Infrastructure Partnerships Australia has stunned the nascent electric vehicle industry in Australia by suggesting that EVs be immediately hit with a road user charge, and has modelled a fee of 4c a kilometre, or about $800 a year based on 20,000kms travelled.
The proposal in a new report released on Thursday – just a day before a key meeting of state and federal transport ministers – suggests that fuel excise revenue – which currently gathers around $11.3 billion a year – could “fall off a cliff’ if the uptake of EVs suddenly accelerates from its current low levels.
The lobby group wants the road user charge targeted exclusively at full battery electric vehicles, but not plug in hybrids or other fuel efficient cars, or any car that has an internal combustion engine.
And the new tax should be introduced now, says IPA chief executive Adrian Dwyer, “before there is an electric car in every driveway.”
The proposal is likely to be considered at a COAG transport ministers meeting on Friday, with reports in mainstream media that the Victoria government, and possibly the NSW government, is considering such a measure.
The EV industry has suggested that a road tax is inevitable, but it should be aimed at all vehicles, not just EVs, particularly as petrol and diesel cars bear no cost of their impacts on health and emissions.
The think tank is singling out EVs as the culprit, even though its own data shows that fuel excise revenue per kilometre has declined by one third over the last decade thanks to the gradual improvement in efficiency, and despite the fact that Australia is one of the few western countries not to have fuel efficiency standards.
Yet the IPA – whose board features many represents of the nation’s biggest contractors and road builders – only proposes that full battery electric vehicles are slugged with the proposed user fee, and not plug-in hybrids or plain hybrids.
The proposed cut-off point of 1 litre per 100 kms fuel efficiency effectively means that any car with an internal combustion engine is excused, even if their contribution to fuel excise is negligible. “We had to draw the line somewhere,” a spokesman said in response to our questions.
The IPA claims – in a document where it also says the need for government assistance in charging infrastructure is a “myth” – that the introduction of a road user tax “would be good for EV owners” and prospective buyers because it would “give them clarity”.
At the same time it notes:
“This proposed approach would impact a limited number of motorists – only those who already own electric vehicles or are actively considering buying one.”
“This reform would not penalise those who wish to continue driving internal combustion engine vehicles. The existing road charging arrangement for petrol and diesel-powered vehicles can and should remain the same.”
It also claims that the road tax is fair because it is “opt in”. i.e. consumers wouldn’t be hit by the tax unless they bought an EV. “This would mean that no driver is worse-off, whether they move to a road user charge for electric vehicles or not.”
The report was met with a withering response from the Electric Vehicle Council, which said it would make Australia “a global laughing stock”.
“Imposing an additional tax on EVs would disincentivise uptake, especially for the emerging mid-tier market,” EVC chief Behyad Jafari said in a statement, noting that petrol cars are already exempt from taxes on their impact on health and greenhouse gas emissions.
“Although this economically illiterate report somehow managed to claim otherwise, sticking a tax on things discourages purchase.
“This report also completely ignores the hazardous effect of our dependence on foreign oil, both to our national security and balance of trade.
“While the rest of the world has introduced fuel efficiency standards and incentives for EVs, Australia has none.
“Under these proposed changes we would go a step further and actively encourage the purchase of polluting cars that cost the health system billions of dollars each year. Air pollution from combustion engine vehicles kills many more people than the annual road toll.”
The IPA justifies the road tax on modelling produces by accounting firm EY that claims it would make little difference to the “total cost of ownership” of battery electric EVs.
But the modeling included in its report suggests that the benefits of owning an EV – assuming they reach price parity – will be more than halved to just $3,600 over an eight year period (based on 4c/km and about 14,000kms travelled a year).
It also claims that the current price difference between a fully electric Kona and its “petrol equivalent” is $15,000. We’d suggest that it is closer to $30,000, and the Kona electric is priced at around $65,000 plus on roads, and not in the low $50s as the modeling claims.
“If a road user charge was applied today, the operating costs of an electric vehicle would still be cheaper than an internal combustion engine,” the report claims.
Yet its own graph – right next door to this claim – shows the opposite is true, even before the proposed road tax and EY’s heroic assumptions about the cost of an electric Kona. It says the difference narrows over time, but is not cheaper.
Previously, the IPA had recommended the road user charge be offset by other incentives such as an exemption fro luxury car tax and vehicle import duties. But that no longer forms part of their thinking.
The report says the charge should capture all vehicles with manufacturer-rated fuel use below 1 litre per 100 kilometres.
It says this would mean existing hybrids will be excluded and future ‘ultra-hybrid’ vehicles cannot be developed to avoid road user charges.”
It doesn’t explain how driving plug in hybrids and avoiding 80 per cent of fuel excise tax is fair, but driving an EV (and further reducing particulates and emissions) is not fair
It cites the case of New Zealand as an example of road user charges. But in New Zealand that applies to all vehicles, and EVs in that country are exempt until their share of the overall car fleet reaches 2 per cent.
In Australia, the report notes, the share of pure battery EVs is currently 0.07 per cent, but the IPA still wants immediate action.
“The best time for implementing a road user charge on electric vehicles is now,” it says. “Governments should implement a road user charge on electric vehicles now while there are few on the roads.”
Some form of road user tax is considered inevitable, but the recent Senate inquiry into EVs suggested it should wait until EVs reach cost parity, and – as in other countries – should be applied to all vehicles.
Bloomberg NEF has suggested that by 2028, EV uptake will have reduced fuel excise takings by about $1 billion from where they otherwise would be. That’s equivalent to the impact of fuel efficient vehicles over the last decade.