This is an HTML version of an attachment to the Official Information request 'Procurement advice'.

Report on possible government measures to encourage 
the uptake of electric vehicles 
Purpose of report ................................................................................................................................ 2 
Useful terms ........................................................................................................................................ 2 
Transport greenhouse gas emissions in New Zealand ....................................................................... 3 
Percentage fuel used on the roads in New Zealand (2013)................................................................ 3 
The New Zealand vehicle fleet: challenges to growing the market for electric vehicles ..................... 4 
Electric vehicles in New Zealand – policies and uptake ..................................................................... 5 
Current projections for electric vehicle uptake .................................................................................... 6 
What are the opportunities and barriers for electric vehicles? ............................................................ 7 
Criteria used to assess potential measures ........................................................................................ 9 
Measures that we recommend be investigated further for inclusion in a package ........................... 10 
Measure 1: Energy Efficiency and Conservation Authority (EECA) information and promotion 
campaign ....................................................................................................................................... 10 
Measure 2: Government support for charging infrastructure ......................................................... 12 
Measure 3: Government fleet procurement of electric vehicles .................................................... 14 
Measures that could be investigated further ..................................................................................... 17 
Measure 4: An electric vehicle programme to co-fund initiatives with other parties ...................... 17 
Measure 5: Electric vehicles in bus and transit lanes.................................................................... 19 
Measure 6: Road User Charges (RUC) exemptions and discounts for electric vehicles .............. 22 
Measure 7: Fringe benefit tax on electric and hybrid vehicles ...................................................... 26 
Measure 8: Tax depreciation rates for electric vehicles ................................................................ 28 
Measures to be progressed outside of the package ......................................................................... 29 
Measure 9: Amending ACC levies for plug-in hybrid electric vehicles (PHEVs) ........................... 29 
Measure 10: A Road User Charges (RUC) rate for plug-in hybrid electric vehicles (PHEVs) ....... 31 
Measure 11: Removing battery import duties................................................................................ 32 
Measure 12: A feebate scheme to encourage purchase of low emission vehicles ....................... 33 
Measure 13: Recognition of alternative low emission vehicle designs .......................................... 34 
Measures that were not considered worth progressing .................................................................... 35 
Measure 14: Lower registration and annual vehicle licensing fees for electric vehicles ............... 35 
Measure 15: GST exemption for second hand electric vehicles ................................................... 35 
Page 1 of 35 

Purpose of report 
This report outlines the potential role of electric vehicles in helping New Zealand reduce its 
greenhouse gas (GHG) emissions from transport. 
It provides you with advice on a range of measures that could form a package to encourage 
the uptake of electric vehicles in New Zealand. 
Our advice is divided into four categories of potential measures that: 
we recommend be investigated further for possible inclusion in a package 
could be investigated further for possible inclusion in a package 
should be progressed outside of the package 
were not considered worth progressing. 
Useful terms 
Pure electric vehicle – a vehicle powered solely by electric batteries charged from an 
external source.  
Plug-in hybrid vehicle (PHEV) – a vehicle that operates on a combination of batteries that 
are charged externally, along with petrol or diesel motors. 
Electric vehicle – either a pure electric vehicle or a PHEV. 
Hybrid vehicle – a vehicle that has an internal battery but cannot be directly plugged in, and 
must have petrol or diesel to run. 
Light vehicle – a vehicle with a maximum gross mass of 3.5 tonnes or less. 
Page 2 of 35 

Transport greenhouse gas emissions in New Zealand 
In 2012, the transport sector accounted for 18 percent of New Zealand’s emissions. Of this, 
89 percent was from road transport and the remainder from domestic aviation, marine and 
Light passenger vehicles emit the majority of road transport GHG emissions. While making 
up only 4 percent of the vehicle fleet, heavy vehicles use almost 21 percent of the total fuel 
used in New Zealand. 
Percentage fuel used on the roads in New Zealand (2013) 
Page 3 of 35 

