Image: Riz Akhtar
Do Australian drivers still need a stepping stone to make the transition from a petrol or diesel vehicle to an electric car?
It’s a question that is dividing the automotive industry as the clock ticks down to the removal of a tax exemption for plug-in hybrid vehicles.
The fringe benefits tax exemption, introduced in 2022, is due to expire in one month but some groups, including the Motor Trades Association and Electric Vehicle Council, argue it should be extended to help drivers on their “electrification journey”.
But other organisations, like the Australian Electric Vehicle Association, say an extension would only encourage more people to buy fossil fuel vehicles rather than invest in cleaner and widely available electric options.
Both sides agree that removing the tax cut on April 1 will change the make-up of vehicles in Australia’s fleet.
The Labor federal government moved to remove fringe benefits tax from some electric, hydrogen and plug-in hybrid vehicles in late 2022, in a move that cut the price of vehicles through novated leases by thousands of dollars a year.
The tax cut could only be passed with support from the Greens and independent senator David Pocock, however, who insisted that tax cuts for plug-in hybrid cars be phased out on April 1, 2025.
With just a month to go, some industry groups are calling for that deadline to be extended, and for plug-in hybrid electric vehicles (or PHEVs) to be treated like their battery-powered peers.
The Motor Trades Association of Australia requested the change in its recent pre-budget proposal and Electric Vehicle Council policy head Aman Gaur says plug-in hybrid vehicles reduce transport emissions and deserve ongoing support.
“The federal government should extend the (fringe benefits tax) exemption for PHEVs to support the electrification of driving in Australia,” he said.
“We know the FBT exemption is an important tool that is helping more Australians afford and access the latest EVs.”
New plug-in hybrid vehicles have soared in popularity in Australia over the past year, doubling during 2024 and recording more than 23,000 sales, according to the Federal Chamber of Automotive Industries.
While the vehicle type is significantly less popular than hybrid or electric cars, National Automotive Leasing and Salary Packaging Association chief executive Rohan Martin says the tax cut did raise their profile and appeal for buyers.
Some vehicles that are less likely to be released as electric models, such as utes and large SUVs, are being made available as plug-in hybrids first, he says.
“When you look at something like the (plug-in hybrid ute) BYD Shark, it’s been extremely popular,” he told AAP.
“It’s meeting the needs of what Australians typically love to drive and that’s larger vehicles that are capable of taking care of your Monday to Friday, as well as your Saturday, Sunday needs.”
Other large vehicles due to launch in Australia as plug-in hybrids include the Ford Ranger and JAC T9 utes, and the Jaecoo J7 and updated Mitsubishi Outlander SUVs.
Tax incentives on fuel-efficient vehicles like plug-in hybrids not only help reduce emissions, Mr Martin says, but they also introduce motorists to the idea of electric vehicles without the fear of range anxiety.
Plug-in hybrid electric vehicles contain both a fuel engine and an electric motor powered by a battery smaller than a typical electric car.
The idea of a fuel-powered backup appeals most to motorists in regional Australia, he says, who are concerned about the distances they can travel between charging stations.
“(Removing the tax cut) is a lost opportunity to give people a pathway into low and then zero-emission cars,” Mr Martin said.
“Once the bulk of people move into a plug-in hybrid, they’re on their electrification journey.”
But other groups argue plug-in hybrid vehicles are no longer needed as a stepping stone between petrol and electric vehicles.
The automotive industry has changed a lot in the past two years, Australian Electric Vehicle Association national president Dr Chris Jones says, with many more low-emission options available with significantly larger batteries and longer range.
Buying a plug-in hybrid vehicle in this market, he says, is no longer the best or safest option.
“PHEVs are a bit like gas in the energy sector: they describe it as a transition technology at a time when we don’t need transition technologies, we’ve got the alternative, we’ve got the final technology available,” he said.
“They are basically being used as an opportunity not to do stuff, not to move to full electrification.”
Encouraging more motorists to buy plug-in hybrid vehicles would keep fossil fuel cars on Australian roads longer, Dr Jones says, and reduce the impetus to install charging infrastructure in regional areas.
European studies have also shown the real-world fuel consumption of plug-in hybrid vehicles is as much as five times higher than car brands advertised, as drivers rely on the vehicles’ fuel engines more often than their batteries.
“They don’t get anywhere near the efficiencies they claim because people don’t use them as electric vehicles – they drive them like petrol vehicles,” Dr Jones said.
