Japan is mulling charging local tax on electric vehicles amid fears of a potential drop in revenue — which may come as bad news for giants like Toyota Motor Corp. TOYOF and Elon Musk‘s Tesla Inc. TSLA.
What Happened: Japanese policymakers floated a plan of raising EV taxes to tackle a difficult financial situation as customers moved away from more heavily taxed gasoline vehicles, reported Nikkei Asia.
See Also: Tesla Could Drop To $150 Before Year-End — Analyst Smells ‘Window Of Opportunity’ For Investors
Japan’s local automobile taxes have a class component based on engine size that ranges up to 110,000 yen ($789) a year. However, that is set at 25,000 yen for EVs and fuel cell vehicles, making it the least-taxed among autos, apart from minicars.
The officials at Japan’s Ministry of Internal Affairs and Communications, which looks after local taxes, said one possible change could be taxing electric cars based on motor power — an approach similar to some European nations.
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This comes as the Japanese Prime Minister Fumio Kishida-led government is concerned that a shift to EVs will reduce the revenue source for the state. The revenue from the class component of local auto taxes is expected to total 1.5 trillion yen in the fiscal year 2022, which is 14% lower than what it was two decades ago, the report noted.
Why It Matters: Although EVs account for only 1%-2% of new car sales in Japan, Elon Musk-led Tesla has seen a growing popularity in the country. The company sold more than 5,200 cars in Japan last year, up from about 1,900 in 2020.
Tesla also placed its 50th supercharger in Japan as it eyes expansion in the country.
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