The ACC Minister proposes that vehicle owners exposed to the same risk pay the same levy. Battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) are exposed to the same risk as internal combustion engine vehicles.
The Minister proposes removing the class 2a classification for light electric vehicle, which includes BEVs and PHEVs, from the Motor Vehicle Account regulations.
Under his proposal:
- petrol-powered PHEVs would return to Class 2 (petrol-powered) vehicles, with no change to their levies
- BEVs and diesel-powered PHEVS would move to Class 6 (non-petrol-powered) vehicles, and would no longer have their levies discounted.
This would mean that petrol-powered PHEV owners would pay their ACC levy when they buy petrol and pay their vehicle licence (rego). Owners of BEVs and diesel-powered PHEVs would pay their ACC levy through their vehicle licence.
Because BEV and diesel-powered PHEV owners don’t buy petrol, the levy component of their vehicle licence will increase under this proposal.
Who would be impacted and what it would mean for them
New Zealand has approximately 75,000 BEV owners who, it is anticipated, would experience a $66.96 increase in annual vehicle registration costs under the new class.
The removal of the discount on diesel powered PHEVs and BEVs, would save owners of other vehicles around $15.8 million over the next three levy years.
The change represents a decrease in the licence levy of approximately $1.63 per year for each of New Zealand’s 2.9 million light passenger vehicles.
It is expected that removing the discount for diesel power PHEVs and BEVs to have little or no impact on the uptake of electric vehicles.
Current state — PHEVs and BEVS are classed together as light electric vehicles with a discounted levy
For levying purposes, ACC splits the vehicle fleet into petrol-powered and non-petrol-powered vehicles. NZTA Waka Kotahi identifies each vehicle’s primary fuel type when it is first registered in New Zealand.
Currently, BEVs and PHEVs are classed as light electric vehicles (Class 2a). This classification provides a reduction of $58.98 when compared to the same petrol-driven vehicles. BEVs and diesel-powered PHEVs being part of Class 2a reduced their levies, because the ACC levy for petrol vehicles is collected in part through petrol sales, and those vehicles don’t use petrol.
The previous Government directed ACC to consider how PHEVs and BEVs could be accommodated in the levy system, to support that Government’s Electric Vehicle Programme.
The discounted levy was seen as a small incentive by that Government to increase the uptake of lower-emissions vehicles. The Clean Car Discount scheme and Clean Car Standard, both introduced in 2021, have achieved quicker uptake of low and zero-emission vehicles.
The Minister wants the levy system to be equal for people exposed to equal risk
The levy system is based on the principle that levy payers exposed to the same level of risk should pay the same levy.
This also means limiting cross-subsidisation and avoiding regressive levying. The current system uses incentives within ACC’s levy system which cost other levy payers.
ACC has no data to determine whether low-emission vehicles are safer or riskier than petrol vehicles. When ACC introduced the lower levy rates for Class 2a vehicles, there were around 10,900 BEVs in the class. The value of the discount by other vehicle types was $0.62 million. Over the last 3 full levy years, BEV owners have paid $9.8 million less in levies.
Additionally, the vast majority of BEVs entering the fleet are new. This means that the current incentive settings shift costs from new vehicle owners to owners of other, often older and cheaper vehicles. This is a regressive levying approach.
EVs have exceeded the 2% target
Successive Governments have exempted light electric vehicles (EVs) from paying road user charges since 2009. In 2016, Cabinet decided to end this exemption once EVs made up 2% of New Zealand’s light vehicle fleet. The Government at that time expected this to be achieved by 31 March 2024.
Data from the Ministry of Transport showed that EVs reached 2.03% of the light vehicle fleet in September 2023.
The current Government removed the Clean Car Discount from 31 December 2023 and the road user charges exemption from 1 April 2024, and we no longer see a need for ACC to provide an additional incentive.