QUICK FACTS ABOUT EVs IN AUSTRALIA

  • Sales of EV’s in Australia tripled during 2019, increasing from 2,216 in 2018 to 6,718 in 2019 (Source: https://www.caradvice.com.au/824591/sales-of-electric-cars-triple-in-2019/).
  • Relative to total passenger car sales, the 6,718 EVs sold in 2019 accounted for 0.6% of the total 1,062,078 vehicles sold in 2019
  • As at 31 January 2020, EVs accounted for just 0.2% of the total Australian Vehicle Fleet (Motor Vehicle Census, Australia, 31 Jan 2020 | Australian Bureau of Statistics (abs.gov.au)
  • Over the last three years, Federal Government grant funding provided by the Australian Renewable Energy Agency (ARENA) has resulted in $21M being provided to support the installation of 63 Ultra-Rapid EV chargers at sites across the country. These have been provided along major driving routes and roadside centres along the East Coast of Australia.
  • In addition to the 63 Ultra-Rapid EV charging sites mentioned above, there are currently 107 fast charging (i.e. 50kw or higher) sites in Australia. These sites are owned and operated by NRMA in NSW (42 sites); are part of the Queensland Government’s Electric Vehicle Highway Project (18 sites); owned and operated by RACWA (33 sites); and, owned and operated by Tesla (36 sites).

Introduction

Australia, and indeed many developed economies, are apparently on the on the cusp of an electric vehicle (EV) revolution. This revolution is being signalled by a three-fold increase in the number of electric vehicles sold in Australia over the past 12 months and a range of policy actions announced by various Australian Governments that suggest recognition of the growing significance of EVs in the passenger car fleet.

The excitement of EV advocates created by this sales trend, however, needs to be tempered by the fact that the observed increase in sales of EVs (i.e. battery electric and plug-in hybrid) accounted for just 6,700 (or 0.6%) of the 1,062,867 passenger vehicles sold in Australia during 2019.

Those with long memories know that Australia has been in this position before. The real-world learnings of previous ‘false starts’ in EV market adoption, both here in Australia and overseas over the past 20 years, have taught all of us to be wary about predicting mass-market scale of EVs based on big increases in EV sales from a very low base of total annual sales.

“Knowing exactly when to invest in the provision of expensive EV charging infrastructure on service station forecourts – without getting ahead of demonstrable demand – remains a very significant challenge for the Australian fuel retail industry”, said ACAPMA CEO Mark McKenzie.

History of EVs

The very first electric vehicle was manufactured by Jacob Lohner and Co – an electric vehicle manufacturer based in Vienna, Australia. The vehicle, which later became known as the ‘horseless carriage’ was exhibited at the Paris Motor Show in 1901. The vehicle was powered by four electric ‘wheel hub’ motors and was co-designed by Jacob Lohner and Ferdinand Porsche – the latter being an employee of the electric car manufacturer at the time.

The Lohner-Porsche ‘hybrid’ drivetrain system was reliable, but it was not competitive with the emerging petrol-powered technology that delivered superior performance. Production costs were also higher than the petrol-powered technology and so the production of this electric-hybrid technology ceased in 1906. Shortly after, Jacob Lohner and Co closed operations. Ferdinand Porsche later went on to design the VW beetle and ultimately found the Porsche motor company.

EVs made a significant reappearance on the global automotive vehicle scene when General Motors introduced the EV1 model into the USA market in 1996. This vehicle was developed in response to laws introduced by the State of California in 1990 that required automotive manufacturers selling cars in that state to make a zero-emission vehicle product available for sale.

A total of 1,117 of these vehicles were leased to consumers and businesses – not sold – before the product was later withdrawn from the market. Shortly after, the Californian laws were amended.

Since that time, global vehicle manufacturers have continued to develop Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEV) – albeit that these efforts have largely taken second place to the roll-out of large numbers of petrol-electric hybrid vehicles (i.e. these vehicle do not require recharging and therefore are not referred to as EVs).

Chief among these manufacturers are those building high-end models (e.g. Audi, BMW, Mercedes) and mid-market models (e.g. Nissan and VW). The biggest manufacturer of EVs in the world is Tesla, a company that solely manufactures EVs.

