Bottom line is that electric vehicles in Australia still face barriers | RenewEconomy

Bottom line is that electric vehicles in Australia still face barriers

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Australia can do much better on EVs – mass popularity is likely to take years. And that’s a shame, because in economic terms, EVs beat ICE cars hands down.

What if all these cars were electric?
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Twinkle twinkle little star,

what you say is what you are

Averages are not the only facts – the commentary section

This analyst note tries to set out some facts about electric vehicles as they apply in Australia. We draw on ABS, Department of Transport, Greenhouse gas and Energeia as our main sources.

As there are quite a lot of unit conversions there may well be some errors. And I’d note I still recall a childhood memory of reading vehicle and pronouncing it “vechile,” and enduring (more than 50 years of) embarrassment. I don’t plan to spend much time on EVs, but the lack of facts in the public discussion to date is disappointing.

My bottom line is that EVs still face barriers. I doubt that cost is the main one – it’s the lack of model choice and the lack of infrastructure and the compromises still required in the few models that are available.

I use my own situation to think about the averages. Apparently 99 per cent of car trips are less than 50km, or a round trip of less than 100km. However, even though many of my own trips fall within that range, many do not. Charging an EV in a country town is unlikely to be easy right now.

The choice in EV models is still very limited. I drive a compact station wagon (estate if you will). It’s perfect for my needs, in terms of flat boot, easy city parking and performance. There is no equivalent electric vehicle in Australia. Never mind the price.

Even the newer EVs still require compromises. Look at the Hyundai Ioniq, in terms of spare tyres and boot space. So I don’t drive an EV. Despite the readership base of RenewEconomy, most reading this article don’t drive an EV either.

The problems are probably going to go away, but it’s not going to happen in a hurry. This is one industry where Australia depends on the international market to provide supply. Still, better and future-proofed charging infrastructure would definitely help local importers to push their offshore bosses, as will the prospect of 25K per year of government orders.

A Paywalled Economist article notes that it’s mostly luxury brands moving to EVs because their buyers can afford the premium. Mercedes, for example, has committed $A16 billion of investment, aiming for 20 per cent EV sales by 2025. BMW, losing money on its i3 hatchback, wants to build compromise platforms.

Mid-market car companies are making noises, but are a long way from committing to big investments.

They don’t make enough margin to just go for it. It’s probably at least four to five years from commitment to fully fledged products, so this automatically means the model ranges available in Australia will be limited. Toyota, for instance, is planning 10 models by the early 2020s, but is probably still half committed to hydrogen.

The superstar is VW, investing $A50 billion on EV manufacturing capacity and another $A80 billion on battery manufacturing capacity (so I’m hanging onto my lithium shares). That investment is expected to result in 22 million EVs over the next 10 years, with 70 models by 2028.

So for Australia, as things currently stand, VW as an historically mainstream brand is likely to be very important. Its “ID” hatch back will cost €30,000, still expensive in Australia.

It also just unveiled an SUV (essential in the Australian and probably USA market). Finally, The Economist notes that VW has 40,000 global suppliers in the value chain, so this industry can be disrupted by simpler EVs from the likes of Tesla or, say, Dyson.

In short, Australia can do much better on EVs in the short term, but mass popularity is unlikely until the model range greatly increases and that will take years. On to the facts…

National aggregates and light vehicle aggregates

Transport in Australia of all forms has carbon emissions of about 100 mt (out of ~550 mt Australian total emissions).

Figure 1, below, carries an estimate that cars (broadly defined) are about half that. The rest is trucks, shipping, air travel.

Figure 1: Summary statistics on transport and light vehicles. Sources varied

ALP policy

ALP clean energy policy states the following on transport:

  • Government target of 50 per cent EV sales by 2030;
  • Government vehicle purchases to be 50 per cent EV by 2025;
  • 20 per cent investment allowance (ITK interpretation) for business EV purchases. The release quote is “immediately deduct 20%”;
  • A $100 million investment on a $ for $ basis to build a $200 million charging infrastructure fund.

Based on the above announcements we estimate as follows:

ALP EV policy economics
Figure 2: ALP EV policy economics. Source ALP website, ITK

Note: This table estimates an after tax value of $2,600 based on an electric car costing $43,000 and assumes there is no claw back of the 20% depreciation allowance. That’s clearly an incentive but EV’s will still be more expensive in capital cost. See below for a lifetime NPV calc. Secondly we estimate the cost to the fuel levy once 50% of fleet sales are EVs at just $141 m each year, but of course that is the annual growth in the reduction of the fuel levy so in 10 years its $1.4 bn per year if there are 2.5 m EVs on the road. If 50% of fleet vehicles were EV its roughly 25% of  total car sales. Also if 50% of  Federal Govt car purchases are  EV that’s about 25 K per year. A decent contract for someone, I’m guessing Hyundai are in pole position right now.

For the fuel tax levy we calculate:

Impact of just 0.25 m EV on fuel tax levy
Figure 3: Impact of just 0.25 m EV on fuel tax levy Source: ITK
EV v Petrol fleet purchases

Comparing cars seems more complicated than comparing wind and solar farms. There are various tax rules and in some years there are investment allowances, private/business uses, log book methods, blah blah.

Our comparison is as simple as we can make it. The cars are owned for eight years, with 25 per cent reducting balance depreciation. Only fuel and service costs and tax benefits are allowed for. We compare a supposedly equivalent $30,000 petrol car with a $43,000 electric car. We use a discount rate of 8 per cent.

Each car is assumed to be traded in at the end of eight years for its book (depreciated) value. In the case of the electric car, where Hyundai warrants the battery for eight years or 160,000 km, we really should allow for a replacement battery. If we did, we estimate it would reduce the net trade-in to about zero.

That’s on the assumption that battery costs fall 15 per cent per year for the next eight years. You can also make an argument that both the electric and petrol cars will be technologically obsolescent in eight years and neither should have a trade in value.

Perhaps we will all use autonomous vehicles. For rural dwellers the idea of autonomous vehicles running round farm tracks would seem to offer cartoon possibilities, but let’s not worry about that.

Let’s imagine that TV ad of a 4WD cresting the mountain top, showing off its suspension, then the faces of passengers as they realise its not an ad but they really are off not only the beaten track but any track….

I look forward to reader comments pointing out all the assumption and calculation errors I’ve no doubt made. No inflation is allowed for in either electricity or petrol. We can make an argument that supports that assumption, but its not critical. Each car does 13,000 km per year.

First the electric car.

EV total cost of ownership
Figure 4: EV total cost of ownership. Source: ITKe

Then the petrol car.

Petrol car cost of ownership
Figure 5: Petrol car cost of ownership. Source: ITK
Regarding charging

A detailed and excellent study of charging was prepared by Energeia for ARENA and CEFC. We reproduce a table from section 1.4.1. It’s column 3 you want to focus on, which shows a 5 minute charge, or less for the electric car in this study, at a cost of less than $10.

EV charging models NV gas stations means electric gas
Figure 6: EV charging models NV gas stations means electric gas. Source: Energeia

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