The Advent of Australia’s EV Era
Introduction
Around 130 years after the first electric vehicles (EV) debuts in the US, credited to a US chemist, William Morrison, EV has undergone a tremendous evolution in terms of appearance, technology, and popularity. According to the global car sales data from “Our World in Data”, EV-to-Total-Car-Sales ratio in Australia only attained 12% in 2023. However, countries which also signed the Paris Agreement, like China, United Kingdom, and Germany, achieved 38%, 24%, and 24% respectively. While the discrepancy in EV-to-Total-Car-Sales ratio between Australia and other net-zero oriented countries displayed its sluggishness in the EV domain, it does, in an opposite way, show a tremendous growth potential in EV and its accessories in this country.
Market Outlook
According to the data from Australia Automobile Association, the number of Battery electric vehicle (BEV) and Plug-in Hybrid Electric Vehicle (PHEV) sales across all states in Australia from 2024 Q1 to Q2 were 59,006 which already amounts to 60% of the total Australia EV sales in 2023. Assuming a constant number in EV sales, it is believed that Australia EV sales will finally reach the milestone of 100,000 in 2024 and even beyond 150,000[1] by 2026 given the motivating factors in both supply and demand sides below.
Supply
Sustainability Target
Endorsing the 2030 Agenda for Sustainable Development, the Australia government has been dedicated to reducing the country’s greenhouse gas emissions to 26-28 percent below 2005 levels by 2030. One of the effective measures to achieve this target is improving the efficiency of vehicles which entails the adoption of EV. In Victoria, the Zero Emission Vehicle (ZEV) Roadmap sets a goal for 50% of new car sales to be ZEV by 2030, supported by a $100 million package. This includes consumer subsidies and charging infrastructure to accelerate EV supply and adoption, fostering a zero-emission transport sector.
Influx of EV Manufacturers
In recent years, the monotonous EV market in Australia has faced an influx of foreign EV manufacturing companies from worldwide. Other than the brands that Australians are familiar with, such as Tesla, BMW, and Mercedes-Benz, brands like BYD, MG, Hyundai, Kia, and so on, have brought diversity to the market recently. Moreover, brands which have achieved a great success in China, such as XPeng, Aion, and Zeekr, are ready to embark on their journey here in Australia by the end of next year. The abundance of EV manufacturers in Australia supports the supply side of EV and the foreseeably intense market competition among those manufacturers will eventually benefit consumers with a more competitive EV selling price.
Demand
EV Incentive Schemes
In Australia, there are several state and federal level EV incentive schemes available for consumers in the forms of tax threshold, registration/stamp duty discount, and purchase rebate. Federal EV incentives include a higher luxury car tax (LCT) threshold for fuel efficient cars at $91,387 compared to other vehicles at $80,567. Western Australia provides a ZEV rebate scheme that will provide a $3,500 rebate after purchasing an eligible vehicle. Northern Territory provides consumers with a free registration for new and existing plug-in electric vehicles (PEV) and stamp duty concessions of up to $1,500. These incentive schemes lower the cost for consumers to purchase EV which in turn increases the demand.
Interest Rate Cycle
On 18th September this year, the US Federal Open Market Committee (FOMC) announced to lower the Federal Funds Rate by 50 basis points to 4.75-5.0% in four years. The interest rate cut delivered a strong signal to the market about the end of high-interest-rate era and the prelude to a new monetary easing cycle. Foreseeably, the Reserve Bank of Australia (RBA) is likely to follow the interest rate cut pace and start the first rate cut in Q1 next year. The decreasing trend in interest rate facilitates consumers to take out a car loan which induces a positive effect on Australia car sales volume, in other words, spurring the demand in the EV market.
Conclusion
The sluggish EV market in Australia and the sustainability development agenda endorsed by the government provide sufficient conditions for a considerable growth in the EV industry. From the perspectives of government policy, economics, and market competition, both supply and demand sides for EV are expected to grow. With an on track annual 100,000 EV sales milestone this year, annual EV sales in Australia are expected to reach 150,00 by 2026.
