Ministry of Finance Weighs Cuts to PHEV Tax Breaks as Auto Importers Pivot to Energy
The Israeli Ministry of Finance is reviewing tax benefits for plug-in hybrid vehicles amid surging corporate fleet sales, while major local auto importers expand into renewable energy projects.
The Ministry of Finance is preparing to overhaul tax benefits for plug-in hybrid electric vehicles (PHEVs), scrutinizing their real-world environmental impact and actual usage patterns compared to traditional gasoline driving. This move is part of a broader review of vehicle taxation in Israel led by an inter-ministerial committee.
Currently, PHEVs enjoy two primary tax benefits. The first is a reduction of approximately 750 NIS in monthly taxable fringe benefits for company-provided vehicles. The utilization of this incentive has surged by hundreds of percentage points over the past two years, with industry data showing that about 70% of PHEVs sold this year were acquired by leasing companies and corporate fleets.
Since the beginning of the year, approximately 65,200 plug-in hybrid vehicles have been delivered in Israel, compared to just 6,900 in 2024, driven by the rapid influx of affordable PHEVs, primarily from China. In the first three quarters, PHEVs captured roughly 24.5% of new car registrations, double their market share from the previous year. The Ministry of Finance estimates this trend will accelerate next year with the arrival of new budget-friendly PHEV models priced between 130,000 and 150,000 NIS.
Re-evaluating Green Tax Incentives
The second benefit is embedded indirectly through the green tax structure, which is calculated based on weighted pollution levels. Most PHEVs currently fall into lower pollution categories 2 and 3, qualifying for substantial green tax breaks of up to 18,000 NIS off the purchase tax.
However, treasury officials argue that these green ratings rely on optimistic scenarios assuming most mileage is driven on electric power. In practice, particularly within corporate fleets, the majority of driving relies on the gasoline engine, resulting in significantly higher actual emissions. To establish an empirical basis for cutting tax perks, the treasury is building a realistic database of actual electric charging volumes for PHEVs in Israel, aiming to update emission standards for tax purposes.
Car Importers Expand into Renewable Energy
Major Israeli vehicle import groups continue to expand into energy production and storage both domestically and internationally. This week, Kolmobil Energy, the renewable energy arm of Kolmobil, announced the commercial launch of a battery energy storage system (BESS) facility in northeastern Bulgaria. The investment totals around 60 million euros, with Kolmobil holding a 60% stake alongside Temnat Energy's 40%.
Spanning 16.2 dunams, the facility is designed to provide 150 megawatts of power capacity with a storage capacity of 317 megawatt-hours. Aviv Peper, CEO of Kolmobil Energy, noted that the project is part of the division's broader expansion into Central and Eastern Europe, including supplying energy to data centers.
New Electric Models and Brand Shifts
In vehicle retail developments, Blilious has acquired the franchise to import the Chinese automotive brand EVEASY, previously held by Frisbee. The import under Blilious will focus on new models with full European homologation, including a new electric crossover boasting a 4.64-meter length and a WLTP range of approximately 460 km, with marketing slated to begin in 2027.
Meanwhile, Delek Automotive is preparing to launch Mazda's first electric crossover in Israel, the CX-6e, starting in November. Manufactured in China, the vehicle features a 78 kWh battery offering a WLTP range of up to 484 km, entering a competitive market against equivalent Chinese models.
