Redirect EV subsidies to manufacturing, says Andrew Hastie
Electric vehicle subsidies across Australia are set to match the $573m peak in funding once given to local car makers.
The cost of state and federal government subsidies and tax exemptions for electric vehicles is closing in on the same annual level of funding the federal government handed local car manufacturers at the height of industry subsidies in 2009.
Liberal rebel Andrew Hastie, who last week lamented the collapse of Australia’s car manufacturing industry, said he thought the funding going to EV subsidies was just being passed on to foreign companies, and should instead be redirected to complex domestic manufacturing.
“We can either continue to pay other countries to sustain their industrial bases or we can set the direction of our very own economy and build capacity in areas where it matters,” Mr Hastie told The Australian.
“It is for governments to set a sensible direction and unleash investments through targeted incentives.”
According to the Productivity Commission, total budgetary assistance to the Australian automotive industry in 2008-09 peaked at $573.3m.
In the 2025 financial year the federal government estimated that it had forgone up to $25m in fringe benefits tax exemptions for electric vehicles, while it announced last month it would provide a total of $40m in direct funding for electric vehicle chargers through its Driving the Nation Fund.
The government has also removed the 5 per cent import tariff on EVs, while it also lifted the threshold for which EVs are subject to luxury car tax, reducing the revenue that would otherwise have been collected.
The Parliamentary Budget Office in June showed the FBT exemption, along with the import tariff exemption for EVs and the generous treatment of EVs under the luxury car tax, will end up costing taxpayers $3.2bn over the next four years and $23.4bn over the next decade.
Along with the federal government measures, state governments have also been pumping in hundreds of millions in electric vehicle incentives, with NSW, Queensland and other states offering direct rebates of between $3000 and $6000 per vehicle up to this year.
The Minns government in NSW committed to $260m in its 2023-24 budget to increase electric vehicle uptake. As of December it had provided 3862 rebates, valued at $3000 each, and stamp duty refunds for 4733 eligible EVs.
Queensland outlaid $45m for EV rebates, driving EV car registrations up fourfold since the start of the scheme, to over 46,000 as of July 21 last year.
In Western Australia more than 5900 EV rebates were paid to EV owners totalling almost $21m. and the government is extending that by another $5m. Victoria handed out 7692 subsidies under its $3000 rebate scheme, equating to a cost of about $23m.
While Victoria’s scheme has been discontinued, EV owners and plug-in hybrid vehicle owners in that state can still receive a $100 rebate on their vehicle registration, automatically applied at renewal.
Northern Territory is forgoing revenue from registration and stamp duty discounts, while the ACT has just provided two years of free registration to purchasers of electric vehicles and offered zero-interest loans. It also spent millions of dollars establishing a TAFE Centre of Excellence for Electric Vehicles.
Economists such as Advanced Manufacturing Growth Centre managing director Jens Goennemann said a more nuanced approach to incentives and subsidies was needed.
“The former car subsidies in Australia were not for manufacturing cars. They were for assembling cars, and that is a difference, especially in a country short of automotive supply chains. If we had nurtured those instead, we’d be shipping competitively manufactured widgets to the world – for automotive and otherwise,” Dr Goennemann said.
“From a manufacturing point of view, subsidies for electric vehicles or batteries are an impressive, inspirational tool – for overseas manufacturers.
“Australia needs to make smart choices where it wants to be competitive and then back these choices with subsidies and offtake agreements. We are not competing against economic theory but against other countries who do that as well.”
The Productivity Commission has called on the federal government to dump the FBT policy as part of its review into emissions reduction policy. The PC is also against subsidies for car manufacturing.
The International Monetary Fund warned last week that government subsidies that target the energy sector, including electric vehicles, pose a “significant risk” of lowering productivity, increasing consumer prices, cutting GDP and becoming costly for budgets.
“The risks that industrial policy may not deliver economic gains are significant,” the IMF said in an early release of a chapter of its World Economic Outlook.
“While industrial policy can raise production in the targeted sector, this needs to be balanced against other considerations such as fiscal cost, higher consumer prices and possible resource misallocation.”
Liberal National Party MP Garth Hamilton said while he wasn’t pushing for a car manufacturing industry, subsidies had to be better directed.
“We need to plot a new course for Australian manufacturing. I’m not calling for a return to car manufacturing but I do want a serious conversation on investing in manufacturing capability. Thankfully, Andrew Hastie is leading that,” Mr Hamilton said.
“While the EV subsidies are directed towards the consumer, we all know the producer is the ultimate winner. Taxpayer dollars used to be invested in the car industry, which supported local jobs … Now these subsidies are going straight out the door. We’ve transitioned from subsidising local jobs to subsidising overseas jobs.”
The push for subsidised manufacturing has been relit under the Trump administration, which is using national security as the rationale for protectionist positions.
Mr Hastie, a former Coalition defence spokesman, said his social media video, posted last week, was designed to raise questions about where subsidies were going and suggested they should go into areas where we could be globally competitive such as such military equipment.
He said his “nostalgic car manufacturing example is an appeal to our nation’s pride: How did it feel when we were able to make things? How does it feel when we can’t?”.
“The car industry is mostly gone, but isn’t it worth building back industrial capability so that we as a nation can meaningfully participate in making things on our very own turf, adding value to commodities onshore rather than just shipping them away so that others do? Or meaningfully participating in the massive defence build over the next decades?
“We have a comparative advantage in energy, with our abundance of gas. We could make things here if we get our energy costs down.”
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