Election 2020

National aims for easy achievement in EV policy

Analysis: National's new targets for electric vehicle uptake are easily achievable without having to pull too hard on any policy levers, Marc Daalder reports

The National Party's new electric vehicle (EV) policy introduces a handful of new incentives for purchasing low emissions vehicles but sets targets that should be easily achievable under the proposed policy settings.

The headline targets are a pledge to have 80,000 EVs in the national fleet by 2023 and have the Government's own vehicle fleet be one-third EV by the same date.

That follows a commitment by the last National government to have 64,000 EVs on the roads by the end of 2021 - a target we are expected to fall well short of.

Although the earlier target was expected to be able to be reached under a business-as-usual scenario during a period of high growth in EV uptake, that pattern has begun to slow. Year-on-year EV purchases more than doubled in 2016 and 2017, but slumped in 2018 and fell nearly flat in 2019, with just 1,429 more EVs purchased that year than the previous one.

That slowed growth is in line with the base-case projections of the Vehicle Fleet Emissions Model, which estimates the growth of EVs in the national vehicle fleet out to 2055. That same base-case scenario indicates New Zealand will have 75,680 EVs on the road by 2023, meaning National won't have to pull too hard on extra policy levers to make up the difference to a flat 80,000.

And they aren't planning on it. National's EV commitments fall well short of the Government's proposed (and subsequently axed by New Zealand First) feebate scheme, which would have subsidised EVs through higher fees on high-emitting vehicles. Instead, National is promising to exploit a tax loophole which effectively subsidises the purchase of double-cab utes by businesses to grant the same subsidy to EVs.

The Fringe Benefit Tax (FBT) is meant to tax alternate forms of income, like company perks in the form of an employer-provided vehicle. Vehicles that are primarily used for work purposes (hauling supplies) are exempted from FBT, and tax experts say IRD effectively waives FBT for all employer-provided double-cab utes. Under National, businesses would also be exempted from having to pay FBT for employer-provided EVs, in an effort to even the playing field between subsidising high-emitting and low-emitting vehicles.

The FBT exemption is something the current Government explored and ultimately did away with. A similar FBT exemption on public transport vouchers has also stalled in Government. But IRD documents released to Newsroom show officials think such an exemption will have a marginal impact on EV uptake and emissions.

After three years in effect, just 795 EVs would be receiving the exemption at a cost of $9.5 million in foregone taxes. It is unclear how many of these EVs would not have been purchased without the exemption.

"It is unclear whether focusing only on one source of demand (ie company cars included in employees’ remuneration packages) is the best way to deliver on the Government’s policy objective of accelerating the growth of EV numbers in New Zealand," officials warned.

National hopes a number of other small tweaks - like exempting EVs from road user charges for a further three years and introducing a special EV license plate that allows drivers to use bus lanes and high-occupancy lanes - will similarly help close the gap to 80,000.

But the second major plank of the EV policy, after the FBT exemption, is wielding the Government's purchasing power for good. The line of thought is similar - if the private or public sector is incentivised (or made) to purchase EVs, these will eventually flow into consumers' hands as used vehicles.

The current Government has a complex history with this type of procurement policy. A commitment in the Labour-NZ First coalition agreement to make the Government's fleet of about 15,000 vehicles fully emissions-free (excluding scenarios where not practicable, like the Department of Conservation's need for all-terrain vehicles) by mid-2025 was abandoned in October before being implausibly resurrected in March.

Even now, after three years as a Government policy, just 108 of the Government's 15,870 vehicles are EVs.

National has promised that it would, upon entering government, immediately order that all new vehicles purchased be EVs (with the same "where practicable" caveat). While that might allow plug-in hybrids (something not considered to be "emissions-free" under the current Government's framework", it could make the fleet a third electric by 2023, they say.

That's not implausible - the minister currently responsible for electrifying the Government's fleet, Phil Twyford, told Newsroom in October that vehicles in the fleet turn over every three to five years. That means between 20 and 33 percent of the fleet turns over every year, providing ample opportunity for reaching a one-third electric goal.

The new procurement policy could also further introduce EVs into the national fleet as vehicles are on-sold from the public sector to private companies or individuals. That again makes reaching 80,000 EVs by 2023 an easy-to-accomplish target.

The only thing that could throw a wrench into the path to 80,000 is slower-than-expected growth. The slow growth scenario modelled by the Vehicle Fleet Emissions Model estimated there could be just 36,972 EVs on the roads by 2023.

While the growth pattern to date has closely matched the model's base-case scenario, electrification of the fleet is likely to have slowed in 2020 due to Covid-19 and its economic knock-on impacts - just 32 new light EVs were registered in April, for example. That could mean a future National government could have to tug harder on the policy levers - or risk missing the 80,000 EV target.

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