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Is it worth a company to buy an electric car?

23 June 2021
We compared the costs of 5 cars for companies, analyzing them by TCO: Total Cost of Ownership, a methodology that analyzes the real costs of using a vehicle.

The TCO allows a company that intends to buy a vehicle to calculate in advance the financial impact that this vehicle will cause, during the period in which it is the owner. The calculations were made for a period of 4 years and 100,000 km.

We used 5 versions of the Volkswagen Golf for the calculations:

Volkswagen Golf 1.4 TSI 245 GTE+ 5p 7DSG - Hybrid: Petrol/Plug In
Volkswagen Golf 1.5 eTSI 150 R-Line 5p DSG - Mild Hybrid: Petrol/Electric
Volkswagen Golf 2.0 TDI 150 R-Line 5p DSG - Diesel
Volkswagen ID.3 150 55KWh Style (Pure Performance) - Electric
Volkswagen ID.3 204 62KWh Tech - Electric

The TCO takes into account all factors with a financial impact, such as: new purchase price, depreciation suffered by cars over time, tax obligations and incentives, GDP evolution and the expected inflation rate.

We also include expected maintenance costs, tires and fuel. In hybrid vehicles we considered: 1/3 of the kilometers to electricity and 2/3 to combustion, for the calculation of fuel expenses.

For companies, there are different tax options than those for individuals, so we took into account factors such as:

- possibility to deduct fuel VAT (50% VAT on diesel and 100% VAT on electricity)
- possibility of deducting VAT from the purchase of the vehicle (non-existent for Diesel and non-plug-in hybrid petrol/electric models)
- IRC tax benefits, for the reduction achieved in the taxable amount when using vehicles in the development of the activity
- autonomous taxation (electric vehicles are exempt)

Considering all these variants, the 2 least profitable models are the Golf 1.5 eTSI 150 R-Line 5p DSG (Mild Hybrid: Petrol/Electric) and the Golf 2.0 TDI 150 R-Line 5p DSG (Diesel), both at a cost per 100 km above 63 €.

The most profitable models for companies are clearly the electric ones: Vw ID.3 150 55KWh Style (Pure Performance) and Vw ID.3 204 62KWh Tech, with costs per 100 km between €21 and €22!
Autonomous taxation or Income in kind?

We also compared the 2 alternatives: autonomous taxation (supported by companies) vs. income in kind (applicable to vehicles allocated to employees, for their full use and identified in employment contracts, therefore being taxable in the IRS case).

With the exception of electric vehicles, which are exempt from Autonomous Taxation, the allocation of vehicles to the employee and taxation of this income in kind, in IRS, is a very sensible decision, since even considering an effective IRS rate of 20% , the amount (paid by the employee) is on average around 10% of what the company would pay in Autonomous Taxation.
All in all, the electric ones pay off!