The modern electric vehicle

The technological and performance improvement of electric vehicles since the first vehicle was introduced to the world in 1901 has been stellar. Today’s EVs are quick – super quick from a standing start given the use of direct drive systems. They have lower overall maintenance costs, as a result of having fewer moving parts than traditional technology vehicles. An increasing number of models also have real-world driving ranges that exceed 500km between recharging.

“EV’s have effectively bridged the performance gap relative to internal combustion vehicles over the last 120 years but, and it is a very big ‘but’, the higher relative cost issue remains unaddressed and will likely remain a challenge to mass market adoption for some time to come”, said Mark.

Putting aside the high-priced Tesla model range, even the lower priced EVs currently on sale in Australia are expensive. The battery powered Hyundai Kona SUV, for example, comes at a $26,000 cost premium relative to the 1.6 litre turbo petrol powered equivalent – which boasts an impressive fuel consumption of just 6.7 litres/100km (Combined City and Highway cycle)

The Australian Government’s Green Vehicle Guide (Green Vehicle Guide Home) estimates the energy cost of the petrol powered Kona is around $1,260 per year, compared with just $550 per year for the electric version. This represents an annual saving of $710 per year in favour of the electric model. If you then consider that the cost of servicing the electric vehicle is likely to be around $800 lower, then the total annual saving of adopting the electric-powered Hyundai Kona over the petrol-powered model is around $1,500 per year.

“This means, that at current average petrol prices, it would take just over 17 years for the owner to recover the $26,000 premium for the electric variant”, said Mark.

“Even if average petrol prices were to increase by 300% in the near future, it would still take more than 5 years to recover the additional capital cost of the electric model – which is beyond the first life of most new cars sold in Australia”, Mark adds.

The other major consumer barrier to the purchase of EVs is recharging.

Charging a typical EV from a standard 240V outlet in the garage requires the vehicle to be “hooked up” to the power outlet continuously for nine hours. Charging times can be significantly reduced by using ‘fast’ chargers which can deliver charging times of between 55 minutes (100kw charger) and 74 minutes (50kw charger), but there is only limited availability of this infrastructure across Australia’s national road system.

Current rates of market adoption of EVs in Australia

Given the economics and charging challenges of EVs, it is surprising that anyone is buying an EV – particularly when you consider the national outcry from motorists and Australia’s Motoring Associations when the national average petrol price increases by just 5cpl (i.e. equivalent to around $150 per year for the average motorist).

“But the reality is that an increasing number of Australians are buying EV’s and therefore our industry should be paying close attention”, said Mark.

Total EV sales in Australia increased three-fold between 2018 and 2019 (the 2020 results are yet to come in but appear to be similar to 2019). EV sales increased from 2,218 vehicles sold in 2018 to 6,718 vehicles sold in 2019, which is impressive in anyone’s language. That said, the higher EV sales in 2019 accounted for just 0.6% of the total number of passenger vehicles sold during 2019 – or around 60 vehicles in every 10,000 passenger vehicles sold.

Further, and despite original equipment manufacture EV’s being available in Australia in various forms for nearly 20 years, the total number of Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (BHEVS) in Australia comprised just 0.2% of the total Australian Vehicle fleet (all vehicles) as at 31 January 2020.

The principal challenge for Australia’s petrol-convenience retailers

The principal challenge for Australian fuel retailers (of all sizes) is predicting whether the increasing number of EV sales is the start of the EV revolution – or just the establishment of a specialist niche market that caters for eco-aware, high wealth Australian households that are located in the inner city suburbs of Australia’s capital cities.

“No one in our industry is opposed to providing EV charging at service stations – we will sell fairly floss to power cars if that is what Australian motorists are willing to buy to power their vehicles”, said Mark

“But at an average value of around $4.3M per site and a national population of more than 7,000 sites, transitioning Australia’s $30B fuel network to support less than 0.2% of the national fleet is clearly unrealistic”, Mark adds.

What will make EVs viable in Australia in the future?

For EVs to be truly viable in the next 10 to 15 years, three things must happen.

First, technology breakthroughs are required in the manufacture of EV’s to reduce the premium price of these vehicles.

