Has the Clean Car Discount been a success or a failure?

Friday, 14 April 2023

The Clean Car Discount scheme was unveiled by Transport Minister Michael Wood and Climate Change Minister James Shaw on June 13. (First published June 2021)

This article originally appeared on Motoringnz.com

A review of Clean Car Discount, a year on from its full implementation, is underway, with ‘fewer discounts, more penalties’ likely to be on the government’s agenda.

Expectation is that it will bring sweeping changes has made the car industry jittery, and might also cause some on the Government’s emissions’ improvement crusade to feel jilted.

Rethinking discounts and fees - lowering one, raising the other – seems a certainty, given the accelerating rate of rebate payout, peaking with a fat sum for eligible electric cars.

An electric vehicle charger is plugged into a vehicle at an Energy Absolute Anywhere charging station in Bangkok, Thailand, on June 5, 2019. MUST CREDIT: Bloomberg photo by Brent Lewin.

A system that removes up to $8625 from the price of a new clean vehicle selling for less than $80,000 (and $3450 for used import) as a discount paid for by levies of up to $5175 on the price of a polluting car has severely eroded the seeding fund of $304 million.

* Kiwis bought more cars in 2022 than ever before

* The Clean Car Programme - what you need to know

Despite the so-called ‘ute tax’, Ford’s Ranger is still selling in big numbers.

* What exactly does the Clean Car Discount mean for car buyers?

That pot presently holds no more than $98 million, and registration data shows the income from Clean Car Discount penalties running well below the rate of payout - $161m in fees against $367m in rebates. That’s a shortfall of $206m.

Tesla’s popularity is good for the local EV population but it’s still small in the face of the diesel ute juggernaut.

There’s also a flow rate difference; fees are known at the end of the month, whereas rebates take time to process and pay.

As sales of electrics, mild hybrid, and, to lesser extent plug-in hybrids, keep growing, that take-up should logically only increase. The industry has been dubious about how long a scheme which transport minister Michael Wood sold as being ‘fiscally neutral’, it can remain effective. On current demand, how long before the fund is entirely depleted?

The review specifically addresses this and another concern: How to counter the Opposition’s avowed intent to repeal ‘ute tax’.

Despite Toyota actively stemming supply of the Hilux, it remains hugely popular.

Industry-aimed publication, AutoTalk, believes big change is coming. From considering industry paperwork, it thinks incoming tweaks will include a shift in the ‘zero-rating band’, the mid-zone for vehicles whose emissions are too high to win a rebate yet below penalty point. At present that zone is between 147 grams per kilometre to 192g/km. There’s talk, apparently, of reducing the high point to 150g/km. That would mean a lot of additional cars will be penalised at purchase.

It also believes the price limit for subsidies will be lowered and expects there will be some form of exemption for utes or light commercials.

Clean Car’s aim to achieve a world-leading CO2 reduction from passenger and light commercial fleet, within five years, still appears unchanged.

The popular Suzuki Vitara now has a hybrid variant, complementing the manufacturer's other hybrid models.

The discount scheme’s supporters cite success, from patent rise in interest in electrified and electric vehicles – there are nearly 76,000 EVs on the road now, mostly new – saving of $100 million a year in fuel bills and better air quality. Non-profit electric vehicle organisation Drive Electric calculates CCD has removed around two million tonnes of CO2 and its chairman, Mark Gilbert, is now calling on all political parties to do more to accelerate transition to clean transport.

That doesn’t mean the country is at a tipping point towards favouring electric. Though EV and hybrids have grown to account for more than a third of new registrations, the population presents as a modest imprint on the overall fleet of close to five million. Electric BYDs, Hyundais, Kias and Teslas seem to be everywhere, but the journey has barely begun.

An abiding issue, however, is that a type of vehicle that earns colloquial recognition is still selling well. Look at the monthly sales stats and, as much as there’s occasional top trumps success by those global power brokers BYD and Tesla, you’re more often to see one diesel utility lead the pack. Ford’s Ranger is a juggernaut.

Ranger wrapped up 2022 as New Zealand’s best-selling new vehicle, its seventh straight year on top. Buyers of those, and the second choice Toyota Hilux, seem to have decided ‘ute tax’ penalty pain, of no less than $2000 and up to the maximum $5175, can be lived with.

Overseas imports like the hybrid Toyota Aqua are important for used vehicle sellers.

Will Government raise the bar to a point where it cannot? That’d likely take the Ranger Raptor – whose super-sporty twin turbo petrol V6 performance is offset by it being the category Koh-i-Noor for price and the top CO2 contributor among one-tonners - above $100k. Would that be a tipping point?

What also hasn’t been fully factored in yet is an ancillary income source to CCD. Enacted on January 1, the Clean Car Standard hits distributors of high emissions in the pocket – and rewards those with low or no CO2 with credits that can be traded between distributors.

From June 1 trading of credits and payments of debits for ‘pay as you go accounts’ kicks in. That side should have also started at the beginning of the year, but sorting the system to handle payments for the debits has been troublesome. Fleet average accounts will trade from January 1 next year.

What has also hurt the Clean Car Discount is consumer and distributor enthusiasm to involve with it. Many new EVs have cannily priced to be rebate-earners. Uptake of those has gone bananas. But also enjoying the moment are mild hybrids, which don’t plug in but still deliver CO2 reduction, are more price-accessible and find favour as a more accommodating technology.

