Australia EV uptake hindered by long road to price parity | RenewEconomy

Australia EV uptake hindered by long road to price parity

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Report says EV uptake depends strongly on consumer perceptions of “pay back period”. And in Australia, that requires a 40,000km drive each year.

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Australia is lagging well behind the rest of the world in EV sales, and one of the key reasons for this is because Australians have to drive further before the cost of owning an electric vehicle breaks even, a new report says.

Global management consulting firm L.E.K. Consulting, who issued the report, lists three key variables that will drive the adoption of electric vehicle.

Cost parity with internal combustion engine (ICE) vehicles heads the list, as well as greater access to charging infrastructure and a broader choice of EV brands and models.

“Currently in Australia, you would have to drive over 40,000km a year for it to be cheaper to own a battery electric vehicle, making it financially unattractive for most consumers,” says Natasha Santha, Principal in L.E.K.’s New Mobility practice and co-author of “Accelerating Electrification: Critical Steps Toward Electric Vehicle Mass Adoption.

This is largely because of the high cost of the available models in Australia, and it means that Australia is well behind other developed countries like Norway and Iceland where the break even is 10,000km or lower.

In countries leading the adoption of electric vehicles, this is often due to generous subsidies available through their governments that mean cost parity falls below that of ICE vehicles.

As with findings in the solar and battery industry, L.E.K. says that uptake of electric vehicles depends strongly on consumer perceptions of a “pay back period”.

While it is clear that a break even in costs is a major reason for the slow uptake in Australia, lack of supporting infrastructure has also been cited as one of the key reasons the EV market in Australia is falling behind other developed countries.

But while much of Australian EV policy is concerned with improving charging infrastructure – take for example the Queensland Electric Super Highway – this is not enough, as access to public charging infrastructure and growth in the electric vehicle market do not correlate.

“Investments in public infrastructure and other non-financial incentives are important because they signal to industry and consumers that government is committed to the transition, but fundamentally, cost competitiveness is what will drive long-term adoption.,” says Santha.

In comparing the Australian EV market to that of countries like Norway – less than 0.1% of EV passenger sales were all-electric in 2017, a far cry from over 20% EV adoption in Norway – the report suggests that it may take around 10 years for the EV market in Australia to catch up.

L.E.K partner Monica Ryu says that one answer is the introduction of financial incentives for consumers to switch to zero-emissions vehicles such as all-electric cars. Non-financial incentives such as priority access lanes and free parking have been successful in other countries.

“Global experience shows that to most directly impact the early adoption of electric vehicles, the Australian government could consider financial incentives that reduce the total cost of ownership, ideally within an emissions policy framework that supports the longer-term transition to electric vehicles,” Ryu says.

The case of Denmark strongly supports this argument, where EV sales jumped strongly between 2013 and 2015 due to import tax exemption.

When Denmark phased out the tax exempt status of EVs, sales of new electric vehicles dropped by 84% over the next two years despite a doubling in the number of charging stations.

A similar reaction to removal of subsidies occured in Estonia in 2014.

Other policies decision-makers should consider include:

  • Educating consumers on total cost of ownership compared to initial outlays of both EVs and the public infrastructure required to make them viable
  • Taking the lead of EV uptake when making government fleet purchases
  • Introducing non-financial incentives such as preferential access for EVs

Madrid is one example where owners of EVs receive free parking and access to restricted roads, further reducing the ongoing costs of operating an electric vehicle.

Ryu adds, “Purchasing electric vehicles for government fleets and public transport is another area where the Australian government may look to overseas examples, like China and Europe.”

While adoption of policies geared towards mass e-mobility is recommended, she also warns caution.

“Any policies adopted by governments to accelerate uptake of electric vehicles must take into consideration their broader impact on the energy supply chain, as well as their role in the context of future mobility trends, like autonomous vehicles and new vehicle ownership models,” she said.

With cost competitiveness of electric vehicles against internal combustion engine cars expected to reach parity in the near future, governments should be prepared for a potentially disruptive transition to electric in the auto market regardless of their approach to electric vehicle adoption.

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  1. George Darroch 2 years ago

    Perhaps the simplest way to encourage EV adoption would be a rebate.

    Charge $300 on every new ICE vehicle sold in Australia in 2019. Give that money equally to every purchaser of an EV in 2019. It would represent $3-9k for each EV, with little cost to the government, and would greatly increase the affordability of EVs at the lower end.

    • Peter Campbell 2 years ago

      In effect that is what the ACT has. Zero stamp duty for an EV, a discounted duty for a more than usually efficient FF car, a standard rate and a penalty high rate for distinctly inefficient FF vehicles.

      • George Darroch 2 years ago

        Not really the same in any meaningful way, other than they’re both incentives.

        • Peter Campbell 2 years ago

          Really quite similar although the extra levy is only on the more polluting ICEs rather than all ICEs in the form of higher stamp duty than the standard rate. Saving a few thousand dollars on the cost of a new EV through the waiving of stamp duty is funded in a revenue-neutral way to the ACT government.

          • Ian 2 years ago

            Yeah, why not? The ACT government would be thinking:1. We want to cross subsidise EV , 2. We don’t want to annoy our electorate. 3. Buyers of EV are probably those that can afford heavy-duty ICE vehicles. Therefore, use some sort of sliding scale of malus to achieve the desired bonus so that the majority are not affected and the cashed up minority won’t mind.

  2. D. John Hunwick 2 years ago

    You are forgetting the thousands of people who want an EV for social and ethical reasons (not economic). Their purchases will kick start the up-take of EVs in AUstralia.

    • Ian 2 years ago

      First adopters who are patrons of this technology are important but why should these people be the ones to shoulder all the burden to get EV prices down. Isn’t that what the frigging government is for?

  3. Ian 2 years ago

    What difference would be made to the government’s tax revenue stream if they removed all import duties,luxury vehicle taxes, stamp duties and registration fees from EVs? All these taxes are an impediment to EV adoption so few would buy these cars and the government would not get this tax anyway;).

  4. MaxG 2 years ago

    Welcome to the smart country — not 🙂

  5. MaxG 2 years ago

    It is less the consumer, but more the dealers who clearly throw a spanner in the works; like this excellent research evidenced.

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