Buying Electric Vehicles in Australia

According to Tucker (2016), the majority of electric cars sold in Australia are purchased by commercial buyers. In 2015, only 2000 EVs were sold, compared to the 1.1 million new petrol and diesel powered cars sold during the same period (Tucker, 2016). This occurrence can be best explained by the concept of price elasticity of demand. The demand for electric cars follows the law of demand which stipulates that the higher the price of the product the fewer consumers are willing to purchase the product. Thus, given that the prices for EVs are much higher than the prices of traditional motor vehicles, consumers are more reluctant to shift to the new product. Typically, the price elasticity of demand is affected by the existence of substitutes and the proportion of consumer’s income that is spent on the product. Characteristically, EVs have a high elasticity of demand (Fan &Hyndman, 2010). Mainly, this is because the commodity is considered as a luxury good whose purchase can be postponed to a later date. Besides, there are various alternative and cheaper substitutes that the consumer can buy instead of the highly priced EVs. The high demand elasticity for the EVs has resulted in minimal sales to individual customers who prefer cheaper petrol powered cars. In contrast, commercial buyers opt to buy the products and resale them later to prospective buyers at a greater profit. The existing luxury car tax has a significant influence on the EV market. Ordinarily, high taxes are a great disincentive to individuals seeking to purchase any form of goods. Typically, taxes increase the cost of buying a product by increasing the price payable for the product. Thus, the luxury car tax imposed on EV cars imposes enormous costs to the purchaser. As such, the tax leads to a higher upfront purchase price, thereby discouraging potential buyers from purchasing the product (Duff, 2015). It is noteworthy that while other countries offer stamp duty reductions for EV purchases, there are no such provisions in Australia. In addition, the Australian government provides no federal tax incentives for consumers to purchase EV cars (Tucker, 2016). Consequently, this has significantly suppressed the demand for electric vehicles in the country as most individuals find them too expensive compared to the alternative petrol cars. Reports indicate that dealers do not want to sell electric vehicles to the Australian population (Tucker, 2016). By and large, this situation is attributed to the cost structure and potential revenue loss resulting from the acceptance of EVs into the Australian economy. Specifically, EVs have generally low servicing requirements that are less costly than the traditional diesel or petrol powered cars (Hills, 2014). Ordinarily, most mechanical failures and maintenance costs arise from the combustion engine of the gasoline powered cars. Interestingly, these mechanical failures cost the consumers a lot of money which act as the primary source of revenue and profits for most dealers (Howard 2013). But, the electric vehicle technology is designed with few moving parts, and their servicing costs are minimal (Tucker, 2016). In turn, this creates a financial conflict of interest and acts as a disincentive to dealers, who opt not to sell EVs in the Australian market. It is rational to think that the EV market will expand and prosper in the future given the changes in the resource market. At the moment, the primary substitutes to electric cars are the traditional locomotives which fully rely on petrol or diesel power. Given the trend characterised by continuously rising oil prices caused by cyclical fluctuations in the supply of the commodity, maintaining gasoline-powered vehicles may become quite expensive in the future. Subsequently, the high oil prices will force consumers to seek alternative products that do not require petrol or diesel. In turn, this will lead to an upsurge in demand for EVs in the country. Additionally, government policies with regard to the environment will lead to an increase in demand for EVs. Particularly, strict anti-pollution laws and anti-emission regulations will force manufacturers to reduce their production of traditional vehicles and move towards the production of environmentally sustainable cars. What is more, adopting zero emission vehicle ownership incentives for car owners will create an inducement for individuals to purchase EVs. In turn, this will intensify the demand for electric cars. Most importantly, the change in tastes and preferences of consumers for environmentally friendly vehicles will lead to the prosperity of the EV market (Tucker, 2016). Consumers’ habits and mentality are changing as they can discern the numerous advantages that come with the ownership of EVs. As such, consumer awareness as to the effectiveness and eco-friendliness of this technology has increased significantly. Consequently, this is bound to increase the demand for electric vehicles. It is worth noting that accelerating the pace and the growth of the EV market requires a coordinated and dedicated action by the government, manufacturers, dealers and consumers (Glerum et. al.). First, the Australian government should enact supportive policies that will guarantee that EV purchasers can get the full economic value of their choice to shift from the traditional model cars to electric cars. Additionally, the government should provide substantial tax incentives and deductions for EV ownership and purchases. Fundamentally, this move will lead to a significant reduction in the overall price of the product. Â  In turn, this will motivate and entice reluctant individuals to purchase electric vehicles, thereby expanding the market. Likewise, the government should offer buyers considerable zero emission vehicle ownership incentives to encourage individuals to shift the to the eco-friendly electric vehicle technology (Harvey, 2013). Notably, the incentive has been adopted in countries like the US and Europe and has worked magnificently to improve and expand the EV market in these economies. The government in collaboration with EV manufacturers could also set up enabling infrastructure to ensure that EV owners have adequate access to ultra-fast charging stations. By so doing, they will guarantee that EV owners will have convenience without the fear of running out of charge. Duff, C. (2014). Why Australians aren't buying electric cars - yet. Cars Guide. Retrieved 3 January 2017, from https://www.carsguide.com.au/car-news/why-australians-arent-buying-electric-cars-yet-30869 Fan, S. & Hyndman, R. (2011). The price elasticity of electricity demand in South Australia (1st ed., pp. 1-17). Clayton, Victoria: Business and Economic Forecasting Unit, Monash University. Retrieved from https://robjhyndman.com/papers/Elasticity2010.pdf Glerum, A., Stankovikl, L., Themans, M. & Bierlaire, M. (2013). Forecasting the demand for electric vehicles: accounting for attitudes and perceptions (1st ed., pp. 12-24). Ecole Polythenique Feredale de https://transp-or.epfl.ch/documents/technicalReports/GleStaTheBie_2012.pdf Harvey, D. (2013). Exploring the adoption of EVs in the US, Europe and China; charging scenarios and infrastructure. Green Car Congress. Retrieved 3 January 2017, from https://www.greencarcongress.com/2013/08/icct-20130806.html Hills, G. (2014). Electric car maker Tesla charges into the Australian market with Model S. ABC. Retrieved 3 January 2017, from https://www.abc.net.au/news/2014-12-03/electric-car-maker-tesla-charges-into-the-australian-market/5938528 Howard, B. (2013). EVs are better and cheaper, so why aren’t they selling? (Actually, they are). Extreme Tech. Retrieved 3 January 2017, from https://www.extremetech.com/extreme/165094-evs-are-better-and-cheaper-so-why-arent-they-selling-actually-they-are Tucker, H. (2016). Why Australian dealers don't want to sell electric cars. Business Insider Australia. Retrieved 3 January 2017, from https://www.businessinsider.com.au/why-australian-dealers-dont-want-to-sell-electric-cars-2016-1