ZLEVS: policy and workshop change (part two)

19 October 2022

Vehicle carbon taxes are being used in some countries to pressure people out of their internal combustion engine (ICE) vehicles, but there are challenges for those who can’t afford a zero and low-emission vehicle (ZLEV), and consequently have little choice other than to keep their old cars.

This isn’t the worse possible outcome for the vehicle service and repair industry, given older vehicles generally need more maintenance and repair than newer ones. Car parts suppliers would also benefit in this market, given the relatively few moving parts in pure electric vehicles (EVs).

So, great care is required from policymakers in Australia to understand that transitioning to a zero-emissions vehicle fleet in one country does not mean the same journey can – or should be taken by another. Even though the unit or currency (electricity) is about as universal as it can get, the policies leveraged to create vehicle fleet transitions require thought.

Vehicle supply is also a key point that was raised in the EU, something that will be a major factor in the speed at which ZLEV uptake will be achieved in Australia. Europe has much better access to ZLEV vehicles than Australia. Currently, ZLEV vehicles transported to Australia are low in number and mainly at an unattractive price range. This major limitation will need to be overcome in Australia in order to achieve anything near Europe’s transitional ZLEV outcomes.

Government needs to recognise Australia doesn’t have its own passenger vehicle manufacturing capability. We rely on what manufacturers decide to send here. Consequently, we will need to find ways to attract ZLEVs that would ordinarily be destined for other countries.

Car manufacturers ship cars into markets where they will sell. If governments in other countries incentivise ZLEV vehicles or create cheaper running cost regimes, then these markets will be more attractive to car buyers and auto manufacturers. If Australia doesn’t recognise the relationship between incentivised markets and ZLEV uptake, targets will start to look very opaque.

In the countries visited, the state of the national power grid was central to supporting any vehicle transition plan. Countries didn’t have to wait to start a transition until the power grid and EV connection points were in place, rather, they needed a coherent and funded plan to parallel ZLEV vehicle uptake with infrastructure developments. This was raised repeatedly as a key principle of any plan.

With this was a shared view that electricity and hydrogen power charge points should be near each other, and that hydrogen should also be made available to car drivers where they had hydrogen vehicles. It was understood that hydrogen was likely to be used in heavy freight scenarios, but on the basis that the future power sources were not locked in, and the infrastructure costs would be less if hydrogen and electricity were duplicated at hydrogen filling stations, then this should be done.

Using existing industry infrastructures was also consistently raised in discussions, even though most visited countries had overlooked the existing vehicle sales and repair network that could house public charging stations. While it appeared logical for service stations to have EV charging points, many other opportunities were overlooked, where facilities could have been funded by government to provide better charging infrastructure. Vehicle dealerships and vehicle repair shops are great examples.

In the home, there also exists an opportunity for government to look more closely at shared costs for infrastructure that could assist in the broader ZLEV uptake to support grid load balancing. Bi-directional vehicle charging is a soon-to-arrive vehicle capability for which government has time to prepare.

To support this action, however, any regulatory blockages for people wanting to upload and download power (bi-directional) from their car to their home should be overcome quickly and before these vehicles become available in 2024. It was considered that bi-directional power, transferring cars into mobile power plants, would be a game changer in transitioning drivers into ZLEVs given the capacity to charge cheaply where this was offered and then upload power into the home.

From a grid management perspective, this provides government with huge flexibility given it can contract car owners to upload and download power to the grid when needed. This truly reflects a vehicle node to the grid scenario.

Many EU countries found major challenges in ZLEV drivers gaining access to charging stations, even in Sweden. In counties like Norway, the Netherlands, Sweden, and Germany around 40 per cent of drivers have no capacity to charge their vehicle from their home. This is often due to people living in apartments and in body corporates where the costs of facilitating charging points are not fully supported. Many tenants do not want to pay for this or have fears of EV fires in their buildings.

To support a ZLEV rollout, it’s essential sufficient public charging stations are available to people from across the driving community, including those who cannot access a charge point from their home.

A leading industry group in the EU suggested a reliable arrangement of public charging stations for EVs would include at least one charging station for every 10 EVs and charging banks of between six to eight chargers every 50 to 75 kilometres along major highways.

The cost of electricity has become more important to people considering buying an EV. This is largely due to the current energy shortages in Europe and sharp energy price rises. In some cases in Europe, gas and electricity prices were four times what they were last year. Many people fear winter in northern and central Europe. However, and counter to a sometimes metro-centric view of ZLEVs, Sweden had good examples of where consumers purchased ZLEVs in regional areas, where power provision was good and electricity prices were favourable. This is counter to often-held views that people in regional areas won’t buy EVs due to range and charge point anxiety.