Turnover of the fleet 
The speed at which the make-up of the light vehicle fleet can be changed is driven by the 
fleet turnover. This is difficult to predict accurately, but on average over the last decade 7.1 
percent of light vehicles enter the fleet each year. New Zealand has an aging fleet by 
Organisation for Economic Co-operation and Development (OECD) standards. In New 
Zealand, the average lifespan of a car is 20 years, and about 5.5 percent of the light fleet is 
scrapped annually.  
Electric vehicles in New Zealand – policies and uptake 
In New Zealand, measures have already been implemented to promote the uptake of low 
emission vehicles generally, which have an impact on the uptake of electric vehicles. These 
23.1.  the New Zealand Emissions Trading Scheme, which establishes a price on emissions 
that flows through to the cost of petrol (the current price signal is weak)  
23.2.  the fuel economy labelling scheme  
23.3.  electric vehicles being exempt from road user charges (RUC) until 2020.  
Recent data indicates that the average emissions performance of light vehicles entering the 
fleet is improving. In 2013 it was 183 grams of carbon dioxide (CO2) per kilometre, down 
from 220 grams per kilometre in 2005.  
However, these initiatives have had limited impact on uptake of low emission vehicles to 
date. While the numbers of electric and hybrid vehicles are increasing, they currently make 
up 0.32 percent of the total vehicle fleet (electric vehicles only make up 0.02 percent of our 
total fleet). 
Page 5 of 35 

Current projections for electric vehicle uptake 
There are serious challenges in providing accurate projections for electric vehicle uptake in 
New Zealand given the high level of uncertainty around a number of factors that will 
influence uptake. Uncertainties include: 
26.1.  the rate that the prices of electric vehicles will fall  
26.2.  the extent to which battery prices will fall 
26.3.  trends in the cost of other energy sources 
26.4.  trends in the price imposed on carbon emissions  
26.5.  the future of the RUC exemption 
26.6.  the availability of used electric vehicles into the New Zealand market (half of light 
vehicle registrations in New Zealand are used vehicles). 
The Ministry of Transport ran one baseline projection of electric vehicle uptake (below). This 
forecasts that electric vehicles will account for 1 percent of the vehicle fleet by 2035 and 2 
percent by 2040. This baseline scenario is based on electric vehicle uptake trends to date. It 
assumes no significant changes in policy, the price of electric vehicles, or any relevant 
external shocks.   
We have not been able to analyse how the measures identified in this report could affect the 
Ministry of Transport’s baseline projection. We have instead provided a qualitative analysis 
of the impact we expect each measure could have on addressing market failures and 
regulatory barriers to uptake (Appendix B to the cover briefing). 
Other modelling work  
We have also undertaken some modelling work for the Ministry for the Environment, in 
response to a query by the Minister for Climate Change Issues, asking what impact 1 million 
electric vehicles in fleets have on reducing CO2 emissions. 
We assumed a range of scenarios where electric vehicles made up approximately 200,000, 
500,000, and 1 million vehicles in the fleet and modelled the corresponding effect on carbon 
emissions (see the graph below). 
Page 6 of 35 

The scenarios depicted below were not based on any specific assumptions about changes in 
policy or the cost of electric vehicles. No analysis was undertaken to identify the conditions 
or policy pathways that would be needed for these scenarios to be realised. 
Ministers may also be aware of some electric vehicle scenario work undertaken by the 
Ministry of Business, Innovation and Employment (MBIE) as part of the Smart Grid Forum. 
MBIE assumed a scenario where electric vehicles saturate the market by 2028. This was 
done exclusively to test what impact this level of uptake would have on the distribution 
network. This scenario was not based on a likely scenario for electric vehicle uptake, or a 
particular policy pathway. The scenario would be extremely unlikely to occur given the 
constraints on used imports discussed above. 
What are the opportunities and barriers for electric vehicles? 
The opportunity 
As well as reducing emissions, increased uptake of electric vehicles can bring other benefits 
such as reducing our reliance on imported fossil fuels, and enhancing the efficiency of 
renewable electricity networks.  
New Zealand is well positioned to benefit from electric vehicles because:  
34.1.  we have high levels of renewable electricity generation (currently 78 percent), with 
capacity to increase the energy demand on renewables via electric vehicle uptake  
34.2.  95 percent of daily travel demand is for distances less than 120 kilometres, which is 
within the range of electric vehicle batteries (currently approximately 150 kilometres 
per charge)  
34.3.  we do not need major investment in infrastructure – domestic power supply is 
suitable for charging at home, and 80 percent of homes have off-street parking.  
Page 7 of 35 

