April 2018 Real World Driving Emissions A PVS White Paper PUDDYS VEHICLE SOLUTIONS LTD
CONTENTS Contents... 1 Introduction to Real World Driving Emissions... 2 Emissions Testing: Present & Future... 2 Figure 1 Table of Examples of Expected Changes in FUEL Efficiency [5]... 2 Effects of WLTP and... 3 Adopting the New Standards... 3 Figure 2 Comparison of two popular company cars [8]... 3 Figure 3 Comparison of two popular company cars Using WLTP... 4 Figure 5 Effect on Capital Allowances... 4 Figure 4 Comparison of VED for two popular cars Using WLTP... 4 Closing Remarks... 5 Bibliography... 6 1
INTRODUCTION TO REAL WORLD DRIVING EMISSIONS In the Autumn Budget 2017, the government announced that it would legislate in a future Finance Bill, for the WLTP system to be introduced from April 2020 [10]. As of the 6 th April 2018 the company car tax rate for a diesel certified will be equivalent to that of a petrol car with the same emissions band. Any diesel car not certified (Real World Driving Emissions Stage 2) will be subject to a 4% supplement [1], and from September 2018 the WLTP (World Harmonised Light Vehicle Testing Procedure) approval will be mandatory for new cars [7]. This paper is designed to explore how the WLTP and the supplement will affect official performance and emissions figures to try and remove the uncertainty surrounding potential legislation changes for company car drivers, fleet managers and fleet owners. EMISSIONS TESTING: PRESENT & FUTURE Previously, new vehicles were tested using the NEDC (New European Driving Cycle) standard, an outdated procedure, designed in the 1980 s based on theoretical driving and performed in a laboratory [3]. WLTP is the new emissions testing procedure replacing the NEDC test. The WLTP is accompanied by the. WLTP is a lab test designed to bridge the gap between manufactures published performance statistics and those achieved in real life. The speeds involved are more realistic of those driven on actual roads, with higher speeds, harder acceleration and braking as well as representations of traffic lights, congestion and so on [3]. Under vehicles are driven on public roads over a wide range of different conditions. Specific equipment installed on the vehicle collects data to verify that legislative caps for pollutants such as NOx are not exceeded [4]. As such, enhances the WLTP by ensuring the delivery of low emissions over on-road conditions. FIGURE 1 TABLE OF EXAMPLES OF EXPECTED CHANGES IN FUEL EFFICIENCY [ 5] Make Model Variant NEDC (mpg) Expected WLTP (mpg) Decrease in Efficiency Peugeot 108 1.0 VTi 68 Active 68.9 51.2 25.7% Hyundai i10 1.0 66 SE 60.1 44.8 25.5% Ford Focus 1.0 Ecoboost 100 Zetec 61.4 42 31.6% Volkswagen Golf 1.0 TSI 115 BMT Match Edition 62.8 46.5 25.9% Nissan Qashqai 1.5 dci 110 Acenta 74.3 48.3 34.9% Fiat 500X 1.6 Multijet 120 Pop Star 68.9 49.9 27.6% BMW 320d 163 Efficient Dynamic Plus 74.3 48.2 35.10% Jaguar XE SE 163 68.9 41.9 39.2% Audi Q5 2.0 TDI 190 Quattro SE 56.5 36.5 35.4% Volvo XC90 2.0 D4 SE Nav 60.1 42.9 28.6% This table really shows the divide between what manufactures are selling and what the customer is getting, WLTP should make it easier for to decision makers to make accurate and cost-effective decisions about their solution. 2
EFFECTS OF WLTP AND With the fleet industry speculating that WLTP test figures are to be adopted by HM Treasury by 2020/21 [2] it is important to understand the effects of these changes. According to FleetNews 98% of new vehicles fail to meet their published consumption figures [5]. Furthermore, FleetNews expects the introduction of WLTP to yield significant changes in official consumption figures (fig. 1). RAC notes that the new tests will give consumers fuel economy information that is far closer to what they can expect from behind the wheel [6]. However, one implication of bridging this gap will inevitably be an increase in CO 2 emissions. A significant increase in published CO 2 emissions will yield an increased taxable BIK, making it necessary for company car fleet providers to find a sustainable solution accounting for this. Furthermore, vehicle excise duty may increase for equivalent models. The standard sets a maximum permitted level of car NOx emissions in real world driving situations, and it is measured through portable emissions-measuring equipment in a variety of real driving trips. Cars must pass the certified level of NOx emissions irrespective of the driving behaviour during the test - for example, the level of emissions produced when an engine is under stress, say, by driving uphill [7]. There are no diesel cars that meet the new standard [8]. ADOPTING THE NEW STANDARDS Adopting the certification has a significant effect on diesel company cars, since no diesel car is currently compliant, company car tax for all diesels cars will be subject to a 4% supplement. A summary for two popular cars [8] is shown below (see fig. 2). However, this is still determined by the NEDC emissions