As countries around the world try to restart their economies, promoting sales of every kind of product is important, but electric vehicles represent a unique opportunity to not only get the money coming in, but also meet key environmental policy objectives.
Overnight Bloomberg revealed part of draft legislation in Europe, that would see a significant change in the focus on EVs. This plan is big and bold and could spawn a tipping point for affordability in electric vehicles.
It’s absolutely clear that electric vehicles are going to take over from ICE vehicles, they’re faster, quieter, have zero emissions and have much lower running costs, but the big stumbling cost is the price of admission – the up-front purchase price.
The European Union looks to be taking an all-electric future very seriously. In the draft EU document, sighted by Bloomberg News, the program would offer incentives to automakers to sell clean cars (EVs) and EV charging infrastructure.
EU-wide Purchasing Facility
The proposal may include a significant budget of 20 billion euros (A$33,411,300,000) for a purchasing facility for clean vehicles. That’s a massive number and the timeframe is aggressive with just 2 years to spend the money.
That timeline should scare a lot of automakers who are yet to get an EVs to market. It is unclear if the fund would be used to buy vehicles outright, like replacing the entire Government fleet, or if it’d offer a discount to any potential EV buyer. If the funding supports the later, it’s difficult to say what percentage we’d see available for each vehicle purchase.
The price difference between a traditional vehicle and an EV is largely a result of the biggest single cost in the vehicle, the battery. Those who want to buy an EV should not be responsible for the fact that’s a more costly component, so an incentive to remove this difference in price makes sense.
Clean Investment Fund
The next point is an interesting one. A Clean Investment Fund would spend 50-60 billion euros on accelerating investments in zero-emission drive trains. That sounds an awful lot like the EU wants to lead the world in the development of electric vehicles, not just cars, but vehicles of all descriptions and again, it’s a massive figure, however, this could be over a much longer timeframe.
2 Million chargers
If the incentives above succeed, the EU would see hundreds of thousands of electric vehicles hit the streets. This creates a demand for a comprehensive vehicle charging network.
This has a knock-on effect of creating additional jobs to design, build, install, and maintain as many as 2 million EV charging locations by 2025. It is possible that many of these charging locations become pay-to-play, which over time could pay back the investment.
No VAT on EVs
Now for potentially the most controversial part of the plan. Zero-emission vehicles (read: EVs), would be exempt from the Value Added Tax (VAT). Across the EU, the rate of VAT ranges between 19 and 27% on purchases.
The removal of that level of taxation on electric vehicles would be costly to the Government income, but is justified by bringing down emissions from the transportation industry.
Should Australia exempt EVs from GST and LCT?
Even though the legislation is only at a draft stage right now, there are so many vehicles made and sold in the EU, that this will make the world stand up and pay attention.
This proposal raises the question of what we should do in Australia. Currently we apply GST to vehicles of 10%. Given the higher price of EVs, many also attracts Luxury Car Tax, often resulting in thousands of dollars added to the purchase price, acting as a disincentive to buy EV.
I encourage Australian Governments at every level to consider a similar proposition to the EU. With a much smaller vehicle market, the incentives certainly wouldn’t be as expensive, however the principles behind them are as valid here as they are anywhere.
Australia wouldn’t need the drivetrain development, but would significantly benefit from discounting the purchase price of EVs. Simply put, the cheaper EVs are, the more people will buy them. I know from writing hundreds of articles about EVs that many people want to go EVs, but they’re simply out of reach, due to price.
More information via Electrek.