World

Thu Apr 2

Fuel prices are driving more Australians to EVs

Written by: Scott Dwyer, Research Director, Energy Futures, University of Technology Sydney

As conflict in the Middle East sends diesel and petrol prices skyrocketing, more and more Australians and New Zealanders are showing interest ^[1] in electric vehicles.

But is this translating to sales? March data shows the answer is yes – EV registrations have shot up ^[2] sharply in Australia ^[3] and New Zealand ^[4].

Manufacturer order books are filling up, EV subscription services are full ^[5] and wait times have blown out ^[6] to months for popular models.

Much of the focus to date has been on new cars. But most people don’t buy new. When Australians buy cars, they tend to buy them secondhand. The ratio of used to new cars is almost two to one ^[7]. EVs are cheaper to run ^[8], but have – until very recently – been more expensive to buy, which acts as a barrier ^[9].

Demand for secondhand EVs is surging ^[10] through auctions and car yards, as cost-conscious households seek out ways to immediately cut costs and reduce exposure to global oil shocks. The Australian government is now expected to introduce ^[11] fuel rationing after Easter.

Fuel price pain is driving the change

The Iran conflict has triggered the second global oil crisis in the past five years. The first was the Russian invasion of Ukraine in 2022, which drove major disruption to oil markets. If the Iran war drags on, this crisis could be far larger. The International Energy Agency expects this crisis to be much bigger ^[12] than the 2022 crisis and the oil shocks of the 1970s.

The Australian government has responded by temporarily halving fuel excise tax ^[13], just as it did in 2022. This will give immediate relief, but will do nothing if supply tightens ^[14] as expected this month.

The oil crisis comes as many people struggle in earnest ^[15] with the cost of living. Fuel is a major expense, especially in car-dependent regional towns and outer suburbs. Many early EV adopters live in outer suburbs ^[16] of major cities, where cars are the main mode of transport.

Since the start of the war, petrol prices have increased by about 80 cents per litre ^[17] and diesel by more than a dollar a litre. For those who need a weekly fill of 50 to 60 litres, this would equate to an extra $40 to $50 for petrol or an extra $50 to $60 for diesel.

Fuel prices are expected ^[18] to make food and many other products and services more expensive. It’s small wonder more people are looking for cheaper alternatives – especially for households where other forms of transport aren’t viable.

Households in outer suburbs and regional towns are heavily exposed to fuel price pain – but often have easy access to charging an EV at home. Ed Harvey/Pexels, CC BY-NC-SA ^[19]^[20]

Secondhand EVs in demand

By world standards, Australia has been slow to take up battery electric vehicles. Sales hit 8% of new car sales late last year ^[21] (14% including plug-in hybrid vehicles).

One reason for this is that EVs have long been more expensive than their combustion engine equivalents. The upfront price difference has dropped rapidly, but is still a deterrent.

That’s why used EVs are now in such demand as a way for households under financial strain to get access. EVs were already much cheaper ^[22] to run than combustion engine cars, even before the oil crisis. The difference is now even starker, especially for those who can charge at home ^[23].

It has taken time for a secondhand market in EVs to develop. The cars for sale now are often coming from expired novated lease agreements, or from government and corporate fleets once they are replaced as part of regular fleet renewal cycles.

Lower income households need support to shift

To date, Australia has offered little targeted support to encourage lower income households to switch to electric vehicles. This means the current trends are both significant and fragile.

Overseas, governments in parts of Europe and the United States have more actively encouraged uptake.

France has pioneered social leasing ^[24] since 2024 to address affordability barriers for EVs targeting low and middle income households. It works by offering eligible households a new EV from A$170 per month with no upfront deposit, made possible through government subsidies of up to A$12,000 to reduce the total cost. At the end of the lease period, the car can be purchased outright or returned to the dealer.

In the US, Washington State’s EV Instant Rebate Program included ^[25] social leasing provisions which helped 4,000 lower income households get an EV. Of these, almost 90% said they would not have been able to purchase the EV without the rebate.

These approaches could work to encourage uptake among households who would benefit most from going electric in both Australia and New Zealand. For many households and small businesses, private vehicles are a lifeline and the only option available. But for many, secondhand or more affordable EVs are still unaffordable.

This week, Australia’s clean energy bank announced ^[26] a $100m program of discounted car loans to reduce the cost of finance for new and used EVs. These types of initiatives are a good start, but more will be needed to expand access to new and used EVs.

New measures could include targeted financial incentives to improve affordability and broaden access (including encouraging carmakers to bring more affordable and smaller EVs to market), a commitment from all levels of government to continue to expand EVs within their fleets, and consistent national policy to avoid boom and bust cycles in what’s still an emerging market. Over time, these measures would boost the supply of secondhand EVs.

While temporary cuts to fuel duty will reduce fuel bills in the short term, they won’t be enough. Coordinated action, tailored incentives and consistent policy will be needed to support households and businesses in going electric while making sure no-one is left behind.