We previously advised that any policies dependent on the turnover of the vehicle fleet may 
be effective at reducing emissions over a very long-term, but are unlikely to make a 
significant contribution to New Zealand’s 2020–2030 emissions reduction target.1 Therefore 
adopting a package of measures to achieve higher electric vehicle uptake represents an 
investment for the long-term, and may assist in the achievement of longer-term emissions 
Barriers to uptake 
High upfront costs – although some models are becoming cost-competitive, the average 
upfront costs of electric vehicles are generally higher than conventional vehicles, and 
consumers are not recognising their additional associated value.  
Limited range – pure electric vehicles are not suited to long journeys (over 150 kilometres) 
without stops to recharge the vehicle. There is a strong body of research that private citizens 
highly value the ability to travel long distances, even if very occasionally. 
Few electric models are available in New Zealand – only a small range of models are offered 
in the New Zealand market currently.  
Supply of used electric vehicles is likely to be constrained in the foreseeable future – uptake 
of electric vehicles in Japan is expected to be low in the foreseeable future. Further, 
Japanese policies mean electric vehicles do not depreciate as quickly as conventional 
vehicles so they are not on-sold into the second-hand market as quickly. These factors may 
consequently limit the supply of used electric vehicles in New Zealand in the future.  
Government’s role in overcoming these barriers 
Government is limited in what it can directly do to address the barriers above. In some cases 
intervention may not be required as existing barriers may reduce themselves through cost 
reductions and improved battery technology over time.  
There is a clearer role for government intervention to address market failures affecting 
uptake, such as in helping to resolve: 
41.1.  coordination problems, for example, addressing any issues to ensure that the 
necessary infrastructure is in place ahead of demand in order to encourage uptake 
41.2.  information problems, for example, lack of awareness and misconceptions about 
electric vehicles, and uncertainty about the total cost of ownership (including 
maintenance costs, battery life and residual values) 
41.3.  trade barriers, for example, the removal of import duties on a broad range of 
environmental goods (which could include electric vehicles and batteries) in the 
context of the negotiations towards a global Environmental Goods Agreement in the 
World Trade Organization (WTO). 
As well, we have identified several instances of possible regulatory failure (for example, ACC 
levies and road user changes for PHEVs). Left unaddressed, these regulatory failures may 
‘nudge’ motorists away from choosing electric vehicles. 
1 Our modelling indicates that doubling the uptake rate of electric and hybrid vehicles over the next 25 years (compared to 
business-as-usual baseline) could result in emissions reductions of 7 percent in the transport sector by 2040. 
Page 8 of 35 

Criteria used to assess potential measures 
A set of standard criteria was used to assess the merits of potential measures in accelerating 
the uptake of electric vehicles as a means to reduce transport GHG emissions. 
43.1.  Effective – the measure will achieve a reduction in transport GHG emissions. This 
includes securing a reduction that is sustained long-term.  
43.2.  Efficient – the measure will take account of: 
43.2.1. purchase, implementation, and maintenance costs for individuals, businesses 
and government 
43.2.2. compliance costs and government administration costs. 
43.3.  Equitable – the measure addresses distributional impacts between high income 
households and low income households, and maintains the principle that system use 
and costs imposed determine who pays and at what level.  
43.4.  The measure maximises co-benefits (for example, increasing air quality) and 
minimises co-costs (for example, increasing the pressure on freshwater ecosystems). 
43.5.  The measure encourages private sector activity and investment with government 
intervention only occurring where there is an identified market or regulatory failure.  
43.6.  The measure helps New Zealand transition to a long-term low-emissions transport 
Page 9 of 35 