In Sweden, the Netherlands, Germany and the UK, there was an underlying concern that power provisions to the grid would not be sufficient to meet the needs of a growing ZLEV fleet. While annual new-car ZLEV uptakes in these countries were between 10 and 20 per cent, the trajectories from government, in terms of the electrification of their car fleets, would put multiple times the pressure on current electricity needs in the community. Many believed it impossible to meet ZLEV targets without significant grid and power expansions.

All visited countries suggested the drive to an electrified transport fleet needed more than one solution, with hydrogen for heavy haulage being an example of multiple solutions for this challenge. E-bicycles, e-scooters and biofuel vehicles are part of a multi-pronged solution.

Incentivisation for consumers was a major factor in ZLEV uptake in all countries visited.

It became clear that the degree of incentivisation for people buying a ZLEV had a direct correlation to the speed at which consumers purchased these vehicles. The length of time a financial incentive was available also played a key role in ZLEV uptake. Longer-term regimes, say five to eight years, would provide ZLEV purchasers with the confidence to time out their existing ICE vehicles and arrange the finances to transition into a new or used ZLEV.

Looking more closely at the Australian situation, where government debt is at its highest since WWII, government should consider dropping all the major vehicle purchasing taxes as a means of accelerating ZLEV uptake.

This includes the removal of GST, stamp duties and luxury car tax on ICE drivers converting to a zero or low-emission vehicle. While these duties and taxes may already be included in budgeting forward estimates, at a state and national level, they are currently uncollected future taxes that have more flexibility to adjust.

For automotive workshops, there is much change ahead. However, it’s likely to be slower than government policymakers would like. It's broadly reported – and no secret to the Australian automotive industry – that EVs have fewer service and maintenance requirements than ICE vehicles.

In regions where ZLEV fleets were large, dealerships reported the need to cycle more vehicles through their service areas. With less service and repair work on an EV, vehicles would often spend less than an hour in the dealership, with vehicle owners timetabled to strict time slots to reduce storage back-ups and the cost of continually moving cars around parking bays.

The speed of ZLEV turnaround, and the constant moving of ZLEVs in and out of workshops, have deeper ramifications for the independent repair market where smaller workshops in built-up areas often already have clashes with local councils regarding parking challenges.

In a ZLEV market, there is less work and less margin in the service and maintenance process. Dealerships and independent repairers are already looking to either bring back outsourced work into their workshops or to value-add where possible. An independent workshop in Sweden, which serviced ZLEVs, reported they had ceased offering free help or advice and that, in a market where a change of technology meant thinner margins, they would need to account for everything. The business owner reported that “(they needed) to become more like dentists and doctors, billing for every minute.”

Many repairers said they needed to service EVs to keep the older ICE work that came from other cars in the same family. This dilemma would compound as a family moved towards a total EV fleet, with less maintenance needed.

The observations of the tour showed body repairers would be less affected by the growth of the ZLEV fleet than other sectors. Vehicle body repairs would continue and the level of technical capability in panel shops would probably increase. Not only to keep abreast of modern repair methods but to become more emerged in vehicle computer scanning, fault diagnosis and camera and sensor calibration.

Batteries dominated every discussion, and, in the majority of cases, automotive business owners would not get involved in the repair of high-voltage components or batteries. Repairers suggested there were opportunities in this technological change and the indications are it would be in the repair and repurposing of vehicle batteries.

In markets where ZLEV uptakes were significant, there was already the emergence of businesses engaging in the changeover, diagnostics, and repair of batteries. Given the space, equipment and safety requirements required to undertake this work, it should be no surprise that specialist enterprises have emerged to capitalise on an area of automotive that didn’t exist a few years ago.

So, what is a realistic time to transition an entire vehicle fleet from fossil fuels to a zero-emission fleet?

Governments have been very optimistic in this area and it’s hard to blame them for setting aspirational targets. Having a new Climate Bill in Australia with reporting requirements can also get policymakers in a lather. Irrespective of targets set by governments around the world, many of the organisations and associations visited by the delegation felt the targets for clean vehicle fleets were not achievable in the timelines set by the government. This doesn’t mean they don’t support the decarbonisation of vehicle fleets. They just believed it would take longer than planned.

Issues of EV costs and the supply of the right vehicles to the right markets were major points that many felt would hamper the meeting of targets. Second to this was a major concern for people who couldn’t afford a new or used EV, but would ultimately be squeezed out of their ICE vehicle by CO2 charges, running and maintenance costs. There was huge empathy and concern for this group, which may form part of the great car divide.

Let’s hope the policymakers have a plan for this as well.

Extract from Zero and low-emission vehicles: Insights from Europe.

Useful links
VACC: Zero and low-emission vehicles – policy and workshop change (part one)