Briefly:
Plug-in hybrid sales have more than doubled from last year, but the planned end of a tax rebate could put a damper on that.
The motor industry is pushing for the rebate to be extended as part of wider efforts to cut emissions.
What is expected next?
The fringe benefit tax exemption for plug-in hybrids will end next year.
A sudden resurgence in popularity for hybrid cars has prompted the motor industry to call for tax breaks for plug-in hybrids to be maintained, saying they will remain “critical” to reducing carbon emissions over the next decade.
Plug-in hybrids are currently exempt from fringe benefits tax, which can save around $20,000 on new cars bought under a renewed lease – but that benefit will end in April next year.
The federal government agreed to end tax cuts for plug-in hybrids as part of a deal with the Greens and independent senator David Pocock to deliver on its election promise to introduce an “electric car rebate”.
The Greens and Senator Pocock had argued that excluding plug-in hybrids, which contain a battery charger and an internal combustion engine, would effectively subsidize a fossil fuel.
Plug-in sales have doubled from last year
Plug-ins were always thought of as a transition technology until fully electric vehicles matured and fell in price.
But their sales have defied expectations and the share of all hybrids sold has increased in recent months compared to other vehicles.
The upward trend has been evident. Plug-in hybrid sales for the first six months of this year were more than double what they were in the first half of 2023. They have also grown as a share of all electric vehicles sold.
Motor Trade Association boss Matt Hobbs said it was a sign that plug-ins were still meeting a need for Australians, both in what they could do and their price.
“Battery electric vehicles are great, but not for every type of vehicle, and this is where plug-in hybrids for larger vehicles and appliances will play such an important role in making sure we can get better vehicles and more fuel efficient on the road,” Mr Hobbs said.
Rohan Martin, chief executive of the National Car Hire and Leasing Association, said that since the “electric car rebate” was passed in 2022, there had been a “significant” increase in new leased electric vehicles .
Martin said about 40 to 45 per cent of all electric vehicles in Australia were bought through a new lease, “from a very low number” before the legislation was passed.
But he said if government incentives were to end next year, that could hurt demand.
“Without this incentive, we think there will be a significant decline [plug-in hybrid] sales, plus those who have been thinking about moving into an electrified vehicle, we think it’s likely to deter them, especially if they want a larger type of vehicle,” Martin said.
Mr Martin said that with several long-awaited plug-ins coming to market next year, notably a Ford Ranger plug-in and the BYD Shark, “the timing is unfortunate if this exemption is going to end”.
The industry says the plug-ins are critical to reducing emissions
Earlier this year, the federal government created major climate laws for the car industry that will require carmakers to sell cleaner or more fuel-efficient cars each year or face penalties of severe if they exceed emission limits.
Mr Hobbs said that in light of the ongoing cost of living crisis, unexpected sales trends and now a comprehensive climate policy for the industry, the government should review its decision to end tax benefits for plug-in hybrids.
“The government has set a challenge for the industry to decarbonise … Now they’ve got it, we need to give the industry the tools and the consumers to push,” Mr Hobbs said.
“The evidence is that if you want to get more fuel-efficient vehicles in that larger size that people like to drive in Australia, [buying] Plug-in hybrids are something we should be encouraging.”
Mr Hobbs said plug-in technology for larger cars will remain critical for carmakers to meet their new emissions obligations until batteries can do the job.
Treasury spokesman Jim Chalmers said the electric car discount was a “win” for motorists, businesses and climate action.
“More Australians will be able to get behind the wheel of an electric car thanks to these changes which will reduce upfront and ongoing costs,” he said.