December 2020 / January 2021

A SHOCK TO THE SYSTEM: EV ROAD-USER TAX PROPOSALS

Electric vehicles have been in the news quite a bit in the past few weeks. Much of this flurry of coverage stems from the announcement by the South Australian (SA) government in November that it would introduce a road-user charge for electric vehicles (EV).

In its 2020 Budget, the SA government announced it intended ‘. . . to introduce a road user charge for plug-in electric and zero emission vehicles. The charge will include a fixed component (similar to current registration charging) and a variable charge based on distance travelled.’

By the end of the month, the Victorian government had joined the party, and was proposing that from July 1, 2021, ‘a new distance-based road-user charge will be introduced for Victorian registered zero and low emission vehicles (ZLEVs). These charges will apply to light vehicles not predominantly powered by a fuel source subject to Commonwealth Government fuel excise, such as petrol, diesel or LPG.’

The proposed charges in Victoria are 2.5 cents per km for electric, other zero emission vehicles and hydrogen vehicles, and 2.0 cents per km for plug-in hybrids.

NSW too, was reportedly making noises about introducing a similar tax system. Not surprisingly, this surge of announcements came as a big disappointment to many, with plenty of voices suggesting such moves would likely act to stifle the uptake of EVs.

In response to the Victorian announcement, Tony Weber, CEO of the Federal Chamber of Automotive Industries (FCAI) put out a statement that read in part: ‘Once again, we have a state government in Australia trying to destroy the path to a greener and cleaner motor vehicle fleet for this and future generations.”

He added later in the statement that: “The FCAI recognises that the decline in excise, the taxation of motorists and their vehicles, is a long-term issue that needs to be addressed. We also understand that road user charging may play a role in Australia’s future tax regime.

“However, such a transition needs to be undertaken in a holistic and nationwide manner, recognising the importance of EVs and other low emission vehicles. Let’s not kill EVs in their infancy.”

Strong stuff.

Others to voice their irritation included the leadership of the Australian Electric Vehicle Association, and the Electric Vehicle Council CEO Behyad Jafari who, in a media release that highlighted research suggesting that the road-user tax position will prevent states from reaching their goal of net-zero greenhouse gas emissions by 2050, stated: “You don’t need advanced economics to understand that applying a big new tax on something discourages its consumption. These proposed state taxes will badly stunt Australia’s electric vehicle uptake before it even had a chance to get started.

“These taxes are like replacing declining tobacco excise with a new tax on nicotine patches. They are madness. And that’s why a few Australian states are so far the only jurisdictions in the world silly enough to flag this policy approach at this point in global history.”

While there probably is little argument that EV owners must contribute to the upkeep of infrastructure, flagging to potential EV buyers that there is a nice chunky tax coming their way does indeed seem to be counter-productive.

As a nation, Australia is already way behind the curve on EV uptake. While 2019 might have been a banner year for sales – 6718 fully electric and plug-in hybrids were sold – that makes up only around 0.6 per cent of total sales.

That number is pretty feeble in comparison to other developed nations. According to EV automotive data provider evvolumes.com the sector is booming in Europe, with sales reaching a 7.5 per cent market share in 2020.

Impressive growth figures in other nations come via, amongst other interventions, very attractive incentives for buyers. For example, in Germany, there’s up to €9,000 ($AU14,700) of subsidies available. In France, subsidies of up to €7,000 ($AU11450) are available for households buying EVs below €45,000 ($AU73,425). There are all manner of other incentives and packages available across European nations.

It should be noted too that in the U.S. – under a new presidential administration – incentives to stimulate EV take-up, such as the federal EV program that provides a tax credit as high as $US7,500 ($AU10,100), will likely remain on the books.

And then there is the extra inducement to change thanks to the declarations from many nations that will see them phase-out fossil fuel-powered vehicles altogether. The UK, Sweden, Norway, Germany and France – and a host of others – have plans in place to do so at various points before 2040. And then there is California – the most populous state in the U.S., and whose every move on these matters has ramifications well beyond its borders – that has declared it would do the same by 2035.

In November, China and Japan announced that they were aiming for carbon-neutral economies by 2060 and 2050 respectively – goals that obviously will have a profound effect on what type of power drives the vehicles used there.

To all of this must be added the actions of the vehicle manufacturers themselves – who are pumping billions of dollars into the research, development and production of an ever-growing range of EVs. For them, clearly, that is where their futures lie.

Which brings us back to Australia and those proposed road-user taxes.

Our EV numbers are small now but the appetite for them is growing and, at some point, we have to recognise that the days of fossil fuel-powered vehicle dominance are coming to an end. Australia is a small nation in terms of its vehicle purchasing power and we cannot sputter on alone as the rest of the world moves on.

We should, as a technologically advanced nation looking to reduce its emissions, be jumping all over EVs and not only backing the development of the technology to make them better and more efficient; but be assisting Australian companies to establish manufacturing capability and, of course, be helping to encourage the uptake of EVs through incentives. The automotive industry is changing and evolving so quickly, we don’t want to be left behind.

15 December 2020

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MTAiQ acknowledges the traditional owners of the land on which we live and work - the Yugambeh and Yuggera people. We pay our respects to elders past, present and emerging. In the spirit of reconciliation, we will continue to work with traditional custodians to support the health and wellbeing of community.