Why electric cars are good for the economy

Blue Tesla Model 3 driving along the road

Tim Nicholson

Posted February 16, 2021

Report reveals electric vehicles could be a boon for the Australian economy.

Every electric vehicle sold in Australia in place of a conventional petrol car will deliver economic and social benefits worth more than $10,000 over 10 years, according to a report by consulting firm EY. 

The findings are at odds with the widely held belief that EVs are a drain on the public purse due to lost petrol excise. (More: 13 biggest EV myths, busted.)

The Uncovering the Hidden Costs and Benefits from Electric Vehicles report, conducted for the Australian EV Council, calculated that the government loses $5979 in fuel-excise revenue for each EV over a 10-year lifespan, and a further $858 in GST revenue from the sale of liquid fuels. 

Australia’s fuel excise is the largest source of road-related government revenue, generating about 41 cents for every litre of petrol or diesel bought, and is used to fund road construction and maintenance. 

However, the report revealed that every EV that replaces an internal combustion engine (ICE) vehicle has a net benefit to government and society of $8763 over 10 years, as well as providing an additional $1370 lift to government revenue. 

EY calculated the direct and indirect benefits and drawbacks of EVs and ICE vehicles on a cost-per-kilometre basis, considering factors like fuel-excise payments, GST, sales taxes, greenhouse gas emissions, noise pollution, public health and the impact on the electricity market.

The report found EVs deliver significant additional benefits to society over petrol and diesel vehicles by reducing greenhouse gas emissions and particulates, other pollutants and noise. They would also contribute additional income tax by redistributing expenditure to more jobs-intensive industries than fuel retailing, and would negate government spending on fuel reserves.

And according to the analysis it’s not just electric passenger vehicles that offer benefits. Electric buses would contribute a net benefit of $40,051 to government and society if they replaced diesel-powered buses, the report concluded. 

Electric Vehicle Council chief executive Behyad Jafari says that if a quarter of Australia’s fleet was converted to electric-powered vehicles, “it would generate an economic benefit of $4.4 billion a year”.

EY Asia Pacific Climate Change and Sustainability leader Dr Matthew Bell says the report clearly highlights the benefits of EVs. “Our analysis shows the significant value that electric vehicles can create for Australia, including to government,” he says.

Dashboard inside the Tesla Model 3

EV's will deliver significant benefit to Australia throughout the next 10 years.

“What will be lost in fuel excise and GST revenue is more than made up for in savings on strategic fuel reserves leasing and the significant health and environmental benefits.

“Climate change is having, and will continue to have, a transformative impact on all Australians. Our analysis shows that the move toward electric vehicles creates a benefit over and above the reductions in greenhouse gas emissions.”

EV uptake in Australia is low compared with other developed markets, but sales are on the rise. EV sales to the end of August are up 17.3 per cent on the same period in 2019. 

Sales of plug-in hybrid electric vehicles are up by 4.1 per cent in that time, while hybrid vehicle sales have skyrocketed by 98.2 per cent. By contrast, diesel and petrol vehicle sales have declined by 21.3 and 25.2 per cent respectively, largely on the back of the COVID-19 downturn.

A survey conducted last year by RACV in partnership with the EV Council found three in five Victorians would consider buying an EV for their next car, but high purchase price, range anxiety and limited choice of models remain key deterrents.

RACV has long supported the increased uptake of electric vehicles in Australia due to their social and economic benefits, including reduced carbon emissions and lower ongoing running costs for motorists. He says RACV has directly supported the rollout of better infrastructure to support electric vehicles through its investment in the Chargefox fast-charging network.