Israel's Electric Vehicle Market Faces Uncertainty Over Tax Changes

Uncertainty surrounding upcoming tax changes in Israel is threatening to disrupt the supply of electric vehicles (EVs), with some buyers facing delivery delays until 2027. While Tesla Model Y deliveries are expected in January, some Hyundai Ioniq 5 models are slated for January-February delivery, according to a "Calcalist" report on October 5. The crucial factor is the purchase tax rate, which is typically decided in December for the following year. However, the upcoming Knesset elections on October 27 have postponed discussions on EV tax policy, intensifying the uncertainty.

Some importers are advising customers to pay for their vehicles now to lock in current prices and avoid potential increases. Israel's base car purchase tax is 83%, with reductions based on pollution levels. EVs benefit from a lower, annually increasing rate and a decreasing tax benefit cap. If a new preferential rate isn't approved, the tax could revert to 83%. In past years, authorities have agreed to more moderate increases after warnings of such a scenario.

The delay in tax decisions complicates procurement for importers, who usually import vehicles in advance, store them, and then sell them. This practice helps mitigate the impact of tax hikes. If companies hesitate to build inventory due to unknown tax rates, the supply of EVs could shrink. Tesla, which sells cars before shipping them, operates on a different model.

Meanwhile, demand for EVs in Israel has been weakening for months, contrasting with global trends driven by high fuel prices and improved charging infrastructure. Even the introduction of EVs under 120,000 shekels with a 300-400 km range has not spurred mass adoption, with sales dominated by more expensive models. Tesla and Xpeng lead deliveries, with most other EV-focused brands selling significantly fewer units.

Barriers to EV adoption include charging accessibility, with home charging requiring suitable parking and public charging being more expensive and time-consuming. Tax incentives for company cars also present issues, with the benefit for a plug-in hybrid SUV being only slightly less than for a fully electric car. Even the government itself is reportedly reluctant to purchase EVs.