Measures that we recommend be investigated further for inclusion in a package 
Listed below are the measures that we recommend are prioritised for further investigation. 
Our initial analysis suggests these measures are the most viable for inclusion in a package 
to encourage the uptake of electric vehicles.  
Measure 1: Energy Efficiency and Conservation Authority (EECA) information and promotion 

We recommend any package includes an information and promotion campaign as a central 
component. A campaign would help address information barriers and enhance the visibility of other 
measures to address barriers to uptake of electric vehicles. Given that vehicle fleet turnover is a 
long-term option for reducing GHG emissions, we recommend pursuing a campaign that seeks 
long-term change (this would require funding of approximately $1.7 million per year, for 5 years).  
Many motorists are either unaware of, or hold misconceptions about electric vehicles and 
their operation. Electric vehicles are a relatively new technology that is not well understood 
or accepted by potential buyers.  
The Sustainable Business Council has also cited a “lack of awareness of electric vehicles by 
corporate fleet managers and staff that have vehicles as part of their salary package” as a 
barrier to uptake. We are undertaking research with EECA to better understand the 
information barriers that exist among fleet buyers.2 
We consider an ideal information and promotion campaign is one that supports the long-term 
change in perceptions and understanding of electric vehicles, which is necessary to 
maximise GHG reductions from uptake.  
Such a campaign would need to target the market segments most likely to respond to 
information and promotion in the first instance (for example, fleet owners, lease companies, 
large businesses, and government agencies). Public information would focus on dispelling 
misconceptions.3 Building long-term relationships with business and local government would 
provide opportunities to develop joint measures and share learnings between stakeholders. 
This level of commitment would send a strong signal to business and local government 
about the Government’s long-term support for electric vehicles. 
EECA has the mandate and capability to deliver this kind of information and promotion 
campaign. EECA has identified the elements of a comprehensive campaign that seeks long-
term consumer change and addresses barriers to uptake. The campaign would run for 5 
years and cost $1.7 million per year. This could require a new budget initiative. The funding 
would enable EECA to: 
49.1.  run a high profile media and advertising campaign  
2 EECA has engaged with a number of major light vehicle fleet owners (including Downer, Opus and Fonterra) to better 
understand barriers to the uptake of electric vehicles from a fleet buyer’s perspective. A key barrier is a lack of information 
on the total cost of ownership. In response to this, EECA is working on a “total cost of ownership” tool to help fleet 
managers compare the total costs of owning and operating an electric vehicle with an equivalent petrol or diesel vehicle, 
so that fuel and maintenance savings can be readily taken into account.   
3 For example, EECA’s engagement with fleet managers (and the public) has identified misconceptions about the 
environmental performance of electric vehicles as a barrier to uptake. To this end, EECA is engaging a consultant to 
undertake a lifecycle analysis of electric vehicles in the New Zealand context, to provide authoritative information that can 
be easily communicated.   
Page 10 of 35 

49.2.  directly market to, and build long-term partnerships with, corporate fleet managers 
49.3.  undertake joint measures with private sector companies and local government. 
This campaign is scalable and could be delivered with a more limited reach over a shorter 
time frame (for example, 2 years) for a cost of $1.2 million per year. 
Any campaign would also be used to inform consumers of other measures within the 
package that address barriers to uptake (for example, the RUC exemption for light electric 
We recommend any package to support the uptake of electric vehicles should involve an 
information and promotion campaign. We consider a longer-term and more comprehensive 
campaign is best suited to the dynamics of the New Zealand vehicle market, particularly as 
the majority of new vehicles are purchased for fleets before entering the second-hand 
market 3 to 5 years later. 
We consider the smaller, lower cost campaigns would still have merit, but would also have 
fewer benefits over the long-term. The signal sent to industry would also be weaker. 
Page 11 of 35 