There is genuine reason to believe that this will likely occur in the next 5 years or so as the worlds big car manufacturers start to experiment with solid state vehicle chassis. These chassis are purpose built for EVs – unlike the current variants that effectively use the heavier chassis of an internal combustion vehicle and swap out the petrol engine for an electric engine – and are expected to deliver substantial reductions in production costs in the near future.

Second, the absence of a nationally available fast charging network must be addressed. This is not simply about installing fast charge and ultra-rapid vehicle chargers around the country – it also means addressing the current fragility of the national power grid with respect to supporting EV charging.

“This problem is well known to some ACAPMA members who have invested in fast chargers at their sites, only to find that they had to spend more than four times the capital cost of the EV charger to augment the electricity network near their site”, said Mark.

We must find a way to adapt the national electricity grid to accommodate the demand from 50kw, 100kw and 350kW vehicle recharging infrastructure at the local distribution level across the country. The recent announcement of the Federal Government’s Future Fuels Agenda (and soon to be announced grants programme for the establishment of EV chargers) suggests that work will commence in early 2021 to address this issue.

The third and final issue relates to the tax treatment of EV’s relative to conventional vehicles, where owners of traditional petrol and diesel powered vehicles pay 42.3 cents of federal fuel excise for every litre of fuel they purchase. EV owners pay no such tax, typically resulting in the loss of around $570 per year in government taxes per EV sold. This means that the 6,718 vehicles sold in 2019 alone, will reduce government taxes used to fund road infrastructure by $3.8M per year – and this figure will likely double in 2020 given current EV sales trends.

Given that the money collected from Federal Fuel Excise is returned to Australian State and Territory Governments to fund improvements in road infrastructure, a key question arises as to how these improvements will be funded as the growth in EV continues to accelerate. The issue has been the subject of considerable discussion over the past 5 years, prompting a 2017 Australian Productivity Commission (APC) suggesting there was a need for the Australian Government need to find a way to transition from the current fuel excise model to a road user charge model– one that charged motorists according to their amount of road use (and time of use), regardless of what energy source is used in their vehicle (see The future of fuel excise in Australia? – ACAPMAg – The voice of downstream petroleum for a further discussion of this issue)

It is interesting to note on this last point, that two Australian State Governments (that is, South Australia and Victoria) have recently moved to introduce a levy for electric vehicles to ensure that the growth of these vehicles does not diminish the amount available for road improvements in the future.

Whether this change in policy has occurred due to frustration about Federal Government inaction on the Productivity Commission’s recommendations for a road user charge, or simply because these government have bought into the story about the imminent explosion of EV’s being advanced by some advocates, remains unclear. But the fact that two State Governments, one on each side of the political divide, have seen fit to implement new taxes for EVs as part of their 2020 budget is yet another indication that everyone is starting to take EV’s seriously.

It is time to engage in the national EV discussion

The Norwegian experience with EVs is an important lesson for fuel retailers around the world. A combination of government incentives and national policy measures saw the sale of EVs in Norway grow from just 1.6% of all new vehicles sold in 2011, to 56% of all new vehicles sold in 2019 (and 79% of all new vehicles sold in November 2020). For whatever reason, the national fuel industry in Norway reacted too slowly to the change in new vehicle purchase patterns, allowing non-traditional market participants (e.g. large retail stores and fast food outlets) to establish fast recharge infrastructure and effectively steal market share from traditional fuel retailers.

There are, of course, strong differences between the operation of the Norwegian market and Australia’s market. These include the small size of the vehicle market (2.8M passenger cars in Norway versus 14.6M in Australia), the nature of assistance provided by government, and majority ownership of the national grid by the state (i.e. 98% State owned in Norway) – a national grid that was being starved of demand as a result of private investment in solar generation and the success of national energy efficiency programmes.

“Nonetheless, the Norway experience it is an important lesson for our industry about the need to stay close to the development of the global EV fleet”, said Mark.

“The Australian EV policy agenda is one where our industry must now invest time and energy – albeit not capital at this stage – by working with government and industry stakeholders to better assess the likely rate of EV adoption in the near term”, added Mark.

ACAPMA will continue to engage in the EV agenda and provide information to members about new developments and opportunities for assistance with the establishment of EV charging infrastructure.

Further information about EV charging and the Federal Governments soon-to-be-released capital grants programme for EV recharging infrastructure can be obtained by emailing communications@acapma.com.au.

ACAPMA