An electric vehicle factory that could have brought hundreds of jobs to Victoria’s struggling Latrobe Valley has stalled. But around Australia the lack of government support for EVs stands in stark contrast to other nations. By Kurt Johnson.

Australia missing out on EVs

An electric car getting charged up.
An electric car getting charged up.
Credit: Claudio Bresciani / TT News Agency via AFP

The SEA Electric vehicle factory, announced on the eve of the 2018 Victorian state election, was supposed to mark a turning point for the Latrobe Valley. For decades, the valley had had some of the highest unemployment levels in the state. The factory was slated to provide 500 jobs in the region, which just a year earlier had weathered the closure of the Hazelwood Power Station.

“Our announcement today,” Victorian Premier Daniel Andrews said at the time, “is all about making sure the Latrobe Valley is the national capital for electric vehicles.”

Three years on from that announcement, construction of SEA Electric’s Latrobe Valley factory, originally scheduled to be completed this year, has not yet begun. In fact, a site is yet to be confirmed.

Tony Fairweather, founder and president of SEA Electric, confirmed to The Saturday Paper that negotiations between his company and the Victorian government over the Morwell factory have stalled.

“We have not spoken with the Victorian government since pre-Covid so are not sure what their current intention for the region is,” he said.

A Victorian government spokesperson said, “We are disappointed that the company has not yet been able to meet its commitment. Contractually, support for this project is contingent on the company meeting milestones set out in the agreement. As such, no Victorian government financial support has been provided since May 2019.”

There is a growing feeling in the Latrobe Valley that the plans are dead. Russell Northe, the independent MP for Morwell, formerly of the National Party, is frank in his assessment.

“There is no evidence from the state government that it will proceed. I get the sense that it has fallen over,” he said.

“I understand that SEA Electric have paid back to the government any funding. [This] suggests to me that it is no longer a project considered for our region, which is absolutely devastating.”

Fairweather confirmed the money for the SEA Electric vehicle plant has been returned to the Victorian government. He said he still holds out hope of getting the Latrobe plant off the ground, but the company is also exploring its options in other states.

“SEA Electric is in great need of expanded assembly operations in Australia,” he said, because the company has “maxed out” its small existing factory in Dandenong.

At present, Fairweather is in the US, where he has been able to drum up US$42 million, after frustration finding investors in Australia.

In the Latrobe Valley, there is an acute demand for jobs after the announcement last month that another power station, Yallourn W, is set to close by 2028, shedding a further 500 jobs.

The potential scuttling of a “national capital for electric vehicles” in Victoria is part of a broader trend across the country that some fear could see Australia sacrifice its innate competitive advantage in the sector.

Around the world, electric vehicle ownership is surging. Europe already has the world’s highest EV market penetration; Britain will ban the sale of new internal combustion engines by 2030 and, in the United States, President Joe Biden has moved to make the federal government’s vehicle fleet fully electric. Consumer incentives across Europe, North America and Asia, such as rebates between $A10,000 and $A15,000, have increased the portion of EVs from 3 to 5 per cent of all vehicle sales in 2019 to 5 to 15 per cent in 2020.

This growth could be a boon for countries willing, and able, to support a domestic EV market. This is because strong local demand is attractive to foreign investment. For a significant portion of cars to roll off the production lines into local showrooms and on to the roads is a clear incentive to manufacturers to start local production.

Australia, with no incentives, has a laggard response – 0.6 per cent of vehicle sales were EVs in 2019 – and could risk nullifying its significant advantages within the region.

“When we talk about resources: minerals and people are the two big things,” said Behyad Jafari, chief executive of the Electric Vehicle Council of Australia. Batteries, the most expensive part of an electric vehicle, require a mix of minerals, some of which are difficult to source. Lithium and cobalt are critical for the commonly used lithium-ion battery.

Currently, manufacturers are experiencing a supply crisis for cobalt – the world’s top three producers of which are the Democratic Republic of Congo (DRC), Russia and Australia. Some markets, such as the European Union, have strict regulations requiring full transparency along the entire value chain. This renders it riskier to invest in mines in politically unstable countries, such as the DRC, where child labour laws and human rights are an issue.

In Russia, existing sanctions could expand to render a cobalt supplier illegal at the stroke of a pen. This leaves Australia, with 16 per cent of the world’s cobalt resources, as the only politically stable major supplier of the mineral.

EV companies are acutely aware of these vulnerabilities in their supply chains and are always looking to diversify suppliers. Last year, Tesla signed a five-year deal with Australian mining company Piedmont Lithium.

Other manufacturers are even directly investing in mining projects to secure supply. And if an EV or battery manufacturer is already investing in a country’s raw material, the benefits of vertical integration mean efficiencies are available for expanding investment upward into manufacturing.

Then there are people. Most jobs manufacturing electric vehicles are so-called “purple-collar jobs”, ranging from those with TAFE diplomas to engineering PhDs. Relevant graduates of Australia’s education system are sought after worldwide. Tesla in the US employs so many Australians, Jafari said, “The Tesla factory in San Francisco has an Australia Day celebration every year.”

He explained: “When car manufacturing shut down here those people got poached … [but] quite a lot of those people would love to go home.”

Jafari said there is also another less tangible factor in the development of a local EV manufacturing industry – the “vibe” or implied receptiveness of a country to an EV manufacturer. It is important because it indicates a willingness to accommodate a prospective industry. When a director of an EV company visits Australia’s regional competitors – including Singapore, Malaysia and Thailand – “the president meets them on the tarmac and asks, ‘How do we get you to come here?’… in Australia, they meet with the CEO of the Electric Vehicle Council. That’s a pretty significant step down.”

Last week’s commitment by the federal Labor Party, if elected next year, to remove a levy on electric vehicles was welcomed by the EV industry. Unfortunately, such commitments are rare at a federal level. Prime Minister Scott Morrison’s comment on electric cars at the last election – saying their inability to tow boats or caravans would “end the weekend”, a claim he has since denied making – are still remembered by the fast-growing EV sector.

The world’s largest car manufacturer, Volkswagen, has recently gone all-in for electric vehicles. Tesla and VW are locked in a tight competition to capture the EV market over the coming years.

Volkswagen Australia’s boss, Michael Bartsch, was blunt about Australia’s prospects. Referring to Australian regulatory conditions as being like “the Third World”, he told The Saturday Paper that “it is difficult to envisage circumstances in which vehicle manufacture could feasibly be resumed in Australia.

“Batteries,” he qualified, “are another matter.”

Even Victoria, with strong commitments to both renewables and net zero by 2050, is sending mixed messages to EV manufacturers. Beginning on July 1 this year, the Andrews government will become the first in the world to actively tax electric vehicles, when a 2.5 cent per kilometre charge on EVs comes into force.

Intended as a means to recoup revenue lost from EVs avoiding fuel excise, the tax has been, unsurprisingly, condemned by EV manufacturers. Bartsch called it “an ill-considered roadblock”, while Tony Fairweather of SEA Electric said, “It’s extremely embarrassing to be honest.” In the US, he added, “there are EV incentives in every state, including many that cover upwards of 80 per cent of the total cost” of the vehicle’s purchase price.

Behyad Jafari is actively campaigning against the Victorian EV tax on the basis that old fuel efficiency data used by the Victorian Treasury has meant EVs will be more expensive to run per kilometre than internal combustion engines.

He warned that the window is closing for Australia to take advantage of the electric vehicle industry. “I would say these next five years are crucial,” he said. “One company spends $300 million building a manufacturing plant in Singapore – that’s an opportunity we lose forever.”

This article was first published in the print edition of The Saturday Paper on April 10, 2021 as "Power down".

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