NZ will be 'dumping ground' for high-emission cars, EV advocate warns

The transport minister is dismissing fears New Zealand will become a dumping ground for high-emission vehicles as the government slashes the Clean Car Standard.

The standard - an effective penalty set up to incentivise the uptake of low- or zero-emission vehicles - will drop by nearly 80 percent at the end of this week.

Importers will be charged $15 per gram of CO₂ for new imports instead of $67.50, and $7.50 per gram of CO₂ for used imports instead of $33.75.

Transport Minister Chris Bishop has made a strong case for urgent change to save consumers hundreds, if not thousands, of dollars when buying a new car.

"If we don't act there will be $264 million in net charges that could have and likely will be passed on to New Zealanders through higher vehicle prices," he said.

It's come as a relief to sector groups like the Imported Motor Vehicle Industry Association, whose chair Greig Epps said importers were doing it tough.

"This is really good for for our business. We had people closing up shop this year. We've lost several members this year. Businesses have just decided that it's too hard to keep going and next year the penalties would have increased, the targets tightened, so that was just not looking good for the industry."

Drive Electric's board chair Kirsten Corson described the change as "really disappointing" and "embarrassing".

"If you look at us compared to Australia, in Australia you're paying $100 as a penalty and now we've just slashed that to $15 in New Zealand.

"So we are going to become a dumping ground for high-emission vehicles."

Speaking to Morning Report on Tuesday, Bishop said a "perfect storm" had arisen, in which both demand for electric vehicles (EVs) and supply had dried up.

"The bottom's fallen out of the EV market - there just simply hasn't been the demand for there. And they also haven't been able to get the supply…

"It's like a double whammy. The supply constraints coming out of Japan and other places, for example, and very high prices because of those supply constraints and overseas markets... the demand isn't there for New Zealanders as well."

Asked if the drop in demand from New Zealand drivers was due to the coalition government's removal of the Clean Car Discount, Bishop said that would only have made a difference "on the margins".

"The major thing is just the supply constraints coming out of the rest of the world."

Gareth Kiernan, chief forecaster at Infometrics, said in September last year the Clean Car Discount had a substantial positive effect on EV sales; while Eric Crampton, chief economist at NZ Initiative, said the slump in 2024 could partially be attributed to people who would have bought in 2024 buying in 2023 instead, bringing forward purchases to take advantage of the soon-to-be-scrapped discount.

Bishop said no climate impact assessment was done on the call to slash the Clean Car Standards because it would be "so negligible that it didn't require one".

"There is an impact, but it's tiny in the grand scheme of things."

Corson questioned this.

"I'm not sure which data he's looking at but it's far from negligible when you think our transport emissions [are] our best hope of hitting our Paris Agreement targets," Corson said.

"We keep our vehicles on our road for two decades. The average car is 15 years old in New Zealand so the decisions they're making today is going to impact our transport emissions for the next three decades."

Simon Lucas of Simon Lucas Mitsubishi on Auckland's North Shore said the change was "definitely necessary".

"I think the distributors have been absorbing these taxes because they haven't had the offset from the sale of the electric vehicles and plug-in hybrid vehicles," he told Morning Report.

"And in some cases, distributors have been absorbing tens of millions of dollars' worth of taxes, and it's not been a situation that's tenable for the long term, and so it would be inevitable that quite massive price rises would flow through to the consumer if they hadn't made this change."

He acknowledged Bishop's placing of the blame on supply constraints, but said the removal of the Clean Car Discount saw sales collapse "by around about 80 to 90 percent", which made it impossible for retailers to offset taxes generated by sales of combustion engine vehicles.

"In this prolonged recession… people are very conscious of the value they get from the money they're spending on vehicles. And the decision that they've made is simply not to pay the premium on electric vehicles.

"So if we let things run, then people will just simply hang on to their existing vehicle for longer because they can't afford to buy the electric vehicles."

He hoped to see a proper "fiscally neutral" scheme to encourage uptake of low- and zero-emission vehicles.

"Consumers thought it was such a good idea to be able to get the subsidy back from the government that they piled in and bought EVs and plug-in hybrids. The issue was that it didn't end up being fiscally neutral because they steered away from the combustion engine vehicles and the scheme ended up costing the taxpayer $330 million.

"So I can understand the motivation for stopping the subsidy. It just means that the market then turned around and people just stopped buying EVs."

'Ironic'

Labour leader Chris Hipkins said the coalition was responding to a problem of its own making, having scrapped the Clean Car Discount.

"It was ironic to see Chris Bishop and the prime minister complaining that there aren't enough electric vehicles and hybrid vehicles on the used car market.

"That's because they collapsed the importation of electric vehicles when they cancelled the Clean Car Discount.

"They made it much more expensive for New Zealanders to buy electric vehicles and to buy low emissions hybrid vehicles and now they're complaining there aren't enough used versions of those on the market."

The government is reviewing the Clean Car Standard with a plan to report recommendations back to Cabinet in June next year.

"Every other country has a variety of different mechanisms," Bishop said. "We bought ourselves into line with Australia, but other countries have lesser standards than we do … What we're gonna look at over the next couple of next few months is exactly what sort of standards should New Zealand have."

The ACT party was already advocating - as it has for some time - for the entire scheme to be scrapped.

The slashed standard will be passed into law by the end of the week.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.