In recent weeks, the car importers had to inform customers several times that the cars they ordered would become more expensive and that they would be required to make up the price difference | Does it make you angry? Welcome to a new era – meet the conditional order era
The customers who ordered new vehicles recently received notices that the cars they ordered will become more expensive and that they will be required to make up the price difference, as published in Calcalist.
It should be noted that these are people who entered the dealership to buy the car of their dreams, signed the document stating the estimated price and went on their way knowing that this is the price they will probably pay for the new car, but it turns out not to be, they got to know the new reality of new car buyers.
It is important to emphasize that the “sudden price increases” do not distinguish between an electric vehicle and a normal one, between a customer who has one and one who has less: at Kalmomobil, a Hyundai importer, customers who purchased a Hyundai Ioniq 5 were called and explained that they could cancel the order, switch to a different type of Hyundai car, or that they might have to pay Another tens of thousands of shekels for a new car that will arrive after January. Toyota importer Union Motors sent messages to customers who purchased a Toyota Yaris Cross and informed them that they could pay an additional price to receive their new car or alternately cancel the order without incurring the cancellation fee. Moreover, as revealed in ‘Calcalist’, she also emphasized to the customers that this year there will be more price increases.
Calcalist explains that the two cases are separate cases: in one the car is electric, and in the other the car is not electric. The tram will become more expensive because of the purchase tax that will increase this January, and the other one has already become more expensive. At this point it is important to emphasize – not all car importers open orders for cars that will become more expensive and “surprise” the customer, and there are certainly cars that can be ordered at a price that will not change, but this is completely a new reality, welcome to a new era, the era of the conditional order.
The term is known from the worlds of tourism and means in simple language “Ordering goods? Congratulations, but there are conditions for accepting it at the agreed upon price”. The conditions in the case of the automobile industry are usually rare, but this year it turned out that somehow many customers can “eat it”: in the case of the electric car at the beginning of January the purchase tax on them will rise from 10% to 20%. This increase is enshrined in law as part of the tax authority’s green tax outline, but it is not the only one. At the same time, the tax authority also cuts the amount of the tax benefit ceiling. Thus, starting in January, the benefit ceiling for an electric vehicle will drop from NIS 75,000 to NIS 60,000.
Why set a ceiling for a benefit that is actually intended to put more clean cars on the roads? The answer is the electric luxury cars, for example the Mercedes EQS whose price exceeds the NIS 800,000 mark. The State of Israel is not interested in granting the benefit to luxury cars. Who will be affected by this move and how much? According to the car importers, the main effect of cutting the benefit ceiling concerns cars whose price to the consumer is currently NIS 200,000 or more, a price that includes quite a few models from the major car manufacturers: senior versions of the Hyundai Ioniq 5, the Tesla 3 in all its versions, the electric Toyota BZ4X and also the Genesis 60 GV. In practice, most of the models that remain outside the envelope of the expected increase in price are Chinese. What is the expected inflation rate? In the case of models whose price exceeds NIS 200,000, the estimates range from a 5%-10% price increase, but the car importers refuse to specify exact amounts.
The Israeli automobile industry has a trick up its sleeve that is used every few years: shortly before the tax increase (in December), the automobile importers bring into Israel ships loaded with cars of the type on which the purchase tax will become more expensive. The importers release the cars from customs and then tell the customers that the purchase tax has gone up and they have to pay more. Selected customers, i.e. fleets, pay the “old” price. It is not impossible that this will happen this year as well and customers who received bad news about a price increase will actually receive a car that the importer has already released from customs according to the old tax.
How in the first place did the Israeli automotive industry get into a situation where car importers reach the last line of a model year and prepare for the worst? The answer lies in the differences between what is desired and what is found: in December 2019, the Tax Authority published the most updated outline of the green taxation concerning electric, plug-in and hybrid vehicles, which established a purchase tax of 10% until the beginning of 2023 and the benefit ceilings. But the outline was based on a logic that stated that the taxation of the electric vehicle would increase based on two main factors: the rate of adoption of the technology and the rate of its discount. That is, in theory, by 2023 there will be a large adoption of electric vehicles in Israel and at the same time the car manufacturers will be able to reduce the cost of the batteries and drive systems – that is, the country will earn more and the FOB prices (dry price without tax) will decrease and a balance will occur. In practice, this prediction does not come true: the war in Ukraine disrupted the global supply chain for electric cars and the prices of the raw materials needed for batteries soared. Car manufacturers report difficulties in obtaining cheap raw materials due to a global attack on them and research and development budgets are increasing due to the need to develop batteries that will be efficient in view of the lack of metals for batteries.
As we said before, the electric cars are not alone and the non-electric cars are getting more expensive for other reasons. This is a combination of a shortage of parts, transportation problems, rising transportation costs, the war in Ukraine, and a host of other factors that simply created a situation where the relatively short period of time between ordering a car and the moment the car arrives in Israel became a long period of time, during which the car also becomes more expensive. First of all, it must be understood: cars that are delivered this month to customers in Israel were manufactured more than 4-5 months ago, except for special cases, and there are those, where the car manufacturer delivers the required quantities on time.
According to Calcalist’s investigation, today there are manufacturers who are able to supply the State of Israel between one-third and one-half of the volume of shipments ordered by the Israeli automobile importer. One of the best examples of this is Toyota, whose importer simply stopped marketing the Yaris in Israel until further notice because the amount allocated was small compared to the demand of the Israeli market. It’s no secret that car importers raise the prices of quite a few models. The question is what will happen to the customers who ordered new cars and then their importer discovers that his manufacturer has no intention of sending the desired quantity by ship, which requires an unpleasant conversation with the customers and a polite request to complete the amount. What can customers do in this case?
The contracts of the car importers are extremely long and incredibly complex and to be honest the chance that the customer will be right is very low. There are importers who offer the customer to pay the full amount and thus guarantee the price of the vehicle, but even here, as always, there are caveats: natural disasters, wars and a host of factors that seem like they will never happen – but have happened in recent years. Therefore, when buying a new car these days, it is recommended to calm down the enthusiasm a little and just deal with the fine print. Ask the right questions, when is the car arriving? Can the car importer commit to a delivery date? What should be done to reserve the price, and what are the caveats that will be imposed on the customer if he discovers that the new car he ordered has become more expensive on his way to Israel and wants to cancel? All in all, the ball is in the hands of the car importers – some act fairly and some less so, a smart consumer will know how to minimize damages and a less smart consumer will pay dearly.