Electrifying surge in sales for EVs in 2023
Electric Vehicle adoption had a break out year in 2023 in Australia, with new EV sales more than doubling from last years numbers. Australia also had a record breaking year for new vehicle purchases as well, with just over 1.2 million(!) new cars entering the country according to federal chamber of automotiv industryies. For the first time ever 7.2% of those 1.2 million new vehicles, or about 87,600 were all electric. If you include other vehicles with batteries in them (hybrids etc), the total number of new vehicles purchased with batteries was 16.2%, almost 200,000!
This is up substantially from the 3.1% (33,400) new vehicles that represented the new all electric cohort in 2022, and represents a 2.6 times increase in total vehicles sold this year. whilst there was a lot of issues in vehicle supply in 2022, with a lot of interruption due to covid related shipping delays, the increase last year comes down to a few key factors, mainly a carefully designed government incentive and fantastic new options for drivers.
Factors Driving the 2.6X Surge in Electric Vehicle Sales.
The two big changes in 2023 that likely lead to the surge of 2.6 times increase in Electric Vehicle adoption come in the form of the Fringe Benefit tax exemption for EVs coming into effect, and cheaper models coming from BYD and Tesla dropping their prices on their popular Model Y.
Government Incentives and Novated leases: A catalyst for EV popularity
The changes to the fringe benefits tax have had a significant impact on the adoption of EVs this year, which only came into effect a few months into the year. We will do a whole explainer on the Fringe benefits tax shortly, and update this article to link to it. In short the Fringe benefit tax exemption makes any Electric car under the price tag of $84,916 a no brainer to get via a novated lease (explainer on that one too coming shortly). It allowed employees to lease an Electric vehicle using their before tax income, which can essentially is a government subsidized discount to the based on the tax bracket you are in.
This has proven to be exceptionally popular in places like Canberra, with its well paid, securely employed public servants immediately taking advantage of this to get a Novated lease at their work. In November 2023 alone, almost 23.9% of all new cars purchased in Canberra were electric, compared with the national share of EVs that month being 7.7%. As EVs come down in price further this year, and if the economic outlook improves for more people, perhaps with some interest rate cuts, we may see the popularity of novated leases increase more broadly.
More Affordable Electric Vehicles and more choice
The other key change, and probably the most important factor this year was the number of new “affordable” Electric Vehicles entering the market for the first time from the likes of BYD and MG. The new pricing and availability of the Tesla Model 3 and Y have clearly proven popular as well with their very high sales numbers continuing this year.
The new entrants from BYD and MG (and GWM) however cannot be understated, with now 3 vehicles starting in in the $30-$40k price range. All of these vehicles have adequate range for daily commuting, and even the occasional trip up the highway using the fast charger infrastructure. With more great options set to arrive next year, things will only improve here, but we’ve clearly reached a bit of an inflexion point when it comes to accelerating adoption. The MG 4, The BYD Dolphin and GWM Ora all received plenty of media attention this year, with their price points all starting at basically $38k.
Price parity and lower running costs transforming the EV market.
With the price point of a brand new Electric Vehicle now starting below $40k, we are starting to see more talk about “price parity” with petrol cars. Its not straight forward to compare the sticker price of a petrol car vs a comparible EV, as with the EV you are kind of buying the energy upfront with the battery – you just have to recharge it (relatively cheaply) each day. So with significantly lower running costs of not having to pay for petrol, much lower maintenance costs, you can start to see why EVs at this price point are becoming more popular. When the government subsidies and FBT exemption are considered, the price tag of these vehicles starts to look very compelling, even becoming a no brainer for some.
Fuel Price Volatility and rooftop solar: additional drivers for EV adoption
Another factor that is perhaps not as frequently discussed is the volatility and stubbornly high prices for fuel. Petrol and Diesel remaining high seemingly at $2/L or above for most of the year, with recent memories of those price spikes upto $2.5/L many were looking for alternatives to lower their running costs and insulate themselves from the volatile international oil price fluctuations. Coupled with Australia’s love of rooftop solar, many households with solar will be starting to weigh the benefits of getting free power from their roof to fill their car, vs the roll of the dice as to what their petrol bill might look like a month from now.
State Government Subsidies: Past Present and Future outlook
State government subsidies definitely helped lift EV numbers, but were likely not as significant as the above 2 factors – and a lot of them were wound down or scrapped this year:
| State | Subsidy | Active |
|---|---|---|
| Vic | $3000 | Ended July 1st 2023 |
| NSW | $3,000 | Ended Jan 1st 2024 |
| QLD | $3,000 – $6,000 | Still active |
| SA | $3,000 | Still active |
| WA | $3,500 | Still active |
| Tas | Stamp duty exemption | Ended 1st July 2023 |
| ACT | 0% interest loan of $15,000 | Still active |
| NT | stamp duty exemption | still active |
Most state and territory governments also provide some incentives, discounts, or exemptions for registrations of electric vehicles as well – again adding to the benefits of lower running costs for EVs. All the these rebates above were for all electric vehicles, however there are some similar discounts, or subsidies for PHEVs as well.
Next year these subsidies will have likely mostly dried up as they will likely fully allocate all the funding that was intended for those programs. It is yet to be seen if these head winds from state governments cooling their incentives (namely Vic and NSW) will have a meaningful impact on sales. Bigger headwinds may come from the broader economic headwinds in the country, and higher interest rates, which can make buying a new car with finance much more costly.
2024 a certainty to be another record breaking year for Electric vehicle adoption
However with 2024 shaping up to bring even more all electric models to the country, offering more choice, better range and different styles there may be some positive tail winds for EV sales. It is very likely that price competition will continue between the leading brands, to the benefit of Australian EV buyers.