Distributors won’t be happy if the rebates system is throttled back so that only fully electric vehicles and plug-in hybrids continue to achieve support and traditional hybrids and low-emission combustion vehicles that currently qualify are expelled.

Despite the Ranger making up three-quarters of Ford’s sales last year, it is working hard to bring in more electric models.

The biggest opponent of this is Toyota New Zealand. The first local distributor to commit to Clean Car’s principles relies very heavily on hybrids and achieves excellent sales; hence why it has refined its passenger car selection to have the technology that, of course, in introduced to the world in the late 1990s.

Suzuki New Zealand, which a year ago threatened – without acting out it – to pull from the new car market over Clean Car, is also entwined in argument.

The Ford Ranger Wildtrak X has been revealed to bridge the gap between the standard Wildtrak and the mighty Raptor.

The specialist in small economical cars has benefitted from the discount yet has felt pain from the Standard, as result of how CO2 calculations are made.

On March 16, at an introduction for a version of the popular Vitara crossover that gives it hybrid capability for the first time, the Whanganui-based business’s chief executive Tom Peck erroneously predicted the exclusion of mild hybrids and low emissions internal combustion cars would be introduced on April 1.

Nonetheless, the industry remains no less edgy now than it was last week. It’s not just new vehicle sellers, but also those who sell vehicles sourced used from overseas, as they also have to comply.

In hindsight, Government thinking it could slice utes out of the scene so easily was daft. The addiction is way too strong; as soon as ‘ute tax’ was in the wind, fans staked allegiance all the more. It hit crescendo in March 2022, the last month before the legislation hit. Mitsubishi Triton, with 2266 registrations, Ranger on 1933 and Hilux with 1580 units. We’d never seen anything like it before, or since.

Demand in April and May last year then fell off. A victory for CCD? No. Simply, stockpiles were exhausted. Also, this period coincided with Ranger’s model cycle change.

The pre-April action was brilliant for Ranger run-out. Normally, it’s hard to shift old stock when customers know new, improved fare is coming. In this instance, any ute escaping penalty was a ute worth having.

Every outgoing Ranger went. For around six weeks, dealers had nothing to sell. When the new line landed in June, it was Christmas; 3000 forward orders. And it hasn’t slowed since. Ranger sauntered into being top dog new vehicle for the year. This year it’s kept momentum going. Last month was huge, with 1333 registered. No other vehicle came close.

Hilux also continues to perform well, even though availability is being purposely throttled back by Toyota New Zealand, and with Triton now heading toward model change, who’s to say Mitsubishi isn’t about to kick in its own full runout campaign? Already it’s among those types subject to a distributor’s ‘buy the ute, we’ll cover the tax’ campaigns.

Don’t think Ford NZ doesn’t understand its societal duty. A plug-in electric Transit van with a fully battery-driven type coming and announcement now of a fully electric small van remind it’s setting up to be a big player for commercial electric choice.

An update all its passenger models – save the Mustang - to mild or plug-in hybrid, with Puma set to go full electric next year, and the imminent sale of the controversially battery-wed Mustang Mach-e show the passenger space isn’t being ignored. There’s the Escape, a crucial volume passenger model out of Europe, and/or its Capri coupe spin-off – both on Volkswagen’s MEB underpinning – might not be as out of reach as was first stated, either.

At same token, they’re a business. Critics of Ranger might call it a toy, but plenty out there use it as a tool. Either way, the degree of consumer desire means it is not a vehicle that can be simply set aside. Calling it vital to Blue Oval business is understatement. It’s been the rock for years and last year claimed an unprecedented 75 percent of total Ford NZ volume. By comparison, Hilux secured just under 35 percent of Toyota sales share, which TNZ openly stated was too much.

The latest Ranger has been irresistible for good reason; it’s the best in its class. Yet utes aren’t icons of efficiency. Within the Ranger family, just the carryover 2.0-litre biturbo is cleaner than before, but only marginally, and its outputs remain well above the penalty cut-off. The new-to-type V6s all the moreso.

Ford is clearly making the most of whatever time it senses it has left for Ranger to rampage without extra restriction. Since last year’s launch, the line-up has grown.

The latest addition is one that might suggest as a pitch for redemption. By running a version of the biturbo designed to meet a European emissions standard higher than NZ demands, the Wildtrack X delivers with the lowest (though still high enough for penalty) CO2 count yet for a Ranger. A sign of better things to come? Perhaps. Or perhaps not. The eco-conscious Ranger buyer’s choice is a short-term opportunity, with just 300 coming.

Utes will one day clean up through adopting electric involved drivetrains; but for the category favourites, that day might not be near. All sorts of potentials are suggested.

Last week Toyota in the United States indicated its Tacoma, a Hilux sister ship, will adopt a hybrid drivetrain. Having previously suggested new-generation Triton (from which a new Nissan Navara will be spawned) will go plug-in or mild hybrid, Mitsubishi is now suggesting it might just bypass those technologies and go full electric. What’s also apparent, though, is that this option won’t figure when the vehicle initially releases, late this year or early next. Ford has said Ranger will accommodate a battery, but seems more keen on PHEV. Yet Volkswagen reckons it can transform new Amarok, a re-engineered Ranger, into a wholly electric model. In time.

At present, the only one to go there is from China; an LDV which has limited range and performance, sacrifices load capability and is purely rear-drive, with its motor slung precariously close to terrain. Low take-up suggests ute faithful are awaiting better.