Australia’s electric vehicle (EV) uptake is lagging, but tax experts say they have a “silver bullet solution” that would both drive sales and help increase the supply of cheaper second-hand EVs.

The Commonwealth-funded, climate-focused research centre RACE for 2030 has released a report recommending tax reforms similar to those in Europe to encourage fleet managers to buy EVs, rather than internal combustion engine vehicles (ICEVs).

Prepared by tax experts from Monash and Griffith universities, the report describes a woeful situation: business fleets (which include both government and company vehicles) account for 40 per cent of light vehicle sales, but almost none of these are EVs.

Of the more than 600,000 passenger vehicles and light SUVs sold to business fleets in 2020, only 488 were EVs.

A major reason for this was federal taxation laws, said Anna Mortimore, a tax expert at Griffith University and lead author of the report.

But this failure was also an opportunity, she added.

Fleet managers are responsible for huge numbers of vehicle purchases. Providing tax incentives to buy EVs would rapidly drive up the total EV uptake.

“Business fleets are the silver bullet solution to EV uptake.”

Can tax reform make EVs as cheap as ICEVs?

Last week, the federal government made EVs (priced below a luxury car threshold) exempt from fringe benefits tax (FBT) and import tariffs.

These reforms were welcome, but not enough, Dr Mortimore said.

To illustrate the price gap between EVs and the equivalent ICEVs, the report uses the example of a Hyundai Kona EV, which was $28,900 more expensive than the ICEV version.

With last week’s new FBT exemption, that price gap drops to a bit over $20,000. (That’s assuming the business continues to pay FBT on its combustion-engine work vehicles, which isn’t always the case).

But that gap was still too wide for fleet managers, said Diane Kraal, a tax expert from Monash University and another co-author of the report.

“Fleet managers are very rational people that look at the total cost of ownership of fleet cars,” she said.