standard and is a short-term outlook. FIGURE 2 COMPARISON OF TWO POPULAR COMPANY CARS [ 8] Volkswagen Golf 5 Door 2.0 TDI 150PS BMT BMW 3 Series Saloon 320d M Sport 2017/18 2018/19 2017/18 2018/19 BIK Value 6,208 6,952 BIK Value 8,466 9,482 20% Tax Payer 103 116 20% Tax Payer 141 158 40% Tax Payer 207 232 40% Tax Payer 282 316 Employer NIC(A) 865.64 959.43 Employer NIC(A) 1,168.34 1,308.54 For the Golf, the 20% tax payer is 13 a month worse off, for the M3 the 40% tax payer is 34 a month worse off. The employer also see s their national insurance bill increase, by 94 per annum for the Golf and by 140 per annum for the M3. When WLTP is used to determine the company car tax rate (expected in April 2020) then it is expected that vehicles will have increased published CO 2 of approximately 20g/km. For the above examples we would get the following changes (see fig.3). 3
FIGURE 3 COMPARISON OF TWO POPULAR COMPANY CARS USING WLTP Volkswagen Golf 5 Door 2.0 TDI 150PS BMT BMW 3 Series Saloon 320d M Sport CO2 109g/km 129g/km CO2 137g/km 157g/km CCT Rate 22% + 3% 29% + 4% CCT Rate 26% + 3% 32% + 4% BIK Value 6,208 8,195 BIK Value 8,466 10,510 20% Tax Payer 103 137 20% Tax Payer 141 175 40% Tax Payer 207 273 40% Tax Payer 282 350 Employer NIC(A) 865.64 1,130.91 Employer NIC(A) 1,168.34 1,450.38 For the Golf, the 20% tax payer is actually 34 a month worse off, for the M3 the 40% tax payer is actually 68 a month worse off. The situation is no better for the employer, National Insurance increases by 265 per annum for the Golf and by 282 per annum for the M3. Changes brought by WLTP will affect the amount of corporation tax a business pays, take the Ford Mondeo as an example with 129 g/km CO 2 emissions and a p11d value of 20,140. Currently, business can wipe 18% of this cost off their profit on reducing balance basis, however the increase in published CO 2 moves the Mondeo into the special rate band so that only 8% can be written down (see fig 5) FIGURE 5 EFFECT ON CAPITAL ALLOWANCES TOYOTA Prius 1.8 VVT-i Active Auto - 24,050 Ford Mondeo Hatch 2.0 Duratorq TDCi Edge 140PS - 20,140 Current CO2 Expected CO2 & Current CO2 Expected CO2 & CO2 70g/km 90g/km CO2 129g/km 149g/km Capital Allowance 100% 18% Capital Allowance 18% 8% Amount Eligible for Tax Relief 24,050 4,329 Amount Eligible for Tax Relief 3,625.20 1,611.20 Increase in Taxable Amount 19,721 Increase in Taxable Amount 2,014 For companies who have worked hard to go green, WLTP will have serious implications on corporate tax contributions, particularly for cars crossing over the 75 g/km threshold. Finally, applying the expected WLTP emissions figures to VED for some of the vehicles above it is clear to see that purchasing a new car will become even more costly in a tight economy (see fig.4). FIGURE 4 COMPARISON OF VED FOR TWO POPULAR CARS USING WLTP Volkswagen Golf 5 Door 2.0 TDI 150PS BMT BMW 3 Series Saloon 320d M Sport CO2 109g/km 129g/km CO2 137g/km 157g/km VED Y1 165 205 VED Y1 515 830 VED Y2+ 140 140 VED Y2+ 140 140 For the Golf first year VED increases by 40 and for the M3 a 315 increase. 4
CLOSING REMARKS Emissions and consumption certification tests are changing to a new standard WLTP and that bridges the gap between real world performance and published manufacturers statistics. WLTP and are significant driving factors in the transition to less polluting, zero and ultra-low-emission cars. The introduction of now will help reduce NOx emissions and improve local air pollution in support of the UK plan for tackling roadside nitrogen dioxide concentrations by forcing fleet managers to move away from a purely diesel-based solution. When HM Treasury adopts the WLTP certification to determine BIK, VED and Corporation Tax there will be increases that effect all parties. As the government continues to encourage high emissions vehicles off the road, it is clear to see that drivers and owners of plug-in hybrid and electric vehicles will be least affected by the new testing procedures. 5
BIBLIOGRAPHY [1] https://www.gov.uk/government/publications/income-tax-cars-appropriate-percentage-increasingthe-diesel-supplement/income-tax-cars-appropriate-percentage-increasing-the-diesel-supplement [2] http://www.fleetservicegb.co.uk/fleets-to-wake-up-to-new-real-world-driving-wltp-mpg-and-co2- emissions-test/ [3] http://wltpfacts.eu/what-is-wltp-how-will-it-work/ [4] http://www.caremissionstestingfacts.eu/rde-real-driving-emissions-test/ [5] https://www.fleetnews.co.uk/fleet-management/environment/fleets-and-vehicles-real-worlddriving-changes [6] https://www.rac.co.uk/drive/advice/emissions/real-world-driving-emissions-tests/ [7] http://www.dft.gov.uk/vca/fcb/wltp.asp [8] http://www.aldautomotive.co.uk/test [9] TNO 2016 R11285, NEDC - WLTP comparative testing [10] https://www.gov.uk/government/publications/taxable-benefits-and-vehicle-excise-duty-regimefor-measuring-carbon-dioxide-emissions/taxable-benefits-and-vehicle-excise-duty-regime-formeasuring-carbon-dioxide-emissions 6