Labor EV discount plan starts July 1 – but is it enough?

With the balloons and bubbly now packed away, Australia’s new Labor government will turn its focus to fulfilling promises and pledges made in the run-up to this month’s federal election.

One of those pledges was to improve electric vehicle uptake via the abolition of trade tariffs and fringe benefit tax (FBT) changes on EV purchases, as it targets a lofty 3.8 million EVs on the road by 2030.

Set to commence on July 1, 2022, the policy will be reviewed after three years, according to the ALP’s pre-election commitment.

At first blush, though, the abolishment of import tariffs on EVs may only impact a handful of vehicles, because the bulk of electric cars currently available in Australia are sourced from countries whose imports are already free of tariffs.

Australia’s best-selling EV, the Tesla Model 3, is built in Shanghai and currently attracts no tariff. And even if Tesla switched Australian supply from China to the US, it would not be affected, because both countries share a free-trade agreement with Australia.

A similar situation applies to the MG ZS EV and the Polestar 2, both of which come from China, and to the Hyundai IONIQ 5 and Kia EV6, both of which come from South Korea.

What is currently unclear is whether the tariff cut will be applied to all EVs on sale in Australia today, or just those falling beneath the current luxury car tax (LCT) threshold of $79,659 for ‘green’ vehicles.

The ALP’s pre-election commitment used the LCT price as a ceiling.

If the LCT limit is used as a cut-off, only the MINI Cooper SE, the Nissan LEAF and the entry-level Mercedes-Benz EQA 250 would benefit from the cut – and given the tariff cut would be applied to the landed cost of the vehicle, not the recommended retail price, it would fall to the respective companies to pass on the savings to consumers.

If, however, all EVs fall under the no-tariff ruling, then the Porsche Taycan, Audi e-tron, BMW iX and Mercedes-Benz EQC will benefit from the reduction to the landed cost.

The abolition of the fringe benefits tax regulations on EV purchases for businesses would equate to considerable savings for businesses buying into EVs.

The ALP provided examples last year, suggesting the circa-$50,000 Nissan LEAF could cost up to $8700 less, while the circa-$70,000 Tesla Model 3 could save the business up to $12,000.

The plan sits beside the ALP’s plan to bolster the nation’s charging infrastructure via a circa-$40m co-funding deal struck with motoring club NRMA.

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