Bank Australia will stop loaning money to drivers to buy new cars fuelled by petrol or diesel from 2025, it said on Friday.
The decision to stop funding the sale of fossil-fuelled cars is part of the bank’s strategy to achieve net zero by 2035, and comes as the federal government readies to release its National Electric Vehicle Strategy which is expected to put the discussion about legislating fuel emissions squarely on the table.
Chief impact officer Sasha Courville says Bank Australia’s move sends “a signal to the Australian market about the rapid acceleration in the transition from internal combustion to electric vehicles we expect to see in the next few years.”
“We’ve chosen 2025 because the change to electric vehicles needs to happen quickly, and we believe it can with the right supporting policies in place to bring a greater range of more affordable electric vehicles to Australia,” she said.
“We’ve been thinking about the carbon impact of car loans since 2004 when we launched our first carbon offset car loan, and we’ve offered discounted interest rates for low emission vehicles since 2018.”
While the bank already provides decreased interest rates for electric vehicle loans, Courville says that cutting new fossil fuel car loans out altogether is the right thing to do.
“We think that the responsible thing for us to do next, is to ensure that our vehicle lending doesn’t lock our customers in to higher carbon emissions and increasingly expensive running costs in the years ahead,” she said.
Transport is the third largest contributor to Australia’s carbon emissions. The sector accounts for around 18% of all emissions, and has risen 48% since 1990 according to the latest greenhouse emissions report from the department of climate change, energy, the environment and water.
A strategy to encourage the adoption of EVs to tackle the sector’s emissions was promised by the former LNP government in 2020 but never actually eventuated.
The current Labor government is now picking up the pieces, and key to the discussion about cleaning up Australia’s transport sector is that of fuel emissions standards. Other than Russia, Australia is the only other developed country without legislation designed to stop carmakers from selling polluting cars.
Because there is currently no such legislation on the table, carmakers have been reluctant to offer the wide choice of cars available to drivers overseas. In particular, there is a gap in the market for low-cost electric hatchbacks and electric utes.
Only Tesla has been able to supply large numbers of EVs to Australia. Newcomer BYD looks set to bring affordable EVs in the thousands, but other carmakers are dragging their feet and there are very few priced under $60,000.
While Bank Australia’s low-interest EV loan helps more Australians afford electric vehicles, escaping rising fuel prices and high maintenance costs, Courville says that Bank Australia recognises not all Australians are yet in the market for an EV.
“While we will cease car loans for new fossil fuel cars from 2025, we are deeply aware that we need to support people not yet able to afford an electric vehicle while the market grows,” she said.
“We’ll continue to offer loans for second hand fossil fuel vehicles until there is a viable and thriving market for electric vehicles.”
“Ultimately, our announcement today is the beginning of a conversation with our customers and a signal to the wider market that if you’re considering buying a new car, you should think seriously about an electric vehicle – both for its impact on the climate and for its lifetime cost savings.”
Bridie Schmidt is associate editor for The Driven, sister site of Renew Economy. She has been writing about electric vehicles since 2018, and has a keen interest in the role that zero-emissions transport has to play in sustainability. She has participated in podcasts such as Download This Show with Marc Fennell and Shirtloads of Science with Karl Kruszelnicki and is co-organiser of the Northern Rivers Electric Vehicle Forum. Bridie also owns a Tesla Model Y and has it available for hire on evee.com.au.