Measure 2: Government support for charging infrastructure 
We recommend that the Government supports the private sector to establish a cohesive network of 
fast-charging stations by:  
  offering branding and promotional support to facilitate a cohesive network 
  providing independent advice to local government and other independent investors about 
appropriate recharging infrastructure  
  potentially funding, or co-funding the installation of fast-charging stations in locations where 
it is not commercially viable for the market to do so. 
A new budget bid would be required to request Crown funding for this option. Alternatively, should 
you progress measures 1 and 4, funding for charging infrastructure (promotion and installation) 
could be drawn from the proposed EECA promotional campaign and electric vehicle programme.  
As in other countries, the majority of electric vehicles are likely to be charged during 
overnight parking, predominantly in homes. In addition, 95 percent of all journeys in  
New Zealand are less than 120 kilometres, well within the range of electric vehicles. We 
anticipate that range will improve with battery technology over the coming years. 
Nevertheless, charging infrastructure will still be required to offset range anxiety and 
enhance the versatility of electric vehicles.  
Evidence from jurisdictions such as Oregon (USA) suggests that public charging 
infrastructure increases the utility, and therefore value, of electric vehicles. Without a 
charging infrastructure network, electric vehicles are only useful within a radius of 50 percent 
of their range. A network of fast-charging facilities means that electric vehicles can travel 
further if required. This makes them appealing to a larger segment of the car-buying 
The Electricity Networks Association has announced plans to study if a ‘renewable highway’ 
providing a nationwide infrastructure for charging is possible. 
On 12 February 2015, officials met with Mighty River Power (MRP) and the Sustainable 
Business Council. [Commercial in-confidence] MRP advised us that it plans to partner with 
other electricity industry players to invest in a ‘renewable highway’. The ‘renewable highway’ 
is a network of fast-charging stations that will form a network from which other charging 
infrastructure could expand. We understand that MRP considers that this measure can be 
entirely funded by industry. MRP intends to establish these charging stations at locations 
where motorists would logically stop on a long journey (for example, shopping areas, tourist 
Other parties (such as JuicePoint and the private equity group behind are 
also looking to provide more charging infrastructure. This does not require Crown funds. 
There may be a role for government in ensuring the network is cohesive. For example, there 
may be locations where charging infrastructure is not commercially viable to install, but 
necessary to complete a cohesive network. Easy identification of charging stations and the 
standardisation of various systems may also be an issue if multiple businesses are installing 
fast-charging stations.  
Page 12 of 35 

We understand that a number of local councils and other players that are looking to install 
charging infrastructure are seeking independent advice about what charging facilities they 
should install. There would be value in government filling this gap. 
We considered the following options for government support for charging infrastructure. 
Option 2.1 – government branding and information support for charging infrastructure. 
Option 2.2 – inclusion of charging infrastructure in large State highway projects. 
Option 2.3 – government providing funding for charging infrastructure to fill gaps in the 
Assessment of the options 
Option 2.1 is preferred. Under this option, the market decides the most appropriate locations 
for fast-charging infrastructure. The cost of providing branding and information support could 
be covered by EECA as part of the information and promotion campaign (see page 10 of this 
report). If set up as a stand-alone programme, a budget bid may be required to request 
Crown funds.  
EECA could potentially play an advisory and coordination role in supporting these 
independent players. The NZ Transport Agency advises that it could assist by providing 
access to Crown land and transport planning advice. 
Option 2.2 is not preferred because motorists are unlikely to consider it desirable or safe to 
charge their vehicles on the roadside (for example, motorists would prefer to do something 
productive during charging times). The cost of creating a safe area for motorists to charge 
their vehicles along State highways would be much higher than installing charging 
infrastructure at existing parking facilities. 
Option 2.3 would be more effective once we have an indication of where the gaps in the 
network are that cannot be filled by the market. The Government could fund (or co-fund) 
charging infrastructure under the proposed electric vehicle programme (see page 17).  
Page 13 of 35 

