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Clean Car Discount tweaks miss their Goal

Too successful. Fiscal hole. The two reasons given for reshaping the income and expenditure for the Clean Car Discount. But the changes are flawed, in that the tinkering misses an opportunity to be bolder. Fundamentally the goal is to produce a fiscally neutral shift to lower emissions transport. That may have got lost in translation, because we forgot about affordability.

Reducing the rebate for new vehicles make sense. Full electric buyers have a clearly signalled rebate reduction from $8,625 to $7,015. Most consumers will be upset by this, but they are affluent, and it would be unlikely to affect their purchase decision anyway. Bear in mind that new BEV start at $50,000, with most being $65,000 plus, so this is a purchase for a relatively comfortable family.

However, the government could have gone further and lowered to cap to say $60,000 as well as lowering the rebate amount (or better still have a lower rebate for more expensive vehicles). This would force manufacturers to decide whether to bring in cheaper less powerful vehicles at a lower price point, which in turn would increase uptake (it's no surprise that lower price points help sell more cars), as well as speed second life adoption (a used BEV when $80K new is less affordable than a used BEV at $60K new). Boost Auto would have liked to see a stepped rebate, $5,000 rebate on cars over $60,000 and a $7,000 rebate on cars under $60,000 for example.

Increasing the rebate for used vehicles is window dressing. It won't make availability of used imports any greater - because we get 95% of our used BEVs from Japan, and they aren't a market leader in BEVs and so the choice and supply is relatively limited. The net result here is Nissan Leafs will be slightly cheaper after the change.

The zero band range is where the big change is. Some vehicles that get a rebate now won’t be eligible for a rebate or will incur a fee. The zero band range will be 101 – 149 (g CO2/km), down from 147 – 191. Take a Toyota Aqua (New Zealand's biggest used import). Today a used import Aqua would get a $1,717 rebate. That makes sense. An Aqua is twice as fuel efficient and half as polluting as New Zealand's previous used import champ, the Nissan Tiida. So a clear win for consumers and the environment (not so good for liquor shops, but that's a separate issue).

From 1st July that rebate falls to $1035. But hang-on. The rebate on a $12,000 car has gone from 14% to 8.6% of its retail price. Last year there were 12,800 Aqua that came into NZ. This car is a game changer for families who buy one and for the environment, and yet the rebate has reduced. So clearly something is very wrong here. Families on a limited budget need cleaner car choices, and incentives to switch, and we brought in 50,000 used hybrids last year. The incentive was working well.

In that cheap and cheerful category (2012-2015) there aren't many choices. Prius V (the small wagon), Honda Fit hybrid, Honda CRZ, Mazda Axela hybrid all now fall outside of the rebate window and will fall into the neutral category. This means that there will be more demand for Aqua, and the step into a family sized hybrid has become harder. These marginal hybrids are an interesting segment. We need cleaner cars for the families that can't afford new vehicles, and we seem to have removed the rebate from a number of vehicles,

At least older more polluting imported vehicles will get penalised more. This makes sense to some degree. .

Last year there were 110,128 used imports, and almost none of them were utes (because Japan is not a ute market), so in fact we import as many passenger vehicles from overseas as we import new passenger vehicles. The importance of getting a balance mix of imports is clear.

On the upside is the trusty Nissan Leaf. Last year was a big year for used import Leaf, with just over 3,500 coming into the market. The rebate on a Leaf has gone from $3,450 to $3,507. Again, a pointless change that just costs time and money to implement, with a likely negligible change in registrations.

However, there is an invisible challenge on the horizon for the affordability of Nissan Leaf. The Clean Car Standard will mean demand for Leaf from importers will increase dramatically. These vehicles are worth a lot of money in CO2 credits. This is the invisible (for consumers) part of the government's clean car initiative. The Clean Car Standard rewards or penalises importers based on whether they import low emissions vehicles or heavy polluters. Under the Standard a Leaf is worth $2,500 in import CO2 credits. Basically, importing a Leaf reduces your CCS fees, and so anyone who imports ICE vehicles will also be chasing down Nissan Leaf to earn credits to offset their import fees. We don't know quite how this will pay out in retail pricing, but for sure, demand at auction in Japan for this product will go crazy.

In the no-mans land for fees and rebates there is a bigger shift. For example, the cheapest new cars in New Zealand, MG3 and Mitsubishi Mirage, have moved from neutral and $2026 rebate respectively, to a $2127 penalty and zero rebate respectively. These cars have just had a 10% price rise effectively.

