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What a great year to give up petrol. The number of Australians with an electric vehicle, or EV, in their driveway doubled in the year to 2022, according to brand new data on Australia’s vehicle fleet. You can see the numbers in the next chart.
An additional 10,000 EVs were on the streets of Australia by January 2022, reports the Australian government. That means 10,000 drivers who didn’t have to go to the petrol station when fuel went as high as $2.30 a litre this year. You could probably power a whole nation off their jubilation.
Of course, electricity prices rose this year, and the non-stop rain means solar panels didn’t operate as efficiently as usual, but EV drivers made fuel savings nevertheless.
A Tesla Model 3 uses around 13kWh per 100km. My electricity retailer charges me 30 cents per kWh off peak. That’s $3.90 per 100km, whereas filling up with fuel would cost around $12 per 100km, generously assuming just under $2 a litre and a bit over 6L/100km. The saving of electric driving works out at 8 cents for every kilometre driven. Your saving could be more or less, depending on your situation.
Related: Why are Petrol Prices so High?
An electric vehicle is expensive. The cheapest new one in Australia is the MG ZS—a small Chinese-made SUV. On carsales.com.au today it still costs at least $44,990, which is $23,000 more than the cheapest model of its internal-combustion sibling. The cheapest Hyundai Kona is $30,000 more than its petrol-powered brother.
If you drive only short distances, the savings aren’t spectacular. Even if you got electricity for free, you’d save only 20 cents per km (assuming $2 petrol and 10L/100km). Given the average car is driven 13,000km per year, a driver saves $2600 a year by buying electric. Does that pay off? The heatmap in the next graphic shows how long it would take to make back a $20,000 price difference. It illustrates that to make an EV pay itself off on fuel savings alone you need to be able to access cheap power and travel long distances.
Of course, saving on fuel is not the only reason to buy one. They are clean, fast and fun. You might make a saving on servicing and taxes. But while we’re taking a holistic view, remember you might pay more for tyres and lose a bit of time charging up on road trips too.
The best time to buy a cheap EV is now, as the Federal Government just cut import duty on those with a price below the luxury car tax threshold, and eliminated fringe benefits tax too—a big upside for those who can lease through an employer.
The luxury car tax threshold is only $71,849 though, so the rule changes do absolutely nothing for you if you want one of the following EVs:
Big incentives to buy electric vehicles might well be necessary to spark widespread adoption in Australia. Despite the impressive growth in EVs, they are coming off a very low base, and in fact, the growth in the Australian EV fleet is dwarfed by the growth in the diesel fleet. The country added 290,000 new Diesels last year, as the next chart shows. The blue bars you can barely see on the right are the electric vehicles.
These buyers are no doubt very displeased with the recent unprecedented divergence in fuel prices that has seen diesel sitting as much as 40 cents a litre above petrol.
EV subsidies work to increase adoption. The only problem with EV subsidies is the following: you don’t reduce global emissions if increasing subsidies simply diverts cars from another market to Australia. So long as the global EV market is supply-constrained not demand- constrained, reducing Australian transport emissions comes at the expense of another country’s emissions. Norway might have 90 per cent EV sales but it’s not possible for every country to emulate them—there simply aren’t enough being made yet.
We need more EVs to be made. The market is responding as fast as it can. But cobalt and lithium are in short supply. Is there enough of those materials in the world to make the batteries we need with current battery technology and current battery sizes?
Some informed observers say no.
World nickel and lithium production will be enough for 3.8 million EVs this year—fewer than half the 7.7m that automakers say they want to make. By 2030, metals will be enough for 15.6m EVs. But stated EV production is over 40m. 1/2 The Electric. https://t.co/MuwDEra1c0
— Steve LeVine (@stevelevine) April 24, 2022
However, the market has a knack for solving such problems. Battery recycling and smaller vehicles may be part of the answer. And it is certainly notable that battery-power has seen incredible growth in smaller vehicles: very few food delivery workers are pedalling unassisted these days. Sometimes disruption comes from right under our noses.
Battery-power is the perfect solution for scooters and bicycles, and could help substitute for certain trips that would once have been petrol-powered. If a uni student can put off buying a car for a few years by getting an e-scooter, a family can limit itself to one car by buying an e-bike, or a company can move things around by e-bike, they have potential to reduce traffic, emissions and car-dependence.
E-scooters and e-bikes are a blind spot for most Australians, but if petrol keeps getting dearer and battery prices make full-scale electric vehicles scarce and out of reach, smaller electric vehicles could suddenly come into focus and our current definition of electric vehicle—a car, but with an electric engine—might fade away.
Jason Murphy is an economist first and foremost. He began his career with the Australian Treasury and later shifted to journalism at the Australian Financial Review. He has written for a range of Australian and international publications.
