Hybrid deadline looms for tax perk

Car industry warns that a policy intended to drive motorists toward electric cars could have the opposite effect.

A Greens policy intended to boost electric car sales has been tipped to backfire. Sales of electric and plug-in hybrid (PHEV) vehicles have been boosted by a Labor Government EV discount that makes efficient cars cheaper to lease than petrol or diesel equivalents.

The discount has turbocharged sales of plug-in hybrid cars that blur the lines between “self-charging” hybrid cars such as the Toyota Corolla and dedicated battery electric vehicles such as the Tesla Model 3.

Electric car sales have dropped this year.

Mitsubishi’s Outlander PHEV is one of Australia’s most popular plug-in hybrids.

But sales of PHEVs have more than doubled as Aussies warm to cars that can be plugged in and driven as an electric car on short trips, or run on petrol for longer journeys.

The EV discount allows people to lease cars without paying fringe benefits tax.

It puts PHEVs on par with cheaper cars.

Mazda’s plain old petrol-powered CX-5 costs about $40,000 to buy, or $235 per week to lease through popular firm Maxxia.

For the same weekly fee, customers can pick up a more efficient Mitsubishi Outlander PHEV worth $57,000, or a flash Cupra Formentor VZe plug-in hybrid that ordinarily costs $64,990 to buy.

Minister for Climate Change and Energy Chris Bowen and BYD chief executive David Smitherman with the BYD Shark. Photo: Supplied

But the tax perk making PHEV cars more affordable ends on April 1.

Chris Bowen, Minister for Climate Change and Energy said the Albanese Government cannot extend the PHEV deadline.

“That was the arrangement we entered to in the Senate to get it through,” he said.

“Unless the crossbench changes their mind about that, I won’t be revisiting it.

“That’s what we had to do to get it through.”

Leader of the Australian Greens Adam Bandt during Question Time at Parliament House in Canberra. Picture: NewsWire / Martin Ollman

Adam Bandt, leader of the Australian Greens party, said in 2022 that a “sunset” on support for hybrid cars was a win for the environment.

“By limiting handouts to petrol cars and accelerating support for electric vehicles, the Greens in balance of power have pushed the government to go further and faster on climate,” he said.

“This shows the power of the Greens in pushing Labor to go further and faster on fossil fuels.”

Tony Weber, chief executive of the Federal Chamber of Automotive Industries, said the car industry had been lobbying to have the deadline pushed back.

“We’ve been talking to the government about the need to provide greater incentives to move motorists into low emission vehicles,” he said.

“I think it’s unlikely that the FBT exemption for plug-in hybrids will be extended beyond its current close off date.”

Automotive industry experts claim the end of tax breaks for PHEVs will push people to hold onto existing vehicles or choose a cheaper, less efficient car.

Ross Booth, general manager of vehicle valuations service Redbook, said “there is a global trend towards PHEVs and not straight BEV due to the flexibility and packaging they afford”.

“It is a shame that the change in the Federal Government incentive will see more inefficient vehicles being sold in the market, than they would be if the incentive was extended.”

Geoff Gwilym, chief executive of the Victorian Automobile Chamber of Commerce said PHEVs are “emerging as a crucial stepping stone for drivers transitioning from conventional petrol vehicles to fully electric cars, offering a practical compromise between traditional motoring and the electric future”.

“The timing of this policy change seems particularly counter-productive given the growing consumer acceptance of plug-in technology,” he said.

“The success of our transition to electric mobility may well hinge on maintaining support for these interim technologies, rather than prematurely forcing an all-or-nothing approach.”