Australians are showing reluctance to adopt electric vehicles (EVs), with only 7.7% of new car sales comprising EVs in 2023. This trend continues despite the Albanese government offering significant tax incentives aimed at boosting the uptake of electric cars. Many potential buyers cite concerns over charging infrastructure and resale values, which have contributed to a slower-than-expected transition to electric mobility.
The hesitancy surrounding EV adoption is echoed across the country. A key issue for many, including those living in apartment blocks, is the availability of charging solutions. Long wait times at public fast-charging stations and the fear of running out of battery on long trips further deter consumers. While the government has made strides in promoting EVs, these challenges have led to hybrids gaining more traction, accounting for 16% of new sales, with plug-in hybrids making up another 4%.
In April 2023, the government ceased fringe benefits tax exemptions for plug-in hybrids, a move that has been met with criticism. Chris Bowen, the Minister for Climate Change and Energy, has stated that hybrids do not align with the government’s ambitious goal of increasing battery electric vehicle sales to meet carbon emissions targets. Despite this, consumer interest in hybrids remains strong, complicating the government’s push for a switch to fully electric vehicles.
Internationally, the situation mirrors Australia’s experience. While countries like Norway have seen substantial increases in EV adoption, Australia is lagging behind. The timeline for widespread EV adoption is still uncertain, even as the government aims for substantial market share for EVs over the next decade.
Concerns regarding the financial implications of these tax incentives have also surfaced. Since the introduction of the novated lease tax incentives in 2022, the Treasury’s estimates indicated that only about 5,000 people would take advantage of them. However, the actual number has far exceeded expectations, leading to an estimated revenue loss of $2.6 billion over the first four years, significantly higher than the initially projected $205 million. Critics argue that a disproportionate share of these benefits is going to higher-income individuals, who may have purchased EVs regardless of the tax breaks.
In August, ahead of an economic roundtable led by Jim Chalmers, the Productivity Commission recommended ending the fringe benefits tax exemption, as it results in high costs per tonne of carbon dioxide abated. However, discussion regarding a road-user charge for EV owners has emerged as a potential solution to compensate for declining fuel excise revenue, which currently amounts to $16 billion annually. This charge would help maintain road infrastructure as the number of EVs increases.
Yet, discussions around implementing this charge have met with resistance. Bowen has expressed concerns that introducing such a fee could undermine his emissions reduction targets, particularly given the skepticism surrounding the government’s ability to meet its carbon goals. The Climate Change Authority has stated that achieving a 62% to 70% reduction target for 2035 hinges on at least half of new car sales being electric, a target that many consider ambitious.
State governments, particularly in New South Wales, are feeling the pressure to address road maintenance funding as fuel excise revenues decline. NSW Premier Chris Minns emphasized the need for a sustainable funding model to address deteriorating road conditions, stating, “If we’re not going to have the petrol excise in five, 10, 15 years from now, someone’s going to have to pay for it somehow.”
While some states have moved forward with their own road-user charges, legal challenges have emerged, including a recent High Court ruling in Victoria that declared its version unconstitutional. The Commonwealth intervened in this case to support two EV drivers challenging the state’s right to impose the charge. Meanwhile, New South Wales and Western Australia plan to implement their charges by mid-2027 unless a national model is established.
As potential buyers navigate the complexities of the EV market, it is clear that many Australians share a sense of confusion about the future of electric vehicles. The combination of financial implications, infrastructure challenges, and government policy continues to complicate the landscape for both consumers and policymakers.
