Scrappage proposed: $569m cost for ‘Clean Car’ upgrade

The Government has proposed a massive scrappage scheme in a bid to get older vehicles off the road in favour of new electrified vehicles.

The announcement came as part of the release of the long-awaited Emissions Reduction Plan, alongside a range of measures including a scheme to lease low-emission vehicles to low-income households, and additional funding for private vehicle alternatives.

The project will start with a trial of 2500 vehicles, though how much the owners will get for scrapping them is yet to be confirmed. It will be funded from the Emissions Trading Scheme, rather than through general taxes or the current Clean Car scheme pool.

“The Clean Car Discount Scheme has been successful in supporting the uptake of electric and hybrid vehicles,” transport minister Michael Wood says.

However, we know for many families, the cost of transitioning to cleaner vehicles can be too expensive. Starting with an initial trial of up to 2500 vehicles, the Clean Car Upgrade will provide targeted assistance to lower- and middle- income households to shift to low-emission alternatives in exchange for scrapping their old vehicle.”

“Through supporting the uptake of cleaner vehicles, we are not only helping families do their bit for our planet, but also protecting them and our economy from future economic shocks and high fuel prices. This will also help safeguard New Zealand by reducing our international dependency on fossil fuels.”

Read more: EVs will drive low emissions future

Climate change minister James Shaw says the initiatives are a critical part of the Emissions Reduction Plan that will put Aotearoa on the path to net zero.

“The package announced today signifies a huge step in making sure people have clean, green, affordable ways of getting about. We have long known that there are some huge wins to be had in decarbonising our transport sector, and it has formed a key part of the action we have taken to date – including the clean vehicle discount.

“Families who trade in their vehicle will receive support for the purchase of EVs, PHEVs and hybrids. By taking advantage of the Clean Car upgrade, families will not only benefit from lower transport costs but will also be able to replace their high-emitting older vehicles with a safe and sustainable alternative”

The system will be in part based on California’s.

Motor Industry Association chief executive David Crawford welcomes the move but notes the lack of detail available at this point.

It confirms a trial for scrappage then commits to expanding it, he says

Crawford says scrappage schemes are usually formulated in countries with new vehicle manufacturing as a way to stimulate production.

“Implementing scrappage schemes in countries where vehicle manufacturing doesn’t happen can lead to unintended outcomes. For a country like New Zealand, designing scrappage schemes is notoriously challenging,” he says.

“Untended outcomes are usually inflationary at the low end of the vehicle market, driving up the price of end-of-life vehicles towards the value of the scrappage incentive.”

On the ERP scheme, Crawford says the MIA is concerned at the old average age (14.7 years in 2021) of New Zealand’s fleet.

“We would support a well thought out scheme that incentivises the trading in your end-of-life vehicle for a much newer one. But I don’t know what the criteria is for low income, and what the rules are around the type of vehicle one must buy with their grant.

“If it is a new EV, their prices are quite high, would they be able to afford debt servicing the difference? “$12,000 (if that is the amount) sounds a lot of money, but the price gap for a new EV can still be big.”

Crawford says that without knowing the details of the proposal, it is hard to comment on whether it would drive up the price of used EVs and by how much.

“This could have a negative impact on that segment of the market making used EV’s less affordable. That would be self-defeating.

“Those lower income families trading in an older car will need to carefully assess if they can afford a new EV or PHEV.”

The leasing scheme, which has in part been tested through co-funding of vehicles with Turners, will be trialled next year.

“For some families owning a vehicle is a luxury, which is why we are also trialling a social leasing scheme that will support low-income families to lease a safe, low-emission vehicle from a community organisation. The trial is expected to operate from early 2023 in three communities to test its effectiveness across New Zealand,” Wood says.

“This will provide a leg up to those who wouldn’t otherwise be able to afford to shift to a low-emission vehicle, helping them reduce their living costs and get ahead.”

The 348-page ERP suggests support for an Auckland congestion charge, a decision expected later this year.

Almost $18 million over three years will support the transition to a low carbon economy through the development of an energy strategy, a regulatory framework for offshore renewable energy, and a roadmap for development and use of hydrogen.

Budget 2022, to be announced by finance minister Grant Robertson on May 19. will also invest in developing major strategies to achieve the Government’s vision for a net-zero economy in 2050.

Initially disappointed, is VIA senior policy advisor Kit Wilkerson’s reaction to the newly released Emissions Reduction Plan announcement.

However, he says he will wait for expert analyses to form a more detailed opinion.

While Wilkerson welcomes the idea of a scrappage scheme in the report, he says one is needed to assist in transitioning and improving the New Zealand fleet’s characteristics.

“This one is designed as a plaster to fix the inequities from earlier policies,” he says.

“Of course, we have not seen all the details yet, but I suspect we will end up with something that is not significantly helpful in addressing the issues with the fleet, nor adequate to address those equity issues.

“I would have preferred an inclusive scrappage scheme that targeted the worst vehicle in the fleet while a separate system of grants can be used to give people money if that is the solution government is looking for.”

Wilkerson hopes the ERP doesn’t just apply to new vehicles.

“I have not seen anything that makes me think that will be the case. I will be even more disappointed if it is.”

Asked if the ERP should include near-new used cars and whether the definition of ‘new’ is something that needs to be reviewed, Wilkeron says “new” should define the condition of a car at point of sale, not who imported it.

“We have importers importing EVs with under 100km on them but they are being treated as used,” he explains.

“Our current definition of new and used is not fit for purpose, anti-competitive, and is making our collective goals harder to reach.”