The idea of government subsidies to encourage the take up of new technology isn't new. What I have always found puzzling is there is really no such thing as a government subsidy. The word government needs to be replaced with a more accurate descriptor, which would simply be taxpayer.
Calls for taxpayer subsidies for electric vehicles have gained some momentum in 2018. Federal Minister for the Environment and Energy Josh Frydenberg has called for a co-ordinated approach from federal and state governments to encourage the adoption of zero-emission vehicles.
Minister Frydenberg and Minister for Urban Infrastructure and Cities Paul Fletcher are leading a Ministerial Forum into Vehicle Emissions, whatever that is.
From the outset, my preference is generally to let the market work it out. Sometimes the market does the job without any government intervention or interference. Take the recently released Volkswagen Golf GTI Original, it is now more affordable than ever before to own a performance Golf. Competition and market forces have done the job.
Australia is the only developed economy that doesn’t offer a financial incentive to switch to an electric car. My response to this is simple, so what?
Electric cars are new technology and new technology always carries a significant premium when it first comes to market. It is up to the manufacturer to meet the market, it is not the responsibility of the taxpayer to make the equation more favourable.
Those calling for EV subsidies are yet to disclose what level of support they are seeking. Look at the models available from Tesla, these are expensive premium cars, should the taxpayer really be asked to kick in for a premium car well over 100k?
A subsidy of $10,000 won't put much of a dent in the cost of a Tesla and it’s very unlikely to swing the decision in the context of the premium segment.
Looking at the mainstream where Nissan’s successful Leaf is looking for buyers, it’s again hard to determine what subsidy could make the car more appealing, should it be a percentage of the purchase price or a fixed dollar amount regardless of the make and model?
For subsidies to be effective, they would need to be generous to the point that an EV can compete with an equivalent petrol or diesel model. Even then, I wouldn’t be willing to gamble the take up would significantly improve.
Large subsidies warp the market and remove the need for car makers to deliver a product that can compete on its merits.
The Australian taxpayer is asked to pick up plenty of slack across a wide variety of industries. Any subsidy should be scrutinised to a far greater level than what they currently are.
Giant resource-rich multinational corporations are among those least deserving of taxpayer support to improve their competitiveness.
There is nothing stopping very profitable brands from subsidising their products in order to grow EV sales.
If a product makes sense, it will sell. At present, in the majority of segments where electric cars are looking for buyers only huge subsidies would make any real difference.
With everything else Australian taxpayers are responsible for, perhaps they have earned the right to sit this one out.
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