- The average Australian car owner pays $717 per year towards the fuel excise by pumping petrol or diesel
- With 500,000 EVs on the road, $717 per car adds up to around $360 million in lost excise revenue
- Introducing a 3c/km road-user charge would recoup $350 to $400 per EV each year
Although the rapid rise in popularity of EVs in Australia has gone a long way to helping the country reach its emissions targets, Savvy modelling has shown that the Australian Government could be missing out on close to $500 million every year as a result.
The reason for that is simple: every time an Australian driver fills up their car with petrol or diesel, 53.7 cents of every litre goes straight to the Australian Government as part of the national fuel excise.
It's one of the largest and steadiest sources of Commonwealth revenue and is expected to bring in $28.3 billion this financial year.
However, with the country’s EV fleet reaching 500,000 and counting, the decreasing market share of internal combustion engine (ICE) vehicles is causing the Government financial headaches.
Aussies making green car switch forcing Government to count the cost
The average Australian passenger vehicle uses around 10.6L of fuel per 100km and travels roughly 12,600km a year.
That works out to about 1,336L of fuel annually, and at 53.7 cents per litre, roughly $717 in fuel excise per car, per year.
When you consider the number of cars on the road that require no petrol or diesel whatsoever sits at approximately 500,000, that $717 per car turns into $360 million in lost government revenue.
For context, that's over 1.0% of the entire fuel excise intake, while EVs make up around 2.5% of the national vehicle fleet.
However, as EV adoption accelerates and the number of ICE vehicles on the road falls, the burning hole in the Government’s pocket will only grow wider.
The surge in EV purchases isn’t without reason; not only are electric cars becoming more accessible and affordable, but fuel price hikes are putting plenty of Aussies in a world of hurt.
A Savvy survey from earlier this year found that 75.8% of respondents were experiencing some form of financial stress as a direct result of petrol and diesel prices going up.
It also found that 37.5% of prospective car buyers were considering switching to an EV, with a further 40.0% looking at a more fuel-efficient vehicle generally.
The $360 million question: how to recoup fuel excise losses from EVs
The big issue for the Government to contend with here is that every EV purchased is a car that's using the same roads, causing the same wear and congestion and paying nothing towards maintaining and expanding them.
Even Treasurer Jim Chalmers himself has flagged that the current system of EVs not needing to pay their way won’t last forever.
“As more and more people get off petrol cars and into EVs, we’ve got to make sure that the tax arrangements support investment in roads,” he said.
“The status quo won’t work in 10 or 20 years.”
One of the proposed solutions is the introduction of a road-user charge, which would likely be paid on a per-kilometre basis, to combat the lost excise revenue.
While there’s no word on what the specific charge may be, modelling based on 3 cents per kilometre and average annual driving and fuel economy suggests EV owners could end up paying around $350 to $400 a year.
That’s still a fair way short of the more than $700 the average ICE driver hands over annually, but it would mark the end of the free ride EV owners have enjoyed on Australia's roads.
There’s no suggestion that the introduction of such a charge is imminent, but the powers that be will ultimately have to decide whether eating into one of the main enticements of electric vehicles will have a significantly adverse effect on sales and climate targets.
Either way, it’s clear that the Government has a $360 million-sized hole it needs to plug that's only getting bigger each year.
