Italy set to increase EV incentives to 10,000€ – are car makers ready?

The Italian government is preparing new fiscal measures to sustain the economic recovery, following months of lockdown at the peak of the coronavirus pandemic. Like in many other countries, particularly so in Europe, economic stimulus is being directed preferentially to a sustainable recovery, especially in the transport and construction industries. As part of proposed new measures, current incentives to low emission vehicles are set to be increased by at least 50% from August for the rest of the year, to levels aligned to similar policies recently adopted in countries like France and Germany.

Under the bill, full electric vehicles (technically, vehicles with CO2 emissions between 0 and 20 grams/km) will now be eligible for a 10,000 euro discount, when scrapping your old car, or 6,000 euro without. This compares to 6,000 and 4,000 euro respectively, under the current “ecobonus” legislation which started last year. Also included in the scheme are hybrids with CO2 emissions between 21 and 60 grams/km, which will see their existing incentives boosted to 6,500 euro if scrapping an old car, or 3,500 euro otherwise (current incentives are 2,500 and 1,500 euro respectively). These enhanced incentives will be funded in part by government and in part by car makers, and will be available for cars up to 61,000 euro including VAT (which means most Tesla Model 3 trims will also benefit from it).

A bit more controversial is the inclusion in the bill of incentives for traditional internal combustion vehicles (also see this Cleantechnica article), which will receive a discount between 1,750 and 3,500 euro under similar terms, albeit with a maximum selling price of 48,400 euro including VAT. It’s a different signal to the one Germany recently gave with its new incentive scheme – no help for ICE cars there – but it’s clear that automakers (particularly Italy’s FCA group) played a key role in lobbying for broader incentives after the near-annihilation of the car market during lockdown.

While the extension of subsidies to non-electrified vehicles sounds odd at a time where the switch to e-mobility is increasingly obvious, the bulk of the proposed new measures is arguably among the best available today around the world and – along with local strict environmental regulations being progressively enforced in cities like Milan – will mostly favour EVs. It represents a huge boost to the existing ecobonus scheme for electric vehicles and it will clearly have a strong impact on electric car sales for the rest of the year. Italy’s car market is dominated by compact models, especially A and B segment-type cars, which is also reflected in the EV portion of it. At the price point of these models, typically below or around 30,000 euro (including VAT), the heft of the new incentives for electric mobility will be substantial.

The new scheme will give the ability to get a brand new full electric car for as low as ~12,000 euro (almost half price!), for a tiny model such as the Skoda Citigo-e iV – currently the cheapest BEV offering in Italy alongside its VW and Seat siblings. 20,000 euro will buy you an Opel Corsa-e, and very likely the base version of the brand new Fiat 500e (currently listed at ~35,000 euro for the “La Prima” model, but due for a cheaper base version very soon). Go up a few thousands and the list will include all the most popular models in today’s Italian EV market.

The 20,000 euro threshold being hit by many electric models through the new incentives is particularly meaningful, as it roughly marks the average price of new cars sold in Italy – a rather low figure compared to other large European markets – and will open electric mobility to a much broader customer base. Beyond that, even upmarket cars such as Tesla Model 3 will become tantalisingly within reach by many (a Standard Range Plus will go down 20% from its ~50,000 euro full price).

As the Italian EV market prepares to accelerate further from its recent highs (see June sales) thanks to the enhanced ecobonus, many car makers are set to benefit – especially those with a compelling offer of compact electric models. The question, if anything, will be whether they are able to respond in time to the ensuing, explosive increase in demand, or if they will be limited by their own ongoing supply constraints, an ironic thought for the industry following months of sales drought during the pandemic.

We can see the likes of PSA (Peugeot, Citroën, DS, Opel, Vauxhall) and Volkswagen group (with VW, Seat and Skoda) easily reaping the rewards of their recent EV offensive, through their range of different vehicles sharing a common technology. Other, less reactive car companies might quickly fall behind in the EV race. One thing is for sure: Italy and other European markets are now ready to seriously test the limits of current EV supply by legacy car makers. As long as they are able to fulfill customers’ requests, the market is there for the taking.