(Author’s note: This story has been updated to reflect a statement from the Danish Ministry of Taxation.)
With an expiring tax break looming in the distance, the Danish government suggested this week that Tesla Motors was going to extraordinary lengths in order to profit from the current tax law. Specifically, Danish Tax Minister Karsten Lauritzen initially accused the car manufacturer of buying up its own cars now to benefit from tax subsidies with plans to resell the cars later at a huge profit; later, Lauritzen indicated that he had received a satisfactory explanation from the company.
Under current law, available incentives for the popular Model S include exemptions from green taxes and exemptions from the vehicle registration tax. A complete exemption on the vehicle registration tax is slated to expire at the end of 2015: that’s just 49 days away. Without the exemption, the price of the Model S would increase from about 650,000 kroner ($97,233 US) to around 1.8 million kroner ($269,262 US) over the phaseout period.
That three-fold increase in price, alleged the Danish government, creates the perfect opportunity to manipulate pricing. And that is what Lauritzen alleged was happening. According to Lauritzen, 2,500 electric cars, which were “most likely Teslas,” were recently registered in the country.
To put that in perspective, reports indicate that the car manufacturer sold 951 Tesla cars in the country through October. According to the European Automobile Manufacturing Association, for the first three quarters of 2015, Denmark registered a total of 2,200 electric, natural gas, and LPG‐ fueled vehicles from all manufacturers (downloads as a pdf).
Buying their own cars now and then reselling those cars – at a profit – would mean that Tesla would benefit from government subsidies for consumer purchases that didn’t really happen during the calendar year. The supposed cost to Danish taxpayers? According to Lauritzen, one billion kroner ($144,926,500 US), who declared that “I, as the tax minister will not allow this to happen.”
Initially, the car manufacturer dismissed the story. Later, Tesla confirmed to Forbes that they had “ordered number plates for 2,500 cars” but stressed that was not the equivalent of buying and registering cars. A spokesperson for Tesla explained, “We’ve been selling a lot of model S’s out there, because of the incentives going away and so in anticipation of that, we bought license plates. These are not registrations.” The spokesperson says that those license plates would not be assigned to a car until it has been officially sold.
After the story broke in Denmark, Lauritzen was said to have backtracked on the story reportedly telling the BBC News that he believes he has now received a satisfactory reason for the registration of the 2,500 plates (the retraction/explanation does not appear on the Danish Ministry website or on a search of the BBC News).
According to the Danish Local, Lauritzen did not explain further.
I reached out to the Ministry of Taxation who clarified that the Ministry of Taxation sees this “as a fiscal matter, a fiscal warning sign – more than a question of car taxation.” A spokesperson for the Ministry went on to say that “[s]ince a political agreement about electric cars was settled October 9 the number of ordered license plates (2.500) has exceeded expectations significantly. That has led to concerns about potential stockpiling, which in a worst-case scenario could lead to a potential loss of about 1 billion DKK for the state budget.” That, according to the spokesperson, is why Lauritzen, who is the Minister of Taxation, chose to inform the Danish Parliament.
We’ll update the story as more information is made available.
