Just a week after unveiling an electric vehicle transition plan for its government fleet and more charging infrastructure, the South Australia Liberal government has shocked the EV sector by announing a road user charge will be imposed on electric vehicles in 2021.
The news came in the South Australia state budget delivered by Treasurer Rob Lucas on Tuesday, and it means the state will become the first in Australia to impose such charges, and the only jurisdiction on the planet – according to EV advocates – to impose such penalties on EV owners while providing no other incentives to purchase.
The scale of the new charge has not been decided but it will comprise a fixed component (similar to current registration charging) and a variable charge based on distance travelled. It will apply to plug in vehicles – both full battery and plug in hybrids – but not standard hybrid cars, even those with very low consumption.
The measure will raise around $1 million in the first year, but given there are probably little more than 2,000 EVs in the state (there were 412 EV sales in the state in 2019), that translates into a tax of nearly $500 per vehicle in its first year.
“Someone needs to take the lead,” Lucas said in comments reported by the AFR. “Now’s the time to bite the bullet and introduce reform. There’s great logic to it.”
Various infrastructure lobby groups and the incumbent car industry have lobbied for road user taxes, arguing that EVs dodge their responsibility to provide funding for roads because they don’t pay fuel excise, because they don’t burn any fuel.
A NSW government panel has canvassed a similar charge, but Electric Vehicle Council CEO Behyad Jafari described that proposal as a “dud” and said it would put Australia at odds with the rest of the developed world, and would be foolish when the country lags the rest of the world in the uptake of EVs.
Jafari was similarly damming of t the the South Australian government move.
“If the revenue from fuel excise is falling because South Australians are burning less foreign oil, that should be considered a blessing,” he said. Overall it’s good for air quality, it’s good for the health budget, it’s good for carbon emissions, and it’s great for economic sovereignty. The last thing any sane government would do is try to hit the brakes on this trend.
Jafari says a recent analysis by EY showed that every driver who switches to an electric vehicle delivers a $1370 boost to government coffers, and a $8,763 boost to the Australian economy.
“It’s like responding to a drop in the tobacco tax take by slamming a new excise on nicotine gum.
“South Australia can’t hit their net zero targets with this kind of policy approach. The state is currently at less than one per cent electric vehicle uptake and now they want to introduce the world’s first EV tax.”
Even the main car lobby, the Federal Chamber of Automotive Industries, said it was appalled by the move.
“The announcement this morning that the South Australian Government plans to introduce a road user charge for low and zero emission vehicles (LZEVs) is simply beyond belief,” FCAI CEO Tony Weber said in a statement.
“All around the world, developed countries recognise the environmental and health benefits of low and zero emission vehicles. These countries encourage the uptake of LZEVs through incentivisation and the deployment of infrastructure.
“With its proposal to tax LZEVs through a road-user charging tariff, South Australia is discouraging the uptake of environmentally friendly motoring and is turning its back on the topic of Climate Change.
Most of the revenue that goes into fuel excise is not spent on roads and goes to general tax revenue, and EVs pay more than their fair share of that because of the higher cost of the cars, meaning more GST, more stamp duty, and often more luxury tax is paid.
The EV industry accepts that road user charges are acceptable at some time, but only if applied evenly to all vehicles. Under the South Australia rule, hybrid cars with very low fuel consumption dodge both the road tax and the bulk of fuel excise costs.
The EV industry also argues that it is absurd that at a time when most other countries are introducing incentives to encourage EV uptake, and lower the cost of EVs, that in Australia the push should be in the opposite direction.
The South Australia government – usually applauded for its visionary approach to the renewable energy transition – has not revealed how the new charges will be imposed, and only expects to raise about $1 million a year from the move. Lucas justifies this by saying last week’s EV policy will cost $18 million and this charge will help pay for it.
“Someone has to pay for the road maintenance and upgrades and it should be the people using the roads,” he said in the comments reported by the AFR, adding that the pandemic provided an opportunity for ”sensible” tax reform.
Note: California ihas also introduced a road user charge, but is making clear it is looking to apply it to all vehicles, and as a replacement for the current fuel tax, not just on EVs. The fuel tax in California currently raises about $US250 a vehicle, and the state has generous incentives to purchase EVs. And california provides hefty incentives for EV purchases, as the table above illustrates.