Australia’s new electric vehicle policy still hasn’t set fuel efficiency standards. While further consultation may suit the car industry, the delay risks putting the country’s net-zero goal out of reach. By Mike Seccombe.
Electric vehicles policy stuck in low gear
There was an element of deja vu for Behyad Jafari, watching the federal government’s announcement of its new electric vehicle strategy on Wednesday morning.
“In 2016 I stood on the lawns of Parliament House with Josh Frydenberg and Paul Fletcher, who were the Liberal ministers at the time, doing much the same as what we were doing today,” he says.
Then, as now, Jafari was chief executive of Australia’s Electric Vehicle Council, invited to hear the government spruiking the manifest benefits of imposing efficiency standards for Australian vehicles: lower fuel costs for motorists, lower emissions and incentives for the uptake of electric cars.
Then, as now, no actual efficiency standards were announced. Instead, we have essentially a plan to make a plan. The government says it aims to have standards set by the end of the year, after further consultation. Jafari has seen that show before.
After Frydenberg and Fletcher made their big announcement seven years ago, a consultation paper was released and immediately condemned by car retailers and motoring groups. Murdoch’s The Daily Telegraph called the idea a “carbon tax for cars”. The National Party, led by Barnaby Joyce, dug its heels in. Within six months of the 2016 announcement, the government junked the idea.
So while Jafari welcomes the release of a new plan by the relevant Labor ministers, Chris Bowen and Catherine King, he does so cautiously.
“It’s very good news that the government has committed to doing fuel efficiency standards. But here we are today with another discussion paper about it. We are somewhat drowning in discussion papers,” he says.
A degree of frustration is understandable. Most of the world’s major economies, except Australia and Russia, have fuel efficiency standards. The United States has had them for almost 50 years. Around the world, some 85 per cent of new cars are subject to them.
Simply put, what they do is require the national vehicle fleet to use less fuel, producing fewer emissions. The fact that Australia does not have a federally mandated efficiency standard is increasingly to our detriment, as Bowen and King noted.
“The absence of a standard has meant Australian households and businesses are missing out on greater choice of car models and paying more in fuel costs to run their cars because manufacturers prioritise sending more efficient vehicles to countries with standards in place,” they said in a joint media release.
“On average, new cars in Australia use 40 per cent more fuel than the European Union, 20 per cent more than the United States, and 15 per cent more than New Zealand.”
Exactly why the government decided to have yet another round of consultations – albeit on a tight timetable – perplexes many experts, for the policy blueprint is broadly agreed across developed nations. An emissions target is set, stipulating how much carbon dioxide can be emitted per mile or kilometre. Carmakers must meet that target across their range of vehicles, by increasing sales of lower-emissions models to offset those that have higher emissions, or be penalised. The targets become progressively more stringent, forcing car companies to sell more and more zero-emissions vehicles.
Another six or 12 months’ delay might not seem much, but there is no time to waste if Australia hopes to achieve its economy-wide goal of net zero emissions by 2050.
Given the life span of a car in Australia, says Marion Terrill, transport and cities program director for the Grattan Institute, “you have to stop selling new cars that are emitting, by about 2035”.
That leaves us maybe 12 years, and Australia is starting well behind the pack. In 2021, according to the government’s electric vehicle plan-for-a-plan, EV sales accounted for about 9 per cent of the global car market. In Australia it was 2.1 per cent.
Admittedly, that was a three-fold increase on 2019 when then prime minister Scott Morrison won the election in part by grossly misrepresenting Labor’s plans to encourage EV sales. And last year the EV share of the new car market rose to 3.8 per cent.
Despite this, Australia’s light vehicle fleet did not get any less polluting. Figures released recently by the peak body, the Federal Chamber of Automotive Industries, showed that Australian cars, SUVs and light commercial vehicles emitted an average of almost 213 grams of CO2 for every kilometre travelled last year. This was a marginal increase on the year before, and well above the FCAI’s self-set target of 189 grams.
Blame Australians’ preference for large SUVs and, especially, dirty big utes. Four of the 10 highest-selling vehicles last year were utes, with the biggest seller being the Toyota HiLux. No passenger sedan made the top 10.
This consumer choice is in substantial part a consequence of government tax breaks that encourage people to buy bigger cars than they otherwise might have, says Terrill. “Particularly the fringe benefits tax concession, if you salary sacrifice for a vehicle as part of your employment. And the instant asset writeoff for business vehicles.”
Another factor is that utes now offer levels of comfort and performance comparable to sedans. But there’s no getting around the fact that Australia’s dismal performance is very much a result of taxpayer-funded subsidisation of businesses, particularly small businesses and tradies, to upsize their transport.
It is to the FCAI’s credit that it established its own targets for fuel efficiency in the absence of federally mandated ones. But they are voluntary and also very loose. Their target for passenger cars and small SUVs, for example, is 100 grams of CO2 by 2030.
The European Union’s is 43. The US proposes about 50.
Behyad Jafari says Bowen and King should have announced similar targets this week, or at least narrowed the parameters for the promised consultation. The discussion then would be “do you want 45 or 53 grams? Not, do you want 130, like the car industry’s been proposing,” he says.
It is not clear, at least publicly, what mandated target the industry wants, though the 130 alluded to by Jafari seems a fair extrapolation from the FCAI’s 2030 voluntary goals of 100 for smaller vehicles and 145 for large SUVs and light commercial utes and vans.
