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Are we unplugging the electric car already? New government taxes threaten to put the brakes on EV sales before they take off

Owners of the Tesla Model 3, the most popular all-electric vehicle on sale in Australia today, are about to pay new state taxes.

How do you encourage motorists to choose cleaner, greener cars whilst still ensuring everyone pays their fair share for using our roads? That’s the $49 billion question that threatens to derail Australia’s uptake of electric vehicles.

The last two weeks have seen two state governments – South Australia and Victoria – reveal plans for a road-user charge for EVs, with New South Wales rumoured to be following suit. In effect, these charges would replace lost revenue otherwise collected via the fuel excise duty.

It’s a course of action that has divided the motoring community, with the Federal Chamber of Automotive Industries (FCAI) and the Electric Vehicle Council (EVC) both adamantly against such a move.

But the Australian Automobile Association (AAA) – which is made up of motoring clubs, including the NRMA, RACV and RACQ – has supported the idea and called for an even more widespread reassessment of how motorists are charged.

The FCAI and EVC believe introducing a road-user charge now, when less than one per cent of all new vehicles sold in Australia are all-electric or plug-in hybrid (only 2712 examples have been sold so far in 2020, excluding Tesla), will only act to discourage people from buying these types of cars.

This is a concern amplified due to the lack of any government incentives to buy EVs and PHEVs; as offered by many governments in developed countries around the world. Only last week, British Prime Minister Boris Johnson announced plans to have all new vehicle sales in the UK be EV or hybrid by 2030.

Tony Weber, chief executive of the FCAI, slammed the talk of a road-user charge for EV owners.

“Once again, we have a state government in Australia trying to destroy the path to a greener and cleaner motor vehicle fleet for this and future generations,” he said.

“Don’t worry about health outcomes, don’t concern yourself about the environment – a short-term revenue collection comes first. 

“Other countries bend over backwards to increase the use of EVs and other low emission vehicles, because they recognise the benefits.”

However, supporters of the idea say a road user charge for EVs is fair because it helps pay for any shortfall in the fuel excise; that the government says is primarily used to fund road maintenance.

According to this year’s federal budget, the fuel excise is expected to raise more than $49 billion over the next four years, but the acceleration of EV sales would reduce that figure.

The AAA is both a supporter of EVs, having invested in a charging network for its club members, but said a change in the way motorists are taxed is inevitable and should be addressed on a national level.

“The technological shifts we’re seeing in the car market are good for consumers and the environment, but they are also going to significantly undermine the federal budget and its reliance on fuel excise revenue to fund transport projects,” said AAA managing director Michael Bradley.

“The federal government must step in and ensure tax changes are nationally consistent, equitable, and progressed in a manner that does not disincentivise technological transition.”

Both the South Australian and Victorian governments are hoping to have the road-user charge passed through parliament and implemented by the middle of 2021.