Japan Continues to Offer Electric Vehicle Incentives

12 September 2013 Dashboard Insights Blog

Many countries around the world are struggling to build a strong electric vehicle (EV) industry. The actual sales of EV’s are far below the target number of many governments.

To boost the sales of EV’s, countries like the U.S., Germany, Japan, and China have introduced various types of governmental incentives. The U.S. offers tax credits up to $7,500 for a purchase of an EV; Germany offers tax exemption for a period of five years; and China offered subsidies up to 60,000 yuan (approximately $9,800) until end of 2012.

Japan, which has been offering subsidies to purchasers of EV’s for years now, has decided to continue to do so. On May 30, 2013, Japan’s Ministry of Economy, Trade and Industry (METI) announced that it would continue to offer “Clean Energy” subsidies to purchasers of EV’s, plug-in hybrids, and clean diesel vehicles in fiscal year 2013. These subsidies will survive while “Eco Car” subsidies, which applied to vehicles achieving certain fuel efficiency standards (including hybrid vehicles), were terminated in September 2012.

Under the “Clean Energy” subsidies program, EV purchasers in Japan are granted a maximum of 850,000 yen (approximately $8,500) upon the purchase of a new EV. The maximum amount was reduced this year from last year’s 1,000,000 yen (approximately $10,000). The formula to calculate the actual amount of subsidies was also slightly changed this year. The current formula is rather complicated but is basically: two thirds of the price difference between the EV and a comparable gasoline car.

The subsidies are granted to both domestically and foreign produced EV’s. Nissan Leaf and Mitsubishi i-MiEV as well as Mercedes Benz’s EV “smart fortwo electric drive” are on the current list of eligible EV’s. The Tesla Roadster was on the list during 2010-2012.

In addition to the subsidies, EV purchasers enjoy exemption and reduction from certain auto-related taxes. For example, EV’s are exempt from automobile acquisition tax (basically 5% of the purchase price) and from automobile weight tax. EV’s also have substantial reduction from annual automobile tax.

It is unclear how long Japan will continue to offer these subsidies and tax benefits and how successful it will be in promoting the sales of EV’s. The race to lead the world in developing the most successful EV industry is yet to continue.

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