Jong. 

His sentiment is echoed by Hans Groen, Chemlube’s representative for the Netherlands. “We are usually only seeing estimates about this or that, or hearing statements along the lines of ‘We believe X will.’ Reliable figures are hard to come by. That said, my estimate is that we’ll see a dramatically smaller market for the [toll] blenders and producers of lubricants in Europe, who are already under pressure from a global supply glut that is affecting their margins.

“We, like many others, don’t have access to reliable market information. At a conference you’ll hear one thing, whereas a major might tell you combustion engines will still have a 40% share in 20 years’ time.”
— Jos Jong, Chairman, Dutch Lubricants Association

“The demand side for lubricants for passenger car motor oils will be for full synthetic products (5W-30) or even lighter viscosities, as we already see a small market for 0W-8. In the heavy-duty segment, the quality will change to the full synthetics as well, but the change will be slow in coming and expected to take at least another five to 10 years,” he added.

Shocker

Jong and Groen do not believe there is much that will stand in the way of the continued uptake of BEVs in the Netherlands. While the country is considered a frontrunner, Jong has not yet seen requests from other national lubricants associations for insights. 

“Surely there are members who dread the move towards electric driving, but everyone agrees that this is a development you need to follow, not something to try and resist. That won’t work. We’re on the aftermarket side, so like many others we have to follow the OEMs,” Jong explained.

According to Harald Oosting, president and CEO of lubricant data services provider Olyslager, the impact of the uptick in BEV sales will be limited in the Netherlands, mainly because the share of these vehicles in the entire fleet of some 8.7 million passenger cars remains small.

“The direct impact will be negligible, and will likely remain so for the coming 20 or-so years,” he told Lubes’n’Greases. “There are simply too many vehicles with a combustion engines still on the road,” he added. 

On top of that, Oosting is not convinced that the trend of ever-increasing BEV sales in the Netherlands will continue. “If the government is serious about raising the taxable income rate on leased BEV, which has been the main driver of new registrations, we might end up with a situation where people will switch back to gasoline or diesel cars. The next five years will be interesting in that regard.” 

Copper wire, the oft-repeated joke goes, was invented by two Dutch people fighting over a penny, in reference to their famous thriftiness. In seeing that an electric car can have as much as 6 kilometers of copper wiring, with analysts forecasting an 840% increase in demand for copper as a result of the growing number of BEVs in the coming years, it is probably best to let the Dutch keep doing what they are doing.