8th August, 2022 ยท CEO Message

CEO Message No. 78

2 minutes to read

In July, the AADA joined forces with a number of Australia’s peak National, State and Territory automotive associations to agree on a set of principles which should guide the country’s transition to electrification. Such is the importance of this issue that it brought together the majority of the industry – the automotive Dealers, manufacturers, independent repairers and others.

Governments around the world are intent on reducing emissions and the automotive industry is increasingly being asked to do its bit. Nothing emphasises this more than the actions by governments such as the UK to ban the sale of internal combustion engine (ICE) (including hybrid vehicles) vehicles by 2030. The EU and some states in the US have made similar commitments around 2035.

The ACT Government joined the club of ICE vehicle-banning jurisdictions in mid-July when they announced a plan to phase out the sale of ICE in 2035. The announcement was troubling on several levels. For one, there was no consultation with manufacturers, retailers, or consumers. Furthermore, it is unclear how this policy would be enforced, given the ACT is essentially an enclave surrounded by NSW, leaving endless opportunities for ACT residents to evade this ban.

The ACT is responsible for only 16,000 new vehicle sales per year and it is comical to suggest that any global manufacturer would take notice of this announcement and adjust its production plans.

Some will say that the ACT is merely following the example of others which have put similar bans in place, but it is incredibly important to understand that those markets engaged in a sequence of policies ahead of implementing a ban. Typically, these jurisdictions have combined generous financial incentives for consumers (far more generous than those being offered by state governments in Australia) with light vehicle CO2 standards for manufacturers. The ACT would be the only global jurisdiction which has implemented a ban before implementing these crucial policy levers.

Aside from the lack of policy process and sequencing, one must ask the question is this time-frame achievable. The answer in my opinion is we don’t know. We may well be 100% electric in 12 years-time, but equally there are many factors which may prevent full electrification from occurring. There are so many variables for Australia to consider in our context as a small right-hand drive market which sits at the far end of a long and complex supply chain. One need only look at the current semiconductor crisis in the automotive industry as evidence of the vulnerabilities that exist in the supply chain.

Zero-emissions vehicles will emerge. This is not in question. But when they will be affordable and available across all vehicle segments is in question and frankly something which is not known. In this uncertain environment, crude ICE vehicle bans are ill-advised.

What is advised is that governments – federal, state and territory – should work closely with the people that make, sell, and repair vehicles for Australians. We will be working hard with our fellow industry bodies to take a unified and reasonable approach to the emergence of zero-emissions vehicles.