EV battery success hindered by lack of fuel efficiency standards

Company News

by Peter Milios

On the 1st of July, the newly elected Labor Government initiated its first step toward phasing out the internal combustion engine, by introducing its Electric Car Discount – a policy aimed at reducing carbon emissions, whilst also making electric vehicles affordable across households within Australia.

The new Discount will excuse many electric car manufacturers from:

-- Import tariffs: a 5% tax on some imported electric cars; and
-- Fringe benefits tax: a 47% tax on electric cars that are provided through employers

The Albanese government has also spoken about future plans to double the amount of money spent on electric-vehicle charging stations across the country to $500 million.

Currently, Australia is falling behind on the global uptake of electric cars.

Only 1.5% of cars sold within Australia are electric. In comparison, the percentage of cars sold that are electric in the United Kingdom is at 17%, whilst in Norway, the figure is just over 85%.

According to ABC News, Will Edmonds, from Bloomberg New Energy Finance, believes that the actions of the Labor government will likely increase the demand toward electric-powered vehicles.

However, the growing sales and long waiting lists for electric vehicle cars suggest that consumer demand is already high, demonstrating “that [Australia’s] uptake is limited not by consumer demand, but by supply constraints,” Monique Ryan, from the Australian Financial Review, writes.

Mr. Edmonds believes the answer lies within Australia’s lack of fuel efficiency standards.

“The reason why Australia is not a priority market for these automakers is because Australia does not have a fuel economy standard in place,” he says.

Fuel efficiency standards help to control the average amount of CO2 emissions emitted, and to reduce both the reliance on fuel and CO2 emissions.

Australia, along with Turkey, Indonesia, and Russia, are the only members of G20 countries with no compulsory policies for clean fuel efficiency.

Due to the absence of these standards, European, American, and Asian manufacturers are dumping the cars that fail to meet the fuel efficiency regulations of their own countries to Australia.

“Other markets — like the EU, China and the US — have fuel emissions standards which automakers need to hit,” Mr. Edmonds said, as these manufacturers have no incentive to send their limited supply of EV’s to Australia.

As well as increasing the number of electric vehicles within Australia, fuel efficiency standards have several other benefits.

Benefits of Fuel Efficiency Standards

Source: Monique Ryan. (June 28th, 2022). ‘How the government can unlock the electric car market’, Australian Financial Review.

Australians will save money. According to government modelling, fuel efficiency targets for vehicles sold will save the average Australian will save $237-$519 per year. However, those figures were based on a fuel cost of $1.30/L – much less than today’s prices.

Australians will improve their health. According to Mr. Webber, Australia has the worst quality petrol in the OECD. Because of this, every year more Australians die from respiratory diseases associated with vehicle pollution than road traffic accidents. Ensuring these standards are in place will improve air quality and reduce these respiratory diseases.

Decrease the reliance on petrol. Over the past 6 months, the price of petrol has soared to a 14-year high. Fuel efficiency standards will boost the number of electric vehicles in the market, and hence, reduce the dependence on fuel.

If Australia wants to successfully phase out internal combustion engines, robust fuel efficiency standards must be set in place.

EU Bans Fossil Fuels

On Wednesday, all 27 countries within the European Union struck a deal to fully phase out sale of all new combustion engine cars and buses by 2035, eliminating carbon emissions to protect citizens from carbon dioxide costs.

This new deal now puts additional pressure on Australia to introduce stricter petrol standards, with fears that the European manufacturers would dump the remainder of their ‘dirty’ vehicles before shifting to producing electric battery vehicles.

Paul Sansom, managing director of Volkswagen Group Australia, agrees, stating, “In order not to be left behind by the rest of the world, our company maintains that Australia requires the mandating of a national emissions target for auto importers – this is needed to secure EV supply from our factories.”

For more on this, see our story from 04/07/22, EU keen to drive ICE vehicles off the road.

Whilst the Labor government’s new policy is a good start toward implementing fully electric vehicles into the market, the next step forward is structured fuel efficiency standards.

Peter Milios

Peter Milios is a recent graduate from the University of Technology - majoring in Finance and Accounting. Peter is currently working under equity research analyst Di Brookman for Corporate Connect Research.

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