At a brand level it is worse - all of MG’s combustion-powered fleet now sits in fee territory, whereas most were neutral. In small SUVS, MG's entry level ZS SUV has gained a $1437 penalty. Looking at Mitsubishi, ASX from has moved from a modest $431 fee to $3220. Unsurprisingly makers of cleanish mild hybrids are complaining also, as they've moved from rebates to neutral or small penalties. At least the field has moved around them at the same pace.

The big polluters get hammered under the changes, and so they should. A Ford Ranger Raptor, the glorious machine that it is, is also a terrible polluter, and so the CCF goes from an eyewatering $5,175 to $6,190. Given that Raptor is already $93,000 and is pretty much the only petrol ute on the market, its unlikely to affect sales. Tradies and surprisingly the National government bemoan the 'Ute Tax', but Utes are a New Zealand and Australian market distortion, supported by FBT rules. We don't even take the Euro 6 cleaner versions, but instead take the more polluting Euro 5 versions. For many businesses, a van or an SUV is a cleaner and safer choice, and so we should avoid the politics of words and look at the emissions. In short, utes are terrible for our environment. Even a 2023 Toyota (champion of the hybrids) Hilux 4WD pumps out a 227 g/km CO2 (or 2.3 times that of a 2023 Corolla Hybrid).

This in turn raises one of the issues for businesses. There are relatively few BEV or PHEV commercial vehicle options at present, and vehicles from legacy car brands are too expensive. Take the Mercedes-Benz eSprinter or incoming electric Ford Transit Cargo. these vehicles will be above the cap, thus limiting options for businesses wanting to do the right thing. But if you must have (rather than prefer) a ute then your choices are limited. Hold on to your ute longer? It's an option that will be voiced loudly, especially in the coming weeks and months.

The other elephant in the room is our bus and truck fleet. Where are the solutions or incentives for cleaning our truck fleet? They travel huge kilometres and would still be legal if they were Euro 4. Yet there are no real incentives for cleaner trucks.

The real challenges are the rate of change to our large vehicle parc. We have very high levels of car ownership and cars are still relatively cheap (with the exception of new BEVs). This is where the changes miss the mark. There are no incentives to get rid of older cars (there are a lot of them), and our vehicle parc is very old (14.4 years) by international standards. We don't even measure pollutants of vehicles on the road and older cars are more polluting and less safe. The rate of change from the scheme as it standard is just too slow.

In 2022 we registered just 16,000 new electric vehicles and 21,000 used electric vehicles, yet our total fleet size is 4.5 million, of which around half are licenced and in use. You can do the maths to see that even at this rate of change, it's going to be a long long time before our fleet is electric, even though the emissions reduction progress for fleet change so far is quite large.

The last piece of the jigsaw is timing. The announcement make sense, but doesn't really give the dealers or distributors time to address the changes. Much better to lay out a roadmap for the next 12 months so that brands, importers and consumers know the pathway thay have to adapt to. The commentary about being too rushed does nothing to help the planet's cause and risks knee jerk political opportunism, such as Act and National saying they will scrap the programme.

Lastly, the Clean Car schemes (Rebates, Fees and Standards) fail to address mode shift; currently the schemes are singular in their focus on increasing take up of low emissions cars and SUVs. Most families are multi-vehicle families; our target is affordable emissions reductions. There is a micro-mobility boom across the globe, yet we are focused on switching an ICE car to a lower polluting ICE or BEV car. We miss the opportunity to encourage take up of other forms of low emissions transport such as e-bikes and e-mopeds, which suit many short journeys. Considering the wider options available to us would be efficient use of the pooled Clean Car fund.

Here are the Boost Auto seven steps for cleaning our fleet.

  1. Introduce a 2 stage cap for full electric passenger vehicles.

  2. Have rego (licence) fees based on CO2 emissions and emissions standards would be useful. It would act as an annual reminder that a car is efficient or inefficient.

  3. Target high polluting vehicles with in-service emissions checking and a targeted scrappage scheme for the oldest, most polluting vehicles.

  4. Introduction of a incentive programme for HGV

  5. Increase the cap for light commercial vehicles to $100,000.

  6. Introduce a fixed fee rebate for e-bikes and e-mopeds.

  7. Have a clear road-map for the next standards thresholds and the date of implementation.

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