Tax uncertainty threatens collapse of electric vehicle supplies to Israel

Uncertainty over the tax rate on electric vehicles in Israel threatens to reduce supplies. Importers cannot plan purchases due to the unknown rate for 2027, with a decision postponed until the elections on October 27. Demand for electric vehicles in the country has been declining for several months, despite the emergence of models cheaper than 120,000 shekels. Tesla and Xpeng lead in sales, but most brands have not reached 2,000 deliveries in nine months.

Uncertainty over the tax rate on purchasing electric vehicles in Israel threatens to collapse supplies. Some buyers will receive ordered cars only in 2027, when the tax may change. The decision on the rate for the next year is usually made in December, but discussions are now being postponed until the Knesset elections on October 27. The basic purchase tax on cars is 83%, with a reduced rate for electric vehicles that increases annually. If the new reduced rate is not approved, the tax will automatically rise to 83%. For importers, the delay complicates purchases: most companies bring in vehicles in advance and store them at ports. If companies do not build up inventories due to the unknown rate, the supply of electric vehicles could shrink. Demand for electric vehicles in the country has been weakening for several months. Even the emergence of new electric cars cheaper than 120,000 shekels has not led to a mass transition. Sales are led by Tesla (nearly 5,000 vehicles in nine months) and Xpeng (about 4,700). Most other brands have not even reached 2,000 deliveries. Barriers include access to charging and weak tax incentives for corporate fleets. The state also refuses to purchase electric vehicles.