Should the next government continue PHEV and EV subsidies?

West Australian

02-05-2025

It's federal election day in Australia, and while there are a plethora of questions around what the next government could bring, we're particularly concerned about those related to cars.
Specifically, we're interested in financial incentives for buyers of electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs), which have been offered for a while now, to encourage the adoption of more low- and zero-emissions by Australians.
One such program has been the fringe benefits tax (FBT) exemption, which applies to all EVs and – until April 1, 2025 – PHEVs priced under the Luxury Car Tax threshold for fuel-efficient vehicles and purchased through a novated lease.
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Under the scheme, the government effectively absorbs the cost of your employer's FBT bill, which would typically be passed on to you, bringing annual savings of up to five figures.
Because this has been wound back to exclude PHEVs, and the Opposition has indicated it would also roll back FBT concessions for EVs if it wins government this weekend, we figured now was a good time to ask the CarExpert team whether it thinks the next government should continue with EV and PHEV subsidies.
It's a controversial issue given PHEVs had just begun experiencing a sales boom with several new vehicles hitting the market in recent months, while EV sales continue to trend downwards.
So the question we asked our crew was 'should the next government continue PHEV and EV subsidies?' Let us know what you think in the comments below.
Easy answer.
With record cost of living pressures and families struggling to put food on the table, wasting taxpayer dollars to incentivise the purchase of new cars is yet another waste of your money that could otherwise be spent on reducing the cost of living.
As I wrote earlier in the year, the government has already blown out the original budgeted amount for FBT subsidies to the tune of over $450 million per year. To think that this poorly thought-out policy should continue any longer is crazy.
Nobody, and I mean nobody, that has enough money to spend up to $90,000 on a new electric vehicle requires or deserves an FBT exemption for a new toy, it's as simple as that.
That $500m per year could be better spent on helping those Australians that are currently struggling to survive.
It's not a pot shot at anybody that has taken advantage of this subsidy. You'd be crazy to not legally reduce your taxable income wherever possible. But nobody could sit with a straight face and claim that this money couldn't be better spent.
My final point here is that if it continues, it should be opened up to used electric vehicles as well. At the moment, it only applies to new electric vehicles, which simply necessitates the further mining of materials for the production of vehicles that will become highly depreciating, disposable assets.
As Paul said, no one that is considering a $90,000-plus vehicle needs government help, but there's more than just that.
It's about the insane amount of taxes and charges the Australian Government puts on all new vehicles that come into Australia. Even if it falls under the luxury car tax, there are still import taxes, GST, stamp duties and more that the government collects along the journey of a car ending up in someone's driveway.
If they really wanted to incentivise people to get into greener cars, they could roll back some of those, rather than offering rebates that only benefit a small percentage of the population.
For those people who can't afford a $90,000 car, but want a greener footprint and don't have the option to purchase through a workplace, they could reduce the purchase price of cheaper vehicles to help someone purchase a hybrid or EV, rather than a used diesel or petrol product.
For me, and many other Australians, EVs don't suit our use cases. So there is no benefit to me as a taxpayer to see a small percentage of the population be rewarded with a few dollars back in their pocket, when the vast majority of us just have to make it work at the full sticker price.
Scrap the subsidies, and while you're at it, scrap the import taxes that were designed to protect an already failing local manufacturing industry. That will make all cars cheaper for everyone.
Buyers of all vehicle types should be treated equally.
But if there are subsidies for new car buyers, they should go to low-income earners in the grip of this cost of living crisis – not upwardly mobile novated leasees who can afford an $85k-plus electrified vehicle.
As it stands, new car buyers will already be forced to pay even higher prices than those we're already seeing due to inflation, supply chain blockages and the 'Covid tax' hangover, as carmakers pass on emissions-related fines to consumers in the coming years – depending on which political party governs Australia after today.
Nobody's arguing we don't need to incentivise demand for more efficient vehicles, but a tax that penalises the most popular, fit-for-purpose vehicle type in this country today, and indirectly promotes mostly cheap electric cars, is not in the interests of the majority of consumers.
And when automotive CO2 emissions are measured by governments at the tailpipe and not over a vehicle's lifecycle, let's not kid ourselves that EVs are lowering the carbon footprints of many drivers in a predominantly 'fossil' fuelled electricity grid like ours. When you factor in emissions from mining and manufacturing, most EVs don't become environmentally friendlier than equivalent combustion-powered models until about a decade after purchase, by which time they're likely to be beyond their use-by date.
There never has been and never will be just one automotive powertrain solution, whether it's petrol, diesel, hybrid, plug-in hybrid, electric, range-extender electric or hydrogen fuel-cell electric.