The chief executive of the FCAI, Tony Weber, avoids nominating a figure to The Saturday Paper. He insists the industry does not oppose efficiency standards, but cautions against simply following the lead of other countries.
He notes that Europeans already prefer smaller cars and travel shorter distances, that countries with more ambitious targets have invested much more in charging infrastructure, that electric vehicles might not be the only solution and that some countries and companies are working on synthetic fuel for internal-combustion engines and hydrogen. He points out that the US, which is more comparable to Australia in terms of vehicle size and distances travelled, sees its more ambitious targets supporting a large vehicle manufacturing sector, which Australia doesn’t have.
“And I think it’s the last element – and this disappoints me a lot in the discussion – that we don’t talk enough about consumers. The reality is, we can bring any product we want to market, and we can regulate things. But if consumers don’t buy those products, we don’t have the change that we’re after,” says Weber.
To a lot of people, these caveats sound like excuses from an industry threatened by change. And to be fair, it has reason for concern. The fact is more electric vehicles means fewer jobs and less money in the legacy car industry.
Car companies reckon it will require 30 to 40 per cent less labour to build EVs, compared with internal-combustion vehicles, because on average they have only about 20 moving parts – a tiny fraction of the hundreds that make up the engines, transmissions, cooling and exhaust systems of internal-combustion vehicles.
That is not a problem for Australia, because we don’t build cars here, but we do service them, and they need much less maintenance. An anecdote illustrates the point: I know one early Tesla buyer who became concerned after several years that it had never been serviced. He insisted on taking it in. It took 20 minutes. They replaced the 12-volt starter battery, checked everything and washed the car. They charged him nothing.
Car dealers make much of their profit from their service departments. A few years ago CarsGuide.com.au, citing analysis by Deloitte, reckoned as little as 5 per cent of dealers’ profits came from new car sales, while 50 per cent came from parts and service.
James Voortman, chief executive of the Australian Automotive Dealer Association says “there is no hiding from the fact” that the shift to electric vehicles will impact profits and jobs. “Dealers will have to accept that the only way to operate in this business in the future is going to be if you’re running an operation at scale.”
Already, he says, the industry is consolidating as larger dealer groups buy smaller ones. “For a number of years, profitability and margins have come under pressure from various factors. The lost revenue in the service and repair elements of our businesses is just going to be another factor.”
A partial answer could be for dealers to expand their operations in things such as tyres and windscreens – which will still break and wear out – or into new realms such as installing charging infrastructure.
Still, some businesses and jobs will go. And they will disappear in other sectors of the internal combustion economy, too – petrol stations, for example. This may be bad news for the industry, but it will be good news for consumers. As Bowen said on Wednesday, an average petrol car consumes about 10 litres per 100 kilometre and costs about $2400 to fuel each year. The average EV consumes about $400 worth of electricity a year. And that assumes people are buying it from the grid. If they recharge from the solar panels on their roofs, it is essentially free.
It is understandable that vested interests should want a slower transition, and also understandable that the government is proceeding with caution. Labor has suffered serious injury before in the climate wars.
This week’s non-announcement of fuel efficiency standards was widely criticised by the Greens, by the renewable energy lobby, and by conservation groups frustrated at another delay in taking action.
John Grimes, the chief executive of the Smart Energy Council, for example, expressed concern “that the can just keeps being kicked down the road”. He told Guardian Australia there had been a “very concerted campaign by the fossil fuel car industry to wind back, retard and stop the implementation of strong standards from becoming law for as long as possible”.
Remarkably, the Coalition’s infrastructure spokesperson, Bridget McKenzie, accused Labor of “stalling” on reform, which shows enormous chutzpah, given the fact that the conservatives did nothing when in government and her party, the Nationals, trenchantly opposes action.
To Saul Griffith, engineer, author, entrepreneur and leading advocate for the electrification of everything, Australia’s inaction seems inexplicable. We should be leading the world.
Apart from the benefits to the climate, to health – medical research cites more than 11,000 premature deaths every year from vehicle emissions – and to consumers, the shift to electric vehicles promises huge benefits for the national economy, he says.
“We spend $40 billion a year buying petrol, which is insane … Australia receives only a small return for our exports of coal and gas, with most of the benefit flowing to overseas shareholders,” he says. “But we pay full ticket on the oil we import. So we make less money on fossil fuels than we spend on fossil fuels.”
It makes no sense, he says, given that Australia is uniquely endowed with renewable resources. And well endowed, too, with the minerals that are vital for electric vehicles – a point made in the government’s EV plan. “These critical minerals include lithium, copper, nickel and magnesium. Australia has a lot of them – in fact, half of all raw materials used in battery production are already mined in Australia,” it says.
“The value of our lithium exports is forecast to increase more than 10 times over 2 years, from $1.1 billion in 2020-21 to almost $14 billion in 2022-23, with continued growth over future years. This is not just an export resource: the development of a battery industry could contribute $7.4 billion annually to our economy and support 34,700 jobs by 2030.”
The funny thing is, the plan is actually a very optimistic document, and sets out an irrefutable case for Australia to catch up with the rest of the developed world in moving rapidly away from the internal-combustion engine.
So, what is the government waiting for?
This article was first published in the print edition of The Saturday Paper on April 22, 2023 as "Electric vehicles policy stuck in low gear".
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