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We are grateful for Prof. Deep Kapur and the team at Monash Centre for Financial Studies (MCFS) for their unwavering support on a student-led initiative and the delivery of our agenda in multiple of ways and acknowledge their contributions to each and all releases. We also remain deeply grateful to the Faculty of Banking and Finance at Monash Business School for continuous support in facilitation of MSMF and our agenda.
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Disclamer
This material is a product of Monash Student Managed Fund (MSMF) and is provided to you solely for general information purposes. I understand that the information in these documents is NOT financial advice. Before making an investment decision to acquire shares, you should consider, preferably with the assistance of a financial or other professional adviser, whether an investment is appropriate in light of your own personal circumstances. If you can, you should obtain a copy of the Information Memorandum of the company that you are seeking to invest in, and consider their risks and disclosures. Subject to the Australian Consumer Law, Corporations Act, the ASIC Act, and any other relevant law, MSMF does not accept any responsibility for any loss to any person incurred as a result of reliance on the information, including any negligent errors or omissions. This information is strictly the personal opinion of an MSMF member and does not represent the views of MSMF. This information constitutes factual information that is objectively ascertainable such that the truth or accuracy of which cannot reasonably be questioned. MSMF does not intend to advertise any stock or financial product whatsoever. Past performance is not a reliable indicator of future performance. Past asset allocation and gearing levels may not be reliable indicators of future asset allocation and gearing levels. Performance data is just an estimation based on public market data and may not be a true reflection of actual fund performance
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[1] The figure is calculated based on the assumptions of same total car sales in 2023 in Aus, same mean growth rate in EV-to-Total-Car-Sales % as the globe, and convergence in EV-to-Total-Car-Sales % with the globe.
[2] This is calculated by harmonic mean.
References
Australia Government Australian Taxation Office. (2024, 5 29). Luxury car tax rate and thresholds. Retrieved from https://www.ato.gov.au/tax-rates-and-codes/luxury-cartax-rate-and-thresholds
Australia Government Department of Foreign Affairs and Trade. (n.d.). 2030 Agenda for Sustainable Development and the Sustainable Development Goals. Retrieved from https://www.dfat.gov.au/aid/topics/development-issues/2030-agenda-sustainabledevelopment
Australian Automobile Association. (2024). The Australian Automobile Association’s (AAA) Electric Vehicle (EV). Retrieved from https://data.aaa.asn.au/ev-index/
Carsales.com. (2024, 5 17). 12 new Chinese auto brands coming to Australia soon. Retrieved from https://www.carsales.com.au/editorial/details/12-new-chinese-autobrands-coming-to-australia-soon-145965/
Government of Western Australia. (2024, 5 6). Government to expand successful EV rebate scheme. Retrieved from https://www.wa.gov.au/government/mediastatements/Cook%20Labor%20Government/Government-to-expand-successful-EVrebate-scheme-- 20240505?utm_campaign=news&utm_medium=miragenews&utm_source=miragenews
J.P.Morgan. (2024, 9 24). Following the Fed’s bold rate cut, what could its next move be? Retrieved from https://www.jpmorgan.com/insights/global-research/economy/fedrate-cuts
Northern Territory Government. (2024). Get registration and stamp duty concessions for electric vehicles. Retrieved from https://nt.gov.au/driving/rego/getting-an-ntregistration/get-electric-vehicle-registration-and-stamp-duty-concessions
Ritchie, H. (2024). Tracking global data on electric vehicles. Retrieved from Our World in Data: https://ourworldindata.org/electric-car-sales
State Government of Victoria. (2024). Zero Emissions Vehicle Roadmap. Retrieved from https://www.energy.vic.gov.au/__data/assets/pdf_file/0036/575676/Zero-EmissionVehicle-ZEV-Roadmap.pdf
Thompson, N. (2024, 8 5). Australia on track to break annual electric vehicle sales milestone. Retrieved from Electric Vehicle Council: https://electricvehiclecouncil.com.au/media-releases/australia-on-track-to-breakannual-electric-vehicle-sales-milestone/
Author
Alden LIU (Ka Kit) - Research Associate
Alden Liu (Ka Kit) is currently a Research Associate in MSMF Institute with a focus area in Electric Vehicles (EV) & Fundamental Investment Analysis, and he is currently pursing a Masters of Financial Mathematics at Monash University.