But consumers will migrate to the most efficient vehicles that still suit their use cases, so let them vote with their feet by getting rid of not just the FBT exemption for EVs as well as PHEVs, but the FBT itself – along with the LCT, which was originally designed to protect the local car manufacturing industry we no longer have, as well as import duties on cars from countries we don't already have a free trade agreement with, plus state rego fees and fuel excise too.
The latter raked in almost $16 billion for the federal government in the last financial year, but according to the AAA just 57 per cent of fuel excise revenue in the decade before the 2022-23 financial year was reinvested in public transport and road infrastructure – the purposes for which it was initially justified.
So why not replace all those automotive taxes with a single road user charge that applies to all vehicles on a sliding scale based on emissions?
And while we're at it, replace income tax with a royalty on all the natural resources currently exported overseas by foreign companies virtually for free, which would make all Australians as rich as they ought to be.
Clearly I'm in the minority here, but as many markets around the world including Australia have proven, initial uptake and popularisation of alternative powertrains heavily relies on incentives.
But, I'm willing to concede we need substantial reform around the entirety of vehicle and road user charges, and our system needs to be overhauled to be more in line with the likes of Europe and the UK.
Instead of financial handouts or tax exemptions, we should have a tiered emissions class system and charge motorists accordingly – ie: cheaper registration, tolls and the like for low-emissions vehicles.
The proposed road user tax for EVs should be a road user charge for all vehicles, scaled depending on a vehicle's emissions class, so it's not a half-baked revenue raiser that effectively penalises EV and PHEV owners.
What I'm saying is that the numbers don't lie, and if we want to continue riding the current wave of low-emissions vehicle uptake, we need some form of concession to make it more attainable for the bulk of Australian buyers.
The federal government's incentives may have served a purpose in making EVs more affordable and attractive to own, but it's a helping hand that's no longer required.
EV prices have dropped to the point where parity with equivalent ICE models has nearly been reached, and they will only become more attainable in the years to come. You can now buy a brand-new BYD Dolphin for less than $30,000, and the influx of new brands into our market has greatly improved choice in the sub-$50k bracket.
What's more, the used market for EVs is growing and many are now available at bargain basement prices courtesy of steep depreciation.
Quite simply, people don't need that extra push to go electric anymore, and the money would be better spent easing the cost of living pressures facing many Australians, or even on environmental initiatives that will offer more bang-for-buck.
I don't disagree that more people should be considering PHEVs and EVs, especially when you consider how long it's been since such vehicles first started entering the Australian market.
Incentives were arguably necessary to convince people to give these cars a go at the start, but times have changed. Sales of PHEVs and EVs overseas prove there's a healthy appetite among average buyers.
PHEVs and EVs are more established worldwide than they've ever been, yet despite incentives continuing until very recently, Australia has lagged significantly behind the rest of the developed world in terms of percentage uptake.
This is despite Australians having access to an EV for less than $30,000 in the form of the
BYD Dolphin
, even if pricier options like the
Tesla Model Y
have sold in big numbers for several years.
That suggests PHEVs and EVs themselves aren't the problem. There's no point in having subsidies for cars like these if a market isn't ready to accept them and, unfortunately, Australia isn't ready – even if people are desperate.
That's because Australia's charging infrastructure is nowhere near where it needs to be to accept large-scale plug-in vehicle uptake.
More chargers are popping up slowly, sure, but a quick look overseas reveals the scale of our deficit. Tesla has its nationwide Supercharger network in the USA, while China has possibly the most comprehensive EV charging network in the world.
The latter is thanks to strong support from the Chinese government, partly through providing aid to its EV brands to get them up and running, but mostly through investing huge sums of money in expanding and fortifying its charging network, which makes it a lot easier for consumers to consider making the jump.
In Australia, we're past the point of telling people PHEVs and EVs are good and reliable. What's needed now is a considerable expansion of Australia's charging network to be able to support these vehicles, and that's where government subsidies and incentives should go.
There's already the $500 million Driving the Nation Fund, which has $39.3 million allocated for the installation of just 117 EV chargers on Australia's key highway routes. That's hardly anything when you consider charging times and the availability of traditional petrol stations.
Another $60 million has been put towards EV charger installation at car dealerships and EV repairers, which doesn't directly help daily EV drivers who simply need to charge.
Instead of worrying about getting people into PHEVs and EVs through incentives, funding should go into a much more concerted effort to rapidly expand Australia's public charging network. Once the infrastructure's there, the buyers will come.