23 October, 2018

Interview with Dr. Christof Engelskirchen, Autovista Group

WLTP will cause sweeping changes to the Total Cost of Ownership (TCO) of a vehicle due to the impact on registration and road taxes. TCO for the same vehicle may increase by 20% if countries switch taxation from NEDC to WLTP-based without adjusting tax bands. To find out how the industry is reacting to this we spoke to Dr. Christof Engelskirchen, Managing Director Consulting & TCO Solutions at Autovista Group.

What is your role here at Autovista?

I am responsible for Car to Market, Consulting Services and Total Cost of Ownership (TCO) solutions at the Autovista Group, advising clients on how to sell more cars more profitably via an optimised residual value and TCO positioning both at launch and over the vehicle lifecycle.

In terms of TCO, what is the biggest impact of WLTP on the automotive industry?

Given the strong focus of the EU and many governments to tax based on CO2-emissions and the fact that with WLTP, CO2 emissions are rising by more than 20% on average, the impact on taxation is potentially huge. This is the area where we are asked the majority of our questions and are asked to quantify and simulate costs. Taxation schemes across Europe are diverse, while some governments have already adjusted their taxation schemes to suit WLTP, others continue to tax based on NEDC values. However, taxes in countries using NEDC values have risen, NEDC scores are now converted from WLTP.

It is safe to say that people are paying more taxes irrespective of whether the country’s taxation scheme has already been adjusted towards WLTP or not, with the exception of countries that are not taxing based on CO2, like Italy. For countries with impactful CO2 thresholds, like France, where your car can suddenly move into another tax bracket, the increase in price could mean an additional 6000 EUR. This represents 20% higher TCO, in registration taxes using France’s bonus/malus system, over a 3-year-period. Germany has simply switched from NEDC-based taxation to WLTP-based taxation, but the impact is “only” in the two- to very low three-digit EUR value because of the low impact that CO2 has on taxation.

What are you doing to ensure that Autovista Group is at the cutting edge of WLTP taxation developments?

We are involved with some local authorities to advise them on taxation. One of the concerns of many governments is that the impact of switching to WLTP may be too high unless the thresholds and the taxation scheme itself are adjusted wisely. In the end, WLTP was introduced to improve testing procedures to get more accurate CO2 emission levels that are closer to real driving conditions; it was never intended to be a stealth tax.

Do you think there is a disconnect between those who are implementing new testing schemes and those that will be impacted by them?

The intention behind WLTP was to improve outdated test routines that had been in place for a very long time (NEDC): These routines led to engine developments that are, from a CO2 consumption perspective, moving in the wrong direction, i.e. higher-consumption/ higher-emissions.

However, for OEMs, the transition to WLTP has been and still is quite disruptive. For example, under the new test, every single option has its own CO2 emission value, which means that OEMs now have to consider each and every option in CO2 calculations at the product planning stage. But it’s not that easy: if you combine several options in one car, it may not be the sum of the CO2 emissions of every single option because there are interdependencies. For example, once you start adding more weight to the car, you may need different equipment to keep it running smoothly on the road. Or if you add more electronics, you may need changes in the energy management. Calculating the data and being in a position to supply those values to industry stakeholders like us and leasing companies is an IT project, rather than a project that replaces the outdated NEDC consumption values with better values.

For Autovista Group, integrating the WLTP data into our systems has been a major project. We have approximately 40 initiatives, which we are controlling in our PMO at the moment related to WLTP, from setting up data and delivery service contracts with OEMs to starting to add the feeds into our data sets and all our products as well as develop new web delivery services.

Do you think WLTP will have an impact on the offerings from OEMs?

WLTP punishes you if your car is heavy and if you have features that impact aerodynamics and energy consumption. Offerings will probably change because of this – things like panoramic roofs and even tyre sizes are some of the most obvious ones. Fleets need to minimise their tax bills, and OEMs will configure their business packages accordingly.

Finally, what is your dream car?

I would be excited to see the introduction of a pure battery-electric vehicle that has a real driving range beyond 600km, four-wheel drive as I enjoy the mountains. It should be 10% cheaper to run from a TCO perspective.