Up to speed: Industry welcomes Labor plan to slash taxes on electric vehicles

Labor’s plan to slash import tariffs and the fringe benefits tax for electric vehicles has been welcomed by industry stakeholders and organisations, saying it will help Australia catch up with the global pack.

Australia lags sorely behind the global EV market due to a marked lack of government support and high purchase costs due to currency conversion, import costs and other taxes.

In 2020, less than 0.1% of cars sold were electric vehicles, against a backdrop of almost 5% of auto sales globally.

The federal opposition’s new package forms part of Labor’s new energy and climate platform and was announced ahead of its National Conference that will be held today along with a $200 million ‘Power to the People’ initiative that would see Labor, if it wins next year’s federal election, fund the installation of up to 400 medium-scale batteries.

Under the new EV plan, the 5 per cent import tariff that is charged on some imported electric cars would be waived, saving up to $2,000 for certain electric vehicle purchases.

Additionally, electric vehicles supplied by an employer to an employee for private use would be exempted from a 47% tax – a potential $9,000 saving.

“Australians want to make the switch to electric vehicles, but the lack of leadership nationally has limited their options,” said Electric Vehicle Council CEO Behyad Jafari said in a statement.

Jafari points out that carmakers are hesitant to bring more electric models to Australia because the policy black hole means there is no certainty they will sell.

Rather, car makers prioritise other jurisdictions with policies in place to accelerate electric vehicle adoption, such as fines for carmakers exceeding carbon emissions limits in the EU and a federal tax credit for those buying EVs in the US.

Most recently, the local arm of VW labelled Australia a “third world” for EV policy and said its ID series will not reach this country for several years unless policy changes.

Jafari says the new policy “would encourage car manufacturers to import and supply more affordable electric models in Australia. This makes it a win for the environment and a win for fairness.”

His support for the new plan was echoed in comments by Australian Conservation Foundation’s climate change program manager Gavan McFadzean.

“Under the Morrison government Australia has fallen well behind comparable developed countries on the take-up of electric vehicles,” said McFadzean in a note to The Driven.

“Labor’s announcement will encourage car manufacturers to supply more electric vehicles into the market, increasing consumer choice and making EVs more affordable to car buyers.”

Chief executive of the Federal Chamber of Automotive Industries Tony Weber also welcomed the new Labor plan, noting the body has introduced its own voluntary emissions standards in the absence of legislation.

“Australia is lagging the rest of the world when it comes to a long-term vision for the continued penetration of low emission vehicles,” said Weber in a statement.

“The automotive sector has seen around the world that strong signals around targets, good infrastructure policy and incentives from national governments contribute to positive outcomes on low emission vehicle introduction.

“The ALP announcement gets the topic back onto the policy agenda and that is critical right now. Positive signals like this can encourage global car brands to increase the choice of low emission vehicles available in our market which in turn increases the adoption of electrified vehicles available to customers.”

The new EV plan from Labor differs substantially from one that was put forward prior to the 2019 federal election when then Labor leader Bill Shorten touted a target for 50% of all new auto sales to be electric by 2030, and for all new buildings to be EV-ready (that is, to avoid expensive retrofits of electrical cabling, not installation of EV chargers).

That target was shot down in flames by the Coalition government, including minister for energy and the environment Angus Taylor accusing Labor of wanting to introduce a housing tax, to prime minister Morrison claiming EVs would ruin the weekend.

Instead, Taylor has introduced a “future fuels” strategy that dubiously places non-pluggable hybrid vehicles that must use petrol to drive as the pinnacle of green transport in Australia based on erroneous carbon abatement calculations.

The new plan from Labor, which is setting in motion policies to win back government in 2022, is somewhat more subdued but sets down a clear pathway to making electric vehicles more affordable for Australian drivers.

“Electric vehicles are cheaper to run, require less maintenance and are better for the environment. It is only government inaction that is causing us to trail the rest of the world in electric vehicle uptake,” says Jafari.

The 5% import tariff that Labor promises to remove on electric vehicles has in the past been labelled a “zombie tariff” by the Australian Automobile Association (AAA) because it, like the luxury car tax, was introduced to protect Australia’s now-defunct car manufacturing industry.

As the AAA pointed out in 2018, the tariff has been “hindering the transition to a safer …. and more environmentally friendly national car fleet.”

Removal of the luxury car tax which adds 33% to the extra cost of fuel-efficient vehicles that sell for more than $77,565 is not part of Labor’s plan, although it has also been dubbed an outdated tax.

This should encourage carmakers to further ensure they price EV models below this threshold bringing more affordable EVs to the country as opposed to premium vehicles.

Alongside the plan to slash the import tariff and fringe benefits, Labor is pledging to work with industry, unions, states and consumers to develop Australia’s first National Electric Vehicle Strategy.

It says this will include more measures to accelerate adoption of EVs, policy to encourage local manufacturing of electric car components (especially batteries) and even perhaps cars themselves, and ways to address declining fuel excise at a national level.

The moves by states such as Victoria and South Australia to consider introducing EV taxes to address this fuel excise decline at a state level has been lambasted by the EVC as well as industry stakeholders.

In contrast to the new plan from federal Labor, Victorian Labor wants to introduce a 2.5c/km fee for electric vehicles and 2c/km fee for plug-in hybrids by July.

“Unlike Victorian Labor, which is making electric vehicles more expensive with an unnecessary and premature electric vehicle tax, the federal ALP has steered in the right direction,” says Jafari.

“This is the type of sensible action that has been taken by world leaders from all sides of politics. It is proven to work by making electric vehicles more affordable for more Australians.”

This article has been updated with additional comments from ACF and FCAI.