How Romania Pushed for Vehicle Electrification Through Incentives

Since carrots tend to stick more in consumers' minds than sticks, Romania jumpstarted its green revolution through an array of incentives for electric vehicles instead of restrictions on their fuel-driven counterparts.

Full frame daylight image with focus of a plug-in electric vehicle charging station
Photo: iStock.com / saruservice

Through numerous benefits, authorities in Romania have shifted the electric market attractiveness and exponentially increased adoption. Could such positive reinforcements lead to greener roads in the rest of Europe, or are restrictions the road ahead?

Choosing the best approach

As the EU seeks to bring forth greener roads to meet environmental standards, authorities have been at a crossroads between strict regulations for fossil engines, encouraging electrification, and hybrid approaches. Bucharest chose positive encouragement as the way forward, offering EV drivers an entire suite of benefits. These incentives have translated into some of the most accessible EVs in Europe, which are sometimes cheaper than gas or diesel alternatives, simplifying consumers’ choices and doubling sales each year.

One of the first drivers of change was an old program called Rabla (meaning Jalopy), which sought to renew one of the EU’s oldest car fleets by offering trade-in grants when buying new models. Because it managed to push Romania up in the rankings, the government grant soon became called Rable Plus. It enhanced the grant pool by offering steep amounts through so-called “Eco-Tickets” to individuals and companies to acquire electric vehicles.

Therefore, by allocating over EUR 1.5 bln last year, a budget expected to double in the upcoming years, the government offered buyers almost EUR 15,000, based on the electrification of the new model and how old the traded one is. Taking advantage of one of the EU’s most generous subsidies, with even France or Germany offering only half of that amount (and planning to reduce it), Romanians basically started a never-ending Black Friday.

Incentives that are hard to turn down

For instance, if someone sought a Tesla Model 3, instead of paying around EUR 45,000 as a starting list price, they could grab an almost 30% discount, putting the final price tag around EUR 30,000. With the same amount, they could even get a small fleet of 3 Dacia Springs, given that this car – the least expensive (across all engine types) in Romania – ends up priced well below the EUR 10,000 mark, making it the most sold electric model.

This increased affordability, especially when coupled with the expansion of low and medium-end models, is going to bear more fruit, as the Ministry of Environment announced that it plans in the upcoming years to expand the initiative’s budget, increase grant levels, offer higher company or bulk purchase advantages, and adjust legislation, amongst other measures to make the market more attractive for consumers. Also, through its design, the program strives to bypass the “hybrid phase” and foster a direct switch to electric cars, as Rabla’s grants (Eco-Tickets) are based on CO2 emissions (for fossil or simple hybrid cars) with merely EUR 1,000-4,000 offered, Plug-in Hybrids (PHEVs) receiving somewhere around EUR 5,000-6,000, and only Battery Electric Vehicles (BEVs) starting at EUR 10,000.

Another gear in this transition consists of tax exemptions, deductions, or other advantages, some of which include:

  • VAT and State Tax (acquisition or annual) – set at zero for electric, halved for hybrids, and further deductions for companies;
  • Local Tax (property) and City Parking Tax – generally following government ones or setting discounts at 75% respectively 25%;
  • Registration fees – reduced, halved, or exempt based on the degree of electrification;
  • Free local lanes, parking spaces, and charging in public spaces – solely for individuals;
  • Variable tax returns – applicable for companies with EV fleets;
  • Discounted road tolls, vignettes, mandatory insurance, and periodical technical inspection – especially for companies;
  • Additional funding is available for mounting EV chargers at home and switching to renewable production.

It is no secret as to why EV demand spiked, even without placing any constraints or limits on petrol/diesel cars, with buyers basically choosing between the latter or all the advantages offered by both authorities and sellers for electric models, particularly for business clients.

Despite all these factors, the necessary infrastructure was lagging, sometimes overshadowing all the positive sides, having the lowest number of chargers per EVs in the EU at only 1500 hubs, although it maintains a 50% yearly growth. Thus, Romania spearheaded several cross-sectorial initiatives to address the issue, with governmental and European efforts paving the way (easier norms, infrastructure investment, business incentives, etc.) and companies jumping in to capitalize on the trend (from innovatory start-ups all the way to en-bloc implementation).

Don’t deprive Europeans of the opportunity to drive clean, attractive, and affordable electric cars built in Europe.”

European Commission Vice-President Frans Timmermans

Therefore, as new industries emerge to sustain remarkable growth rates and consumer trends, we can observe that in 2022 alone, the year-to-year commercial EV sales grew by 72%. There was 131% growth in 2021, followed by almost 50% increases in the following years. Based on the Association of Autovehicle Producers and Importers (APIA) reports, all these mean that nowadays, EVs (both fully electric and hybrid) have over 20% of the total market (8 percentage points more than diesel ones), with the sale of Battery Electric Vehicles (BEVs) recording a yearly growth of 114%, almost doubling their market share and representing half of the new sales of electrified motors. Although adjusted to the scale of the country and the industry, these absolute values position Romania in front of other developed economies like the US, Japan, and South Korea and amongst the top within the EU.

Moreover, it is notable that Romania has managed, through these facilities for consumers, to go in roughly a decade (2011-2022) from less than a few dozen EVs (all types) registered yearly to almost 30,000. Hence, if Bucharest continues to make these models too good of a deal for consumers, implements the necessary legislation and infrastructure to sustain the growth rates, and provides favorable business contexts, Romania might never need to use the stick to reach its 2035 goals for full electrification, as people themselves will drive the change.

Christopher Radovici

is a Ph.D. student at the Bucharest University of Economics, former Westminster graduate, specializing in CEE and EU Neighborhood affairs, involved in several cross-disciplinary research projects across Europe and with a series of active publications and conference participations in the field of IR, FP and Macroeconomics. Private and Civil Society - Duke of Edinburgh's International Award Gold finalist, alumni of Alpbach, Aspen and SUSI, actively contributing to various civil society organization and think-tanks in the Danube Region, while also having been the founder of a social entrepreneurship start-up.

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