Research shows electric car discount could halve vehicle emissions

New research shows that continuing Australia’s Electric Car Discount policy until 2035 could halve vehicle emissions compared with ending the policy earlier, while tripling value for money through health, environmental and economic benefits.

Independent modelling by Magenta Advisory and Pragmatic Policy Group has found continuing the Fringe Benefit Tax exemption for battery electric vehicles (BEV) and reinstating it for plug-in hybrid electric vehicles (PHEV) until 2035 would likely result in 50% lower carbon emissions compared to a scenario where the discount ends in 2027.

The research also estimates that every $1 spent on the EV Discount has delivered $2.25 in environmental, economic and health benefits – a return that is expected to rise to $3 by 2030.

Policy drives 105,500 additional EVs onto roads

Commissioned by the Electric Vehicle Council, the National Automotive Leasing and Salary Packaging Association and the Australian Finance Industry Association, the research found the EV Discount is estimated to have placed an extra 105,500 new BEVs and PHEVs on Australian roads between 2022 and 2024.

Since Q1 2022, used EV sales have increased by 157%, with 61,000 EVs entering the second-hand market – a figure that would be much smaller without the exemption.

If the EV Discount continues for BEVs and returns for PHEVs until 2035, it could deliver an additional 1.5 million new BEVs, 200,000 new PHEVs, and 870,000 used EVs.

The research shows that in every country with strong EV uptake, governments have paired demand-side incentives with supply-side measures over a sustained period of time.

Outer suburbs driving uptake

The top 10 postcodes for EV novated lease sales are in the outer suburbs of Melbourne, Sydney, and Brisbane, averaging 44 km, 37 km, and 31 km from their city centres respectively.

Electric Vehicle Council chief executive Julie Delvecchio says the modelling shows the Electric Car Discount has already put 105,500 new EVs on the road and boosted the used EV market.

“Keeping this support until 2035 and bringing back plug-in hybrids into the scheme could deliver hundreds of thousands more new and second-hand EVs, making them affordable for more households, including young people and lower-income families,” Delvecchio says.

“When more Australians can afford an EV, we all benefit. Quieter streets, cleaner air, and healthier neighbourhoods are the ripple effects of a strong EV market.”

She says with transport on track to be Australia’s largest emitting sector, incentives like the EV Discount are critical to hitting climate goals.

“Every new vehicle purchased today locks in another fuel guzzler or a cleaner car for decades to come,” Delvecchio says.

Industry calls for policy continuation

National Automotive Leasing and Salary Packaging Association chief executive Rohan Martin says Australia’s EV uptake is rising thanks to the EV Discount, but the country still trails global leaders.

“This research confirms that every country with strong EV adoption has paired buyer incentives with supply measures – clear proof that continuing government support through the EV Discount is vital to keep momentum and grow the market,” Martin says.

“The modelling shows the EV Discount is making the switch within reach for everyday Australians and boosting the supply of affordable second-hand EVs.”

He says the Electric Car Discount has been helping tens of thousands of working Australians afford the upfront cost of an electric vehicle, with owners saving thousands each year on running costs once behind the wheel.

“From Werribee and Baulkham Hills to Springfield and beyond, the Electric Car Discount is popular with families on middle incomes who live in the outer suburbs. Teachers, nurses, and firefighters all tell us that they wouldn’t have made the switch without the Discount,” Martin says.

Australian Finance Industry Association chief executive officer Diane Tate says the EV Discount is a proven policy that has driven real change by helping over 100,000 Australians get behind the wheel of vehicles that are cleaner, cheaper to run and increasingly affordable.

“To make cleaner vehicles accessible for all Australians and stay on track for net zero, we need a suite of national policies that are proven to deliver such as upfront discounts, fast-tracked charging infrastructure and stronger public-private partnerships,” Tate says.

“We shouldn’t just be continuing our support for the EV Discount, we should bring it back for plug-in hybrids – these vehicles are really popular, especially as Australia lags on our charging infrastructure.”

The findings will form the basis of the organisations’ evidence to the Productivity Commission with submissions to its net zero transformation interim report.

The report can be accessed here and key findings can be found here.