Factors Affecting the Sale of Electric Vehicles in Australia

Question: Discuss about theFactors Affecting the Sale of Electric Vehicles In Australia. Answer: Introduction Electric vehicles have gained importance in the recent times as a favourable technological development for fighting the oil and natural gas dependency , instability in the prices of the petroleum products, controlling the air pollution as well as changes in the climate due to emissions of harmful gases. The said market is still to be developed. The reason for Australias slow uptake is consumer preferences, the diminishing prices of oil and improper infrastructural facilities. However the biggest hurdle is the high cost of these cars which makes it difficult for the large masses to buy. The three main players in this segment are BMW, Tesla and Nissan. The said essay critically analysis the factors that are affecting the sales of electronic vehicles in Australia. Predominantly the government policies, price of oil, price of the electric cars as well as its usability are the main determinants which define the demand and supply curve of the said segment. Who are the Buyers of the Elelctric Cars? The main buyers of the electric vehicles are commercial rather than individual. The year 2014 saw a sale of only 1130 electric cars where the main buyers belonged to the commercial sector i.e. 71.5 percent. Even though the electric car has revolutionized the market of Australia but it had not been able to drive its sales through the private buyers. Price elasticity of demand is posed to be one of the main reasons for the same. Price elasticity means how responsive is the demand to the change in the cost of the product. As to the budget of the individual buyers the cost of an EV is too high to the total budget set. Due to the same the demand of the EV amongst the commercial buyers is more than individual buyers. When the price of an EV increases then the demand of the same within the commercial buyers also increases. The same is illustrated with the help of the graphs below which shows that as the price of the vehicle increases steeply the demand for the EV is reduced amongst the individual buyers in comparison to the commercial buyers Further to this the buyers of the EVs are mainly commercial also due to the fact that the LCT is not applicable on cars used for commercial use specifically not meant for carrying people. Further there is a provision for claiming refund of the said tax also for those who use it for commercial use therefore if the entire price is analysed then the electric vehicles prove to be cheap for the commercial users hence as per the price elasticity of demand if the price of the EV is increased then the sales is tend to decline specially amongst the individual buyers(Australian Automotive Dealer Association. 2015). Tax Implications The said segment attracts luxury car tax (LCT) which is basically a tax levied by the government on the buyers. The same was introduced in the year 2000 when the sales tax was replaced by the Goods and Service Tax (GST). However the LCT is applicable only on those vehicles whose price exceeds the LCT threshold. Unfortunately Australias LCT rule is framed in such a manner that for an EV buyer also LCT would be payable if it is bought from a dealer, is less than two years old and the price of the vehicle exceed the LCT threshold. Further to this although the government of Australia does not offer any such incentives to the buyers of the EVs rather puts in some disincentives which makes it less attractive. However recently the threshold has been increased by 21 percent to A$75375 which is a big difference thus attractive also. However not all places in Australia offer incentives while registering the EV (Strattonfinance.com. 2015). In Victoria, a discount of A$100 is received on registering an EV which may also be hybrid in nature annually. And if any car is registered in the Australian Capital Territory then the stamp duty on the EVs is nil. Thus these tax implications also play a big role in determining whether the buyer should be individual or commercial. Do Dealers Want To Sell EVs? The dealers in Australia are seen deterrent in selling the EVs so much that a dealer had tried to convince the founder of Shiny Things, Mat Peterson not to buy a Nissan Leaf. First and foremost these EVs require very low service which affects the cost and revenue of the dealers as they gain a lot by providing services to the cars. The petrol and diesel cars demand more greater amount of service at shorter intervals however EVs do not demand for service in the short run(Ruiz 2015). Thus the main reason is the impact on the income of the dealers which is getting affected as EVs fail to adhere to the expensive servicing costs that comes along with every car which shows that there is a financial conflict of interest . Also these dealers profit margins also gets impacted at the time of sale as well as post sales services as well. Secondly the sales persons lack knowledge about the operations of such EVs and the incentives offered on sale of each car is also very minimal. Generally these are sold to those customers who are more cash rich and pre-informed as well which further impacts the dealers commission and that of the sales persons also(Tucker 2016). Lastly the customers who buy an EV once are next seen into the shop after a considerable time gap. Therefore the dealers forecast a very limited opportunity for sale of the plug-ins which also a deterrent in pushing the said product for sale. Future Of The Ev Market Although Australia as a country too holds electric vehicles yet its future is not as bright as in USA. The local and the federal governments are main hurdles to the shining future. They are not agreeable to offer incentives to the EV manufacturers despite their continuous requests and o the other hand it is proposing various subsidies and such other incentives to promote coal as a source of energy even if the same is harmful to the environment (myelectriccars.com 2015). Secondly the prices are so high that it becomes difficult to afford for the general public. The main users are the highly educated and cash rich public who believe in keeping the environment green and understand the benefits of it (Watts 2016). Recomendations For The Ev Market To Grow In Australia The EV market has huge potential in Australia. The only backlog are the various policies of the government, the taxes applicable and the lack of awareness amongst the public about the benefits of using such cars. Australia has developed and constructed various charging stations also so as to boost the sales of EVs but due to the above mentioned glitches the same has taken a back seat. Thus on a concluding note I would like to recommend to the fact that the government should nullify the LCT as EVs are not to be considered as luxury items. Secondly the environment of Australia is clean as of now but with increasing population and number of cars the air may soon become polluted like that of USA and before it crosses its limits, adequate measures should be taken. Government policies and incentives in favour of the EV manufacturers as well as dealers is another way to encourage the said market. Lastly awareness programs should also be set up so that the general public are enlightened about the benefits of using EVs. Thus factors mentioned above if dealt with carefully will help to boost the sale of EVs in Australia. References: Australian Automotive Dealer Association. (2015). Why Aussie Buyers Arent Switching to EVs and Hybrids. Retrieved from https://aada.asn.au/why-aussie-buyers-arent-switching-to-evs-and-hybrids/ myelectriccar.com. (2015). Australias EV Opportunity. Retrieved from https://myelectriccar.com.au/australias-ev-opportunity/ Ruiz, P. (2015). Do Automotive Dealers Want To Sell Electric Cars? Retrieved from https://energyfuse.org/447/ Strattonfinance.com. (2015). What is Luxury car Tax? Retrieved from https://www.strattonfinance.com.au/car-finance/learn/articles/what-is-luxury-car-tax.aspx Tucker, H. (2016). Why Australian dealers dont want to sell electric cars? Retrieved from https://www.businessinsider.com.au/why-australian-dealers-dont-want-to-sell-electric-cars-2016-1 Watts, T. (2016). Do electric cars have a future in Australia? Yes, but theyre not for everyone. 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