But Australian drivers may be more economical in their fuel consumption, Mr Martin argues, as a study of 600 plug-in hybrid vehicle drivers found they used their vehicle’s battery to power almost two thirds of their travel.
Motorists do still have time to access tax cuts on hybrid vehicles, he says, though they may face a smaller range of options as vehicles must be delivered and in use before April 1 to qualify.
AAP
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Plug-in hybrids were a brilliant idea 15 years ago.
Australia's charging network is 15 years ago
In fact it's such a disgrace that a granny drove her EV right around Australia four years ago..........
..........way too hard for the average Coalition voter.
Did she do it in 30 days and ps she did not drive around Australia
One further observation - conventional hybrids have been on the market for over 25 years now. Battery EVs for about 10 years. Why has it taken until now for hybrids to become so popular? The arrival of the hybrid SUV probably has a lot to do with it. But when battery EV SUVs are matching the hybrid prices, and cost substantially less to run, there must be other factors at play. Reliable public charging comes to mind.
Also, considering big SUVs, dual-cab utes and 4x4s make up about a third of all family car purchases, I suspect EV sales will be rather linear until a BEV version of a Ford Ranger or Hilux comes along.
If Geely can hurry up and release the RD6 in Australia...
Why has it taken until now for hybrids to become so popular?
Toyota has had that market to itself for decades and with the arrival of BEVs in numbers over the last few years other ICE manufacturers have released that they need to offer hybrids to keep the profits coming in as pure ICE volumes and profits are declining globally. Had they moved faster and further into BEV then they wouldn't have needed the hybrid stepping stone.
The innovators set the pace of market change, not the incumbents. The next few years are going to be very interesting indeed (even if we do fail to reduce emissions, as we seem intent on doing).
Charging EVs in the country areas is still a PITA IMHO. 1500km in a Highland Model 3 over Easter, 4 special trips to Tesla chargers and a 5th stop in a carpark in Moe that was sort of en route.
With something like a Haval H6 GT PHEV and close to 180km EV range, you have the backup of an ICE engine in the country and mostly EV running around town. I will be cross shopping one of these and a Sealion 7 which is full EV. Sealion 6 suspension is too soft and EV range not enough.
How often will you do that trip though? Why pay $50K plus for 80km of EV only range just to save a few dollars? If that was a hire car then you may be new to EVs and how to optimise charging stops on long trips, which is understandable.
Did you use plugshare to find DC chargers or only depend on what was on the Tesla screen for charging stalls?
This rebate was created when PHEV range was about 40km and the charging network was rubbish.
The charging network is still rubbish and PHEV EREVs are nearing 200km range.
Rebate should be extended for EREVs with over eg. 100km range for 2-3 more years while Australia sorts out its rubbish charging network.
How does subsidising PHEVs, which don't rely on the charging infrastructure, encourage anyone to fix the charging infrastructure? Better to focus efforts on improving charging.
Why would you pay extra for a PHEV if the charging network was rubbish in the first place. BTW 70% of EV drivers charge at home, when not on long trips. Would you buy a PHEV if you can't charge at home?
As is it says above:
"European studies have also shown the real-world fuel consumption of plug-in hybrid vehicles is as much as five times higher than car brands advertised"
We do have to stop this nonsense (and convenient for old auto makers) "transition" language, while carbon emissions continue to increase, already at dangerous levels. Moving straight to EVs - the smartest technology anyway - is the way to take advantage of some low hanging fruit in reducing carbon emissions in the transport sector. Skip the PHEV, go straight to BEV.
Well actually, they've already had a nearly three year transition. Definitely time to move on particularly with the new vehicle emission standards driving up the range of BEV models in our market.
Given that the European studies in 2021 have shown that plug in hybrids are mostly driven on fuel, they are only justifiable in a very narrow user case where there is currently no EV option. The BYD Shark might fit this, although several full EV ute options will hit Australia in 2025. A subsidy now sends the wrong message if we are serious about reducing pollution and emissions. Fleet plug ins are a particular problem -if your company gives you a fuel card, you're not going to use your home electricity to charge it.
I would LOVE to know how much dark money is changing hands from legacy OEMs (that have a lot to lose from pure EVs eg. Toyota) to corrupt pollies and others to ensure that they continue supporting tax breaks for hybrids.
Probably equivalent to the amount spent by the coal, oil and gas industries to save their skins.
electric and hybrids are so good why do they need tax payers money
Phev are a gateway drug for people who aren't ready to make a full EV commitment. The people I know who have phevs are really excited about the plug in capability And with Australia having long distances the make a lot of sense. Extend the rebate for a could more years I reckon.