Electric Vehicles in New Zealand: When is the Tipping Point?

It’s hard to predict the future, but it’s our opinion that at some point, not too far away, new car buyers will be purchasing mostly electric or hybrid-electric vehicles. 

Here’s why:

· Electric cars are the future.  Investors know this.  Tesla (who will sell around 300,000 cars this year and is not yet profitable) is worth more than Ford (who will sell around 6,000,000 vehicles this year). 

· There is significant consumer demand.  This may not be the most scientifically rigorous survey ever, but figures from a recent Trade Me survey show 74 per cent of Kiwis are considering an electric vehicle (EV) as their next car. 

· There is significant government/wider public demand.  The government recently announced “feebate” scheme will reduce the cost of electric vehicles by adding a cost to less economical and higher polluting passenger vehicles.  It will be introduced in 2021.  The government wants to encourage the uptake of electric vehicles.  The government has stated the response to “feebate” scheme has been very popular with the public and interested parties.  Associate Transport Minister Julie Anne Genter said about 80 per cent of the online responses the Transport Ministry had so far received in response to a discussion paper on the feebate scheme and an associated "clean car standard" had supported the policies.

· The current engine technology is hazardous to the environment. Internal combustion engines contribute significantly to climate change, are significant polluters, and emit toxins harmful to the environment including humans.

· Technology is rapidly evolving and the cost of producing electric cars is coming down.  Manufacturers are releasing a lot of new electric vehicles and they will shortly be hitting an affordable price point.  One of the most significant new models to be released in 2020 will be the Volkswagen I.D.3.  It is the size of a Volkswagen Golf, fully electric with a sensible range (even in base form), and will cost about as much as a higher end internal combustion engine Golf. Volkswagen will produce around 330,000 of these per year.  The Volkswagen stable of companies will be producing a wide range of electric vehicles in the near future.  All car companies will need to be.

·  Electric vehicles are cheaper to run and service.

·  Electric vehicles make particular sense in New Zealand.  We produce most of our electricity from renewable sources, therefore, as electric vehicles replace internal combustion engine vehicles, we won’t need to import as much oil.  Oil is a significant cost to our economy.  Transport costs will reduce and that will flow right through our economy.

· Switching our fleet to electric vehicles is a massive economic opportunity for New Zealand.  The government would be wise [and almost certainly will] to continue to incentive the fleet switch over.

Here’s why the switch to mostly electric new car sales won’t happen as fast as we’d like and some people suggest:

· There are supply-side constraints.   Capacity for car battery production is increasing quickly but car battery production is still limited.  Most car companies won’t be able to move that quickly - they are heavily invested in internal combustion engine car manufacturing and manufacturing cars to support internal combustion engines.  Combined, they have invested 100’s of billions of dollars in the current technology.  They need to get a return on that.

Other points to consider:

·  New Zealand has a large and old fleet.  We have a fleet of 3.6 million vehicles with an average age of 14 years (old compared most other advanced economies). Even when electric vehicles become the new vehicle purchasing norm, it will take a long time to switch out a large proportion of the entire fleet. 

·  There will be winners and losers.  It seems likely that some of the current car companies won’t make it through to the transition to the new technology.  They can’t afford to invest heavily enough.  There will probably be a number of newer ones that will emerge strongly.  As New Zealand imports all its cars – we’re agnostic about this from an economic perspective.

So, when will new car buyers will be purchasing mostly electric or hybrid-electric vehicles?

·  We think that by 2030 over 50% of new passenger car sales (except Utes) will be electric or hybrid-electric. From there they will take an increasing share of new car sales.  We think electric and hybrid-electric vehicles will start to take a material share of new passenger car sales by 2025.

  

The Car Brokers can help you determine the best vehicle for your specific needs and then find and negotiate the best deal for it.  Contact us at thecarbrokers.co.nz - we’ll do the hard work and save you money.