Spotlight On Australia - December 2024

Australia is a clear leader when it comes to the adoption of rooftop solar, with 1-in-3 homes having installed rooftop solar. However, Australia is lagging when it comes to the adoption of EVs. In 2023, Norway led the world with EVs comprising 93% of all new cars sold. In contrast, the share for Australia was only 12%. But 3 years earlier, the figure was only 1%. As the chart below shows, EV sales have greatly increased since 2021 and are expected to double in the next 2 years. So why has it taken so long and can Australia reach the levels of Norway?

Subsidies and incentives

New technologies are not cheap. It takes increasing scale and innovations to bring prices down. Henry Ford’s Model T was produced 22 years after Karl Benz produced his first ICE 9Intercal Combustion Engine car.

Many countries with a current lead in the sale of EVs, such as Norway and China, were early to provide incentives to EV buyers and producers. This made EVs attractive to consumers long before EVs could compete with ICE vehicles on price and running costs. For example, Norway began to waive registration tax and the 25% VAT on new cars for EVs in the 1990s. They also provided other incentives such as free parking in cities and exemptions from tolls.

Australia’s federal and state governments have been late to introduce incentives but they seem to be working. 

Australia’s most populous state, New South Wales (whose capital is Sydney), introduced a stamp duty (sales tax) exemption and a rebate in 2021. Unbelievably, the incentives were ended at the start of 2024. Similarly, the second most populous state, Victoria (Melbourne), introduced a rebate in 2021 and ended it in mid-2023. Despite the ending of these incentives, they have no doubt contributed to the growth in EV sales since 2021.

Victoria tried to introduce distance-based user charges for EVs to recoup money that will be lost through lower fuel excise revenue. However, in 2023, the High Court ruled that the charges were unconstitutional. NSW is planning to introduce a road user charge for EVs in 2027 but needs to assess the impact of the High Court’s ruling.

After previous Prime Minister Scott Morrison questioned whether EVs could “tow a caravan” or “allow Australian to take camping trips to the bush”, the new federal government under Prime Minister Anthony Albanese has introduced a range of measures to support the sale of EVs. It has raised the luxury car tax threshold for EVs (and other fuel-efficient vehicles)  and exempted EVs under the threshold from all custom duties and Fringe Benefit Tax (FBT). The FBT exemption has allowed companies to offer EVs as a leased-work car to employees, which is a significant market opportunity. 

On December 19, the federal government announced low-interest loans for workers who earn less than AUD 100,000 to buy an EV up to a value of AUD 55,000. There has also been interest in EVs among some Australian securitisation firms.

The federal and nearly all state governments have also set future EV targets (many up to 100%) for their fleets.

Increasing the supply of EVs

Even before many of the above incentives had been introduced, demand for EVs outstripped supply. In 2019, there were only 22 models of EVs available for sale in Australia. This increased to 122 in 2023 but still trails the 160+ available in Norway.  

A key reason for the low supply was that Australia had not updated its fuel efficiency standard to include restrictions on CO2 emissions. This discouraged car makers from exporting low-emission vehicles and EVs to Australia. However, this disincentive has been removed with the introduction of the New Vehicle Efficiency Standard.

Car makers will now see increased opportunities for EVs in Australia and will also want to bring down the average CO2 emissions across their range by increasing the export of their EV models relative to their other models.

“Having a tougher fuel efficiency standard is wildly overdue for Australia, and it’s the major stumbling block for our industry,” Behyad Jafari, former CEO of Electric Vehicle Council. 

Charging ahead

As with many countries, limited charging infrastructure combined with “range anxiety” has kept some consumers from buying EVs in Australia. While Australia is a highly urbanised country, Australians often take long-distance trips to other cities and the countryside.

In 2019, there were 1,930 public vehicle charging stations in Australia. This has increased to 2,908 in 2023, including 1,059 fast and ultra fast charging stations. However, this remains far short of Norway’s 27,528 public charging stations.

The federal government has been funding charging stations since 2020 and stations for heavy-duty vehicles since 2022. State governments have also been investing in charging infrastructure as has some electricity companies, but it is clear that a lot more investment is needed. 

“There’s one charging station for every 10 electric cars overseas. In Australia, the figure is one for 35, ” Dominique van den Berg, CEO, Emergy Networks Australia.

Final thoughts

Australian EV sales have broken through the 10% level on the back of increased government incentives and charging stations.

The start of the New Vehicle Emissions Standard will likely have an even larger impact, increasing the choice and lowering the cost of EVs in Australia.

However, state governments could be doing more to incentivize the take up of EVs and more public charging stations are needed if Australia wants to reach EU levels of EV sales.

The price of EVs worldwide will continue to fall as production increases and technology matures, and this will help drive increased EV market share in Australia. But anything Australia can do to increase the rate of adoption will help it meet its Paris Agreement goals faster.