Top EV models could be thousands cheaper

EV take-up would be much faster if incentives applied in other countries were offered in Australia.

Audi S8 e-tron is one car that gets slugged with a luxury car import tax, despite the closure of the domestic car industry.

Electric vehicles in Australia could be not just cheaper, but tens of thousands of dollars less expensive if the federal government took the approach widely used in Europe by slashing luxury car tax, import duty, stamp duty and GST on EVs.

Those financial incentives would remove one of the biggest barriers to EV uptake – the high price of entry – and encourage car makers to bring more zero-emissions vehicles to Australia.

Modelling by The Australian shows EVs could cost between 10 and 25 per cent less by removing taxes and providing other incentives, pricing them more competitively with petrol alternatives.

An EV such as the go-fast version of Australia’s top-selling EV, the $86,472 Tesla Model 3 Performance, attracts $2029 in luxury car tax and $7857 in GST. Add to the almost $10,000 saving you’d get from removing those taxes about $3525 in stamp duty and the price of what is a premium electric sports car suddenly looks a lot more tempting at 15 per cent off the current cost.

Another example is the Audi e-tron 50, priced at $124,000, which currently contributes at least $35,500 to government coffers through payment of GST ($12,500), luxury car tax ($14,500), import duty ($3000) and state-based stamp duty (from $5500 in South Australia to $9000 in Western Australia).

By comparison, a $113,990 V8-powered Chevrolet Silverado currently pays no luxury tax or import duty (being classified as a commercial vehicle means the luxury car tax is not applied and as it is sourced from the US means it benefits from a free-trade agreement).

Removing those taxes would lower the e-tron’s price by almost 29 per cent and bring it closer to that of the Q5 (between $69,900 and $110,900) and Q7 ($105,100 to $162,377) that it sits between in size.

Audi S8 e-tron

Audi S8 e-tron

Such radical temporary tax reform would almost certainly fast track the introduction of EVs into Australia by changing buyer behaviour and incentivising carmakers to take advantage of the revised landscape. Volkswagen Australia boss Michael Bartsch has said low petrol quality and the lack of emissions standards in this country acts as “a disincentive commercially to actually bringing in electric vehicles”.

Such tax changes have occurred in Norway, where EVs make up more than half of all new vehicles sales (in Australia EVs account for a little over 1 per cent of sales).

EVs in Norway sidestep the 25 per cent VAT (similar to our GST) and receive other benefits such as free or discounted tolls and parking as well as access to bus lanes and a reduced annual road traffic insurance tax that’s usually about $465.

Those other incentives on their own could add up to $20,000 or more over the life of the car in a city such as Sydney.

The UK has announced it will ban sales of new petrol and diesel cars by 2030 and there are generous tax breaks for EVs while additional taxes are applied to cars powered by internal-combustion engines.

A new EV in the UK, for example, pays no initial CO2 tax, whereas a diesel vehicle can pay up to £2245 ($A4150) at its registration and £155 ($280) each year after, or £490 if it’s priced over £40,000.

Little wonder the Tesla Model 3 was the top-selling car in Britain in September.

It’s not hard to find potential savings to implement tax savings, EV proponents say. Diesel-powered mining trucks, generators, SUVs, vans and heavy vehicles get the benefit of about $7.8bn annually in fuel-excise rebates handed out to businesses including miners, primary producers, and freight companies. That’s about $26,000 for every one of the roughly 300,000 diesel-powered vehicles purchased in Australia each year.

The rebate makes refuelling about 25 per cent cheaper than it would be if those companies paid what average motorists pay.

Mining magnate Andrew “Twiggy” Forrest recently said the “fossil fuel rebates are a complete joke economically, when that capital could be being deployed to give Australia a choice”. This from a man whose Fortescue Metals Group benefits to the tune of $300m annually from that same rebate.

Forrest is on a mission to commercialise green hydrogen and has already started development of hydrogen-fuelled mining trucks.

The diesel rebate makes the promised $250m for some EV chargers look small, despite Scott Morrison’s pledge that “when new vehicle technologies are cost competitive Australians will embrace them”.

Opposition Leader Anthony Albanese predictably took aim, saying “this is a government that is scared of change”.

Yet change is what the industry is calling for, with Electric Vehicle Council chief Behyad Jafari describing the recent announcement on EV infrastructure as “far too little far too late”.

Rebates for EVs and more stringent emissions standards for ICE cars are crucial, according to Jafari. If that $7.8bn was diverted to eliminating taxes on EVs it could reduce EV prices by between 10 and 25 per cent, depending on the price of the car.

There’s also the question of how much more unappealing a diesel-powered truck for a farm or mine site would be if it wasn’t getting a 25 per cent discount on fuel.

EVs are unlikely to undercut petrol cars on price without some serious government intervention, and batteries are still expensive even if the technology is advancing and prices are coming down.

EVs are unlikely to undercut petrol cars on price without some serious government intervention, and batteries are still expensive even if the technology is advancing and prices are coming down.

Australian consumers are keenly seeking out cheaper electric vehicles, however. Toby Hagon, editor of specialist Australian website EVcentral.com.au says searches for “affordable EVs” are one of the biggest traffic drivers, and he points out that car buyers are also realising that EVs have the added bonus of being cheaper to run.

A recent study by EVcentral showed improving residual values, fewer servicing requirements, lower energy costs and state government incentives could make EVs cheaper to own than a petrol car.