Australian uptake of EV and plug in hyrbids could stall without tax breaks

Australia risks stalling efforts to cut transport emissions if it does not reintroduce tax breaks and incentives for the purchase of electric and hybrid vehicles.

The Australian Finance Industry Association issued the warning on Monday with its EV and hybrid car report, which revealed Australians financed almost 105,000 low-emission vehicles last year – a rise of more than 40,000 cars.

But the figures also revealed the removal of a tax exemption for plug-in hybrid cars this year delivered a sharp decline in sales.

The report comes after flat sales for electric vehicles this year and amid speculation over changes that will occur when penalties for exceeding emissions under Australia’s New Vehicle Efficiency Standard begin in July.

The association’s study, called Driving Down Australia’s Emissions, found finance companies provided $6.17 billion for electric and hybrid vehicle loans in 2024, representing a 50 per cent rise from 2023.

More than 104,800 low-emission vehicles were purchased under finance during the year, including more than 60,000 hybrids and 44,000 battery electric vehicles.

The figures proved Australian consumers and companies were keen to reduce transport emissions, Australian Finance Industry Association chief executive Diane Tate said, although some were still wary about moving to an electric car.

“Hybrid vehicles remain a popular choice for customers who want to make the move into lower emissions transport but don’t have easy access to charging infrastructure or still rely on the convenience of petrol back-up for travelling longer distances,” she said.

“At the same time, we’re seeing steady and growing confidence in electric vehicles.”

But figures from the group, which represents banks, finance firms and fleet providers, also showed loans for plug-in hybrid vehicles dropped sharply in April when a fringe benefits tax exemption expired.

The number of plug-in hybrid vehicles under finance fell by 40 per cent in April compared to March, the report found, and loan value fell by 47 per cent.

The drop demonstrated how sensitive buyers were to price changes, Ms Tate said, and proved the need for financial assistance to encourage the adoption of hybrid and electric vehicles.

“These figures further highlight the role that financial incentives and policy consistency play in accelerating or hindering Australia’s transition to lower emissions transport,” she said.

“To provide Aussies with options that suit their transport needs, we must bring back the (fringe benefits tax) exemption for plug-in hybrids, fast-track public and private charging infrastructure projects (and) introduce upfront discounts and price subsidies that have proven to be effective overseas.”

A fringe benefits tax exemption is still in place for electric cars purchased through novated leases, although all state and territory rebates for electric vehicle purchases have ended.

Only the ACT government offers zero-interest loans of up to $15,000 to assist with the purchase of an electric car.

AAP