Swiss Federal Council ends tax exemption for EVs

The regular tax rate of four per cent will apply to electric cars from 1 January 2024. The Federal Council initiated an amendment to the Vehicle Duty Ordinance in April, said to counteract the decline in revenue from the automobile tax and secure the deposits in favour of the National Roads and Agglomeration Transport Fund (NAF). In line with the Federal Constitution, the revenue from this tax may only be used for the NAF.

According to the Federal Council, “the situation has now changed significantly” as the number of imported EVs continues to grow. Around 8,000 EVs were imported into Switzerland in 2018. In 2022, that figure rose to 45,000 vehicles. And in the first six months of 2023 alone, 30,400 electric cars were imported – a plus of 66 per cent compared to H1 2022. In H1/2023, electric vehicles accounted for 23 per cent of total imports.

Specifically, the Federal Council calculates that the tax loss in 2022 amounted to 78 million Swiss francs (81 million euros). For the current year, it expects a decline in revenue of 100 to 150 million francs – i.e. of 104 to 156 million euros. If the tax exemption had continued beyond 2023, the cumulative tax shortfall for 2024 to 2030 would have amounted to an estimated two to three billion francs.

The tax is levied on the import price, not the retail price. “According to the industry, the ongoing reduction in production costs for e-vehicles will result in price parity between fossil fuel vehicles and e-vehicles as from 2025. It should therefore still be possible to achieve a profit margin in the future, without increasing prices for the consumer and without state subsidies,” the press release states. “The Federal Council takes the view that the exemption from duty as an incentive is no longer necessary, given the sharp rise in the share of e-vehicles in total car imports and the convergence of prices.”

However, initial reactions from the industry are going in a different direction: the importers’ association Auto-Schweiz describes the decision as a “black day for electromobility in Switzerland.”

“The deterioration of the framework conditions for EVs is a stark contrast to the CO2 reduction targets for new vehicles set by the same politicians,” says Auto-Schweiz President Peter Grünenfelder. “The transport sector must reduce its CO2 emissions by 57 per cent by 2040 compared to 1990. With anti-consumer decisions at the expense of those who want to buy an electric car from 2024, this target is far away. At the same time, it sends the worst possible signal when the automotive industry is trying to convince more and more customers to switch to a zero-emission vehicle.”

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