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Toyota HiLux not Tesla Model 3: Why the government incentivises us to buy utes instead of electric cars

Buying a Toyota HiLux has its perks, but shouldn’t buying an electric car like the Tesla Model 3 also be incentivised?

The idea of incentives for electric cars is a controversial and long-running topic in Australian motoring.

It’s often seen as an unfair way to treat motorists, favouring one type of buyer over another simply because of the vehicle they choose to drive. Ideas such as reduced registration costs and special parking for EVs have been derided by critics as problematic for a variety of reasons.

Except, governments around the country already do heavily incentivise one particular type of vehicle above others, and as a net result, these types of vehicles dominate our roads. And yet, no-one seems to mind or call it unfair or biased.

We’re talking about dual-cab utes. Vehicles like the best-selling Toyota HiLux and Ford Ranger, Nissan Navara, Mitsubishi Triton, Volkswagen Amarok and so on are being helped in the sales race by tax benefits and special parking privileges by the same governments that are looking to introduce extra taxes to EVs.

Without turning this article into an accounting story (and because we’re not qualified accountants), in simple terms, dual-cab utes are able to take advantage of a fringe benefits tax exemption, provided they can demonstrate the ute is used for work-related activities.

Under the guidelines laid out by the Australian Taxation Office (ATO) this is primarily limited to travel to and from work, as well as other “incidental” and “infrequent” non-work use. However, looking at the sales of dual-cab utes in the past decade, it’s clear that this tax break, combined with the improved quality of utes, has played a role in them becoming so popular.

As an example, sales of the Ford Ranger 4x4 leapt from just 9836 in 2010 to 37,889 in 2020. While there are undoubtedly other factors in the increased popularity of the Ranger, there can also be no question that the government’s tax ‘incentive’ played a role.

As for parking, while various countries around the world offer free parking for EVs in city centres – Norway famously offers free charging too – in Australia, owning a ute gives you added parking options in the city. That’s because if you own a ute you are free to use loading zones, and there’s no obvious way to tell the difference between a genuine ute-driving delivery person and a regular employee that happens to drive a dual-cab because they want to take advantage of the tax break.

Thanks to these incentives for ute buyers, the market share for 4x4 variants has ballooned over the last decade from 9.1 per cent in 2010 to 16.7 per cent last year. That’s the kind of sales growth car companies would no doubt like to see happen to EVs in the coming decade.

But despite the evidence that even small incentives like tax breaks and additional city parking options have helped ute sales grow, both the federal government and most state governments around the country remain non-committal on EV incentives.

The South Australian government became the first in the developed world to announce plans for a road user charge that would actively dis-incentivise EV uptake in its state. The concern is that the increased number of EVs would cut into the revenue raised by the fuel excise duty, which is used for road maintenance.

The Victorian government recently introduced a cash subsidy of $3000 for up to 20,000 EVs, but only after it announced its own plans for a distance-based road user charge for EVs like SA.

In NSW, the state’s transport minister recently announced the government is considering a range of incentives for EVs, including reduced registration costs, access to bus lanes, subsided parking and more public charging infrastructure. The government also declared it won’t consider a road user charge until EVs account for more than 40 per cent of the cars on the road in the state.

With EVs accounting for approximately one per cent of new car sales in 2020, the question of incentives will continue for the foreseeable future. And the example of ute sales is perhaps the strongest argument that government incentives for particular vehicles drives growth.