Is the Government being too heavy handed with a new tax - or at least, distance charges - on electric vehicles?
Electric vehicle (EV) owners who’ve approached the Herald say they’re happy to pay the road user charges from April 1. But they also point out the amount they’ll pay will be roughly double what fuel-efficient petrol car owners pay in fuel excise duty (or “petrol tax”).
Transport Minister Simeon Brown yesterday confirmed EV owners will be charged $76 per 1000km in road user charges from April 1, with plug-in hybrid (PHEV) owners paying $53 per 1000km.
If road user charges or RUCs - paid by mainly diesel cars and trucks - weren’t extended to EVs, then the Crown would be left with a roughly $2 billion hole in its books as the nation’s fleet electrifies and revenue from fuel tax dries up.
The Automobile Association (AA) says the average Kiwi driver clocks up 12,000km a year, meaning $912 a year in road user charges - plus an admin fee of $12.44 or $13.71 each time you pre-pay for a block of 1000km online or over the counter.
“We have both an EV and a petrol vehicle,” one reader, Derek Papesch, responded.
“Today’s article made me wonder how much we pay in road tax on our petrol vehicles,” Papesch said.
“After a few calculations, I found that our Suzuki Swift pays effectively $511 per year [in petrol tax], while the EV will cost $912 per year [based on the AA’s average driving distance]. Checking a few more fuel-efficient vehicles, I see the most fuel-efficient vehicles such as the Toyota Yaris Hybrid pay only $350 per year. It looks like many of NZ’s popular petrol vehicles pay around half that which EVs will be paying.”
(His argument has since been reinforced by a submission to the Government from the MTA, AA and others. Read it here.)
“I fully agree with [Transport Minister] Simeon Brown’s statement that RUC[s] should be about fairness and equity. But EVs paying double that of fuel-efficient vehicles doesn’t feel that way,” Papsech added.
Using each car maker’s fuel efficiency figures per 100 litres of petrol, Papesch calculated his family’s Swift cost $43 per 1000km in fuel excise (which is taxed at 89c a litre. The latest Swift is rated at 4.6 litres per 100km, its hybrid version at 4.1 litres/100km). A Toyota RAV4 Hybrid would cost the same. A Honda Jazz would cop $34 in fuel tax per 1000km.
“Your reader’s calculations are correct,” AA fuel pricing policy expert Terry Collins told the Herald.
Road user charges first applied to trucks, based on their number of axles and weight, which correlated to the damage they caused to roads, Collins said. Money from RUCs and fuel tax feeds into the National Land Transport Fund, which goes largely - but, since a 2020 change, not exclusively - towards road maintenance.
When fuel economy regulations led to diesel cars, a catch-all under 3500kg class was introduced that is now being extended to EVs, following an exemption designed to encourage uptake.
The changes to road user charges being implemented by the Government incentivise buying polluting vehicles over clean cars, Better NZ Trust spokesman Rob Birnie said.
“The Government’s RUC changes will result in New Zealanders paying highly varied amounts of tax towards supporting our roads, artificially promoting some fuel types over others and distorting the market.”
By his group’s calculations, an owner of a hybrid version of Hyundai’s Kona would pay about $600 more in RUCs than an owner of the petrol version would pay in fuel excise tax (hybrids are exempt from RUCs, unlike plug-in hybrids).
Although Brown had sought to address the “double dipping” issue with a lower RUC rate for plug-in hybrids, PHEV owner Michelle Sclanders said she still felt as if she would be double-taxed.
“My biggest concern, as a plug-in hybrid Mitsubishi Outlander driver, is that on my car I am only able to get 23km out of my battery before it reverts to petrol,” Sclanders said. “Although it is a reduced rate, it still would mean that I am paying double the road user charges considering how small the percentage of electricity my car uses versus petrol.”
She also raised the question of a triple dip, asking: ”What about the tax that we are already paying for the electricity that is being used to charge our cars?”
There is the factor that EVs, loaded with weighty battery packs, are markedly heavier than their internal combustion equivalents (a Tesla Model 3 weighs 1.78 tonnes), giving them the potential to cause more damage to roads. But Collins said next to heavy trucks, the difference was negligible.
Why not have some nuance, with a lower RUC rate for EVs?
Beyond the fact that would have brought in less revenue, Collins said: “It’s a trade-off between simplicity and fairness.”
With about 100,000 plug-in hybrids on the road, and a long-standing March 31 deadline (set by the previous Government), sticking with the present rate - and a single rate - was easily the most logistically feasible option.
Pre-election, Brown said RUCs would be expanded to all vehicles.
“It will be a much fairer way of charging for the number of kilometres people drive rather than the amount of fuel they use,” he told the Herald.
Today, he elaborated: “How much cars pay in fuel excise duty varies widely depending on the size, weight and the different fuel efficiencies of each vehicle. The costs that owners pay is always dependent on how they use their vehicles and the distance they travel.
“That is why we are committed to working towards all vehicles moving into the RUC system.
“This Government has committed to work to move all vehicles, starting with electric vehicles, to RUC. This is a key transport policy of the National-Act coalition agreement. I have asked ministry officials to begin policy work on transitioning from FED [fuel excise duty, aka petrol tax] to RUC. This work is still in its early stages, and I am yet to received advice on timing and phasing.”
In the meantime, electric vehicle owners might pay more in RUCs than petrol cars pay in fuel tax, but “EVs are generally cheaper to run than conventional vehicles as electricity is cheaper than petrol”, Brown said.
Collins saw a switch to across-the-board RUCs as inevitable - and said it provided an opportunity to introduce different tiers of pricing in the light vehicle class.
“But it will take years, not months,” the AA policy adviser said.
In the meantime, he had one word for the reader who paid $511 a year in fuel excise tax: “Congratulations”. The set-up incentivised people to buy more fuel-efficient cars.
“It’s still much cheaper overall to own an EV,” Collins added.
The Energy Efficiency and Conservation Authority’s rule of thumb is that charging an average EV is the equivalent to paying about 40¢ a litre for fuel.
Electric vehicle owners also benefit from lower servicing and maintenance costs, Collins said.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
OPINION: Liam Dann takes a deep dive into the week's economic news.