Even As EV Sales Boom in Australia, Fuel Efficiency Standards Arrest Further Growth

Australia is witnessing a demand-side surge for electric vehicles, yet the lack of new fuel efficiency standards is posing challenges for EV penetration. The Electric Vehicle Council’s (EVC) latest State of Electric Vehicles report highlights a significant surge in EV sales, representing 8.4 per cent of all new cars sold in Australia in the first half of 2023. This was a mighty jump from 3.8 per cent for the same period last year.

Electric car sales in Australia during the first six months of the year have surpassed the total sales for the entire year of 2022, with 46,624 electric vehicles sold in the light vehicle market by the end of June. This represents a remarkable 269 per cent increase compared to the same period in 2022. While this surge in electric vehicle adoption is positive news for Australia, the report also highlights that the country still has a considerable distance to cover to meet international standards and achieve its emissions targets.

Despite the commendable growth in renewable energy, as evidenced by its contribution of 35.9 per cent to Australia’s total electricity generation in 2022 (up from 32.5 per cent in 2021) and rising fast, the country is trailing on EV policy and its consequent adoption to align with the nation’s environmental goals. Sales can be expected to keep gaining in the country with the highest rooftop solar penetration, as owners slowly focus on getting the most out of their generation rather than face curtailment, as happened in South Australia sometime back.

EV Obstacles

It is noteworthy that the demand for EVs has been twice as high as the actual sales figures. However, consumers often faced disappointment as their orders remained unfulfilled, leading them to choose a conventional car instead due to the long waiting times. Australia’s lack of a new fuel-efficiency standard is at the core of the supply-side constraints.

Fuel-efficiency standards set by various governments worldwide limit emissions from cars by creating a cap on carbon emissions across a manufacturer’s overall sales. This provides an incentive for manufacturers to supply low and zero-emissions vehicles and penalises companies that fail to do so. Due to the lack of an effective policy for EV adoption in Australia, manufacturers are diverting more EVs away from the Australian market to not miss out on incentives.

The Australian EV uptake has varied considerably among regions. For instance, EV sales have been strongest in the Australian Capital Territory, where 21.8 per cent of new cars sold so far this year were electric, followed by 9 per cent in New South Wales and Tasmania, 8.5 per cent in Victoria, 7.7 per cent in Queensland, 7.5 per cent in Western Australia, 6.5 per cent in South Australia and 2.4 per cent in the Northern Territory.

The report also highlights a lack of options in the EV market for consumers in Australia. Interestingly, just three vehicles, namely Tesla’s Model Y and Model 3, along with the BYD Atto 3, dominate over 68 per cent of the market share. Although there are 91 different electric cars, vans, and utes available, most of them suffer from limited supply issues.

Australia released its Long Term Emissions Reduction Plan to achieve net zero emissions by 2050. The government is looking to invest AUD 20 billion in low carbon power over the next decade (under the Technology Investment Roadmap), hoping to unlock AUD 80 billion of private and public investment on green technologies. While the renewable energy transition, with a third of country’s electricity coming from renewable sources, is in line with its net-zero ambitions, the time can not be better for the country to fill the federal policy vaccum incentivising the EV adoption. This will help country to advance toward its clean future goal.