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3 strategies to accelerate EV uptake

Meridian came out last year with their marketing campaign ‘Let’s take on Norway’. This was designed to fire up Kiwis to convert to EVs, and position Meridian as a leader in the EV space. It was a bold statement, and if you don't know how Norway is achieving rapid growth (49.1% of all cars sold last year were electric) it sounds doable. But is it?

Lets start by breaking down the incentives the Norwegian central and local government provide to EV buyers:

  • No purchase/import taxes (1990-)

  • Exemption from 25% VAT on purchase (2001-)

  • No annual road tax (1996-)

  • No charges on toll roads or ferries (1997- 2017). Charges were introduced on ferries with upper limit of maximum 50% of full price (2018-). Charges on toll roads were introduced with upper limit of maximum 50% of full price (2019)

  • Free municipal parking (1999- 2017). Parking fee for EVs was introduced locally with an upper limit of maximum 50% of full price (2018-)

  • Access to bus lanes (2005-). New rules allow local authorities to limit the access to only include EVs that carry one or more passengers (2016)

  • 50 % reduced company car tax (2000-2018). Company car tax reduction was lowered to 40% (2018-)

  • Exemption from 25% VAT on leasing (2015)

  • Fiscal compensation for scrapping of fossil vans when converting to a zero emission van (2018)

  • Allowing holders of driver licence class B to drive electric vans class C1 (light lorrries) up to 2450 kg (2019)

“You could say that the [national] government has made it cheaper for the consumer to buy an electric car (through government-induced tax exemptions), whereas the cities have made it easy and affordable to use,” noted Lan Marie Berg, Oslo’s vice-mayor for environment and transport.

So the Norwegian incentives roughly fall into three buckets:

  1. Tax breaks

  2. Free parking (or 50% reduced)

  3. Driving incentives (no toll charge and use of bus lanes)

Let's start with tax. To give you an idea of the Norwegian incentives for those buying a new Volkswagen Golf, a petrol version would cost $56,190NZD including taxes, whereas an eGolf would cost $58,455NZD. Pretty close to a no brainer right?

In NZ a base model Golf is $37,490, whereas the eGolf is $68,490. A big gap. Removing GST drops the price to $59,556 (close to the price in Norway), however we would need to increase the cost of the base model petrol Golf by 75.5% using more GST and fees. Ouch. A better way could be to take tax off the EV, provide a 15% incentive AND increase the GST on petrol/diesel vehicles by 30%. In a country that prides itself on relatively simple GST, this is starting to get complicated.

While simply removing GST on new vehicles is still not enough, it could be a good incentive for those buying second hand vehicles.

Onto free parking. If we use Auckland (Auckland Transport data) as the target city and assume:

  • by 2023 there are 150,000 EVs in Auckland (~10% of all light vehicles in Auckland)

  • this ratio is applied to parking use (10%)

  • the free parks are only in the lower-cost carparks (max charge $24/day)

  • AT apply a 50% discount

  • the revenue split is 60% of parking revenue comes from hourly charges, and 40% from maximum daily charges

EVs represent 0.41% of the total light vehicle fleet in Auckland today. So if they use AT parking at the same ratio, it would 'cost' AT $99k p.a. in lost revenue. By 2023 this would 'cost' $2.45m in lost revenue p.a. To make this up in 2023 AT could apply an additional $0.30/hour and raise the maximum daily charge by $0.50. Definitely doable.

Driving incentives. Calculating the economic cost of using bus lanes is best done by someone else as this is a complex calculation involving estimated impact to bus timetables (if any). In regards to toll charges, again this is easily solved by slightly increasing toll charges to all internal combustion engine cars. Again, doable.

Add all these together and they support more aggressive growth in EV uptake (or any new emerging low-emission technology) because they reduce further barriers in drivers minds.

The perceived challenge. Looking at these numbers through the cold hard eyes of an economist, you'd have to balance out the additional costs with the economic benefits from cleaner air, quieter cities and safer vehicles (modern cars are just safer). In Norway they have managed to make these stack up, and the people agree with this direction because they have high levels of trust in their national Government. New Zealanders have a similar degree of trust in our national Government. So while a loud few may think it's too hard to implement a similar approach, the real challenge is political will (well more like bravery). Let's be brave.

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