72.3.  Electric vehicles remain unattractive to many fleet managers for practical reasons, 
such as the need to ensure pool cars are charged for the next user, ensuring that 
electric vehicles have sufficient range for employees’ day-to-day activities, and that 
employees have access to charging facilities.  
The current AoG contract is due to expire on 30 June 2015 and the new contract has the 
potential to be in place for the next 10 years. The criteria for vehicle inclusion in the 
catalogue are expected to stay much the same, and as a result electric vehicles are highly 
unlikely to be included in the catalogue under the status quo.4 
Options considered 
Potential options to facilitate the uptake of electric and other low emission vehicles into the 
government fleet include the following. 
Option 3.1 – the Government funding a trial of electric vehicles within government agency 
fleets. An indicative cost for such a trial would be around $500,000 (and potentially cost 
neutral over time). This level of funding would cover the additional purchase costs for around 
24 electric vehicles or PHEVs in four government fleet locations around New Zealand. It 
would also cover the risk to fleet managers of any lower residual value at on-sale, the cost of 
installing charging facilities, and costs associated with project management, research and 
Option 3.2 - requiring MBIE to include a specific class in the AoG catalogue for electric and 
hybrid vehicles. 
Option 3.3 – providing greater information in government fleet managers’ guidelines 
regarding electric vehicles. 
Option 3.4 – amending government procurement guidelines to require a set percentage of all 
vehicles purchased by government fleets to be electric.  
Option 3.5 – the Government guaranteeing agencies a residual value on the resale of all 
electric vehicles purchased through the AoG vehicle catalogue. Government would 
guarantee an on-sale price that would make electric vehicles competitive with other vehicles 
vying for inclusion in the catalogue.  
Option 3.6 – choosing electric vehicles for some or all Crown limousine replacements and 
ministerial self-drive cars. 
Assessment of the options 
Option 3.1 is the preferred option. A trial could fill information gaps around the whole-of-life 
cost associated with electric vehicles, and demonstrate their functionality in New Zealand 
fleets. This information would help to inform government and corporate fleet purchasers 
about key uncertainties, such as likely resale value, and maintenance and replacement 
costs, and therefore reduce risk. The visibility of a trial by government could complement a 
government information campaign by normalising electric vehicles and dispelling myths 
associated with electric vehicles. 
MBIE and EECA have expressed their willingness to support the development of a trial 
scheme, in terms of developing parameters, providing comparative cost data, and identifying 
willing government agencies to participate.  
4 Inclusion in the catalogue is determined by an expert procurement panel. 
Page 15 of 35 

Further discussions would be needed to determine who would administer and manage this 
trial. MBIE would also work with the AoG contracted suppliers on the supply of electric 
vehicles. While some contracted suppliers are manufacturing electric vehicles globally, these 
are not being imported into New Zealand due to the current low demand for these types of 
There is some risk associated with this option. The unknown costs around electric vehicles 
(that is, on-sale value, maintenance and replacement costs), which this trial is trying to 
identify, also risk increasing (or decreasing) the costs of this trial. 
Option 3.2 (including a specific class for electric and hybrid vehicles in the catalogue) is also 
recommended. This would make electric and hybrid vehicles more visible to government 
fleet managers and nudge them to consider them as a viable option. It would ensure that 
manufacturers that sell electric vehicles are included in the AoG contract so that lower prices 
for electric vehicles can be negotiated. This measure would place some cost on MBIE, which 
may have to run an additional tender process for this specific class. 
Option 3.3 would provide a low cost way of encouraging uptake of electric vehicles in the 
government fleet. However, without information relating to the whole-of-life costs (that option 
3.1 will seek to generate), this would have limited effect.  
Option 3.4 is potentially viable but it is a higher risk option. We do not know how government 
agencies use their vehicles so a prescribed level of uptake risks burdening agencies with 
vehicles that do not fit their needs (that is, typical driving distance or pooling arrangements). 
This approach could also present a financial risk to agencies and government given the 
unknowns around the supply of affordable electric vehicles, the on-sale value of these cars, 
and maintenance costs (all unknowns that a trial would seek to inform). This option would 
require adjustments to the AoG solution, but MBIE advises that the new contract scheduled 
from 1 July 2015 will be flexible enough to allow for any such change. 
Option 3.5 could be effective for incentivising wider uptake of electric vehicles in the 
government fleet. It could also offer a simplified approach to financing option 3.4. It removes 
the risk for government fleet purchasers of on-sale value being unknown, and provides 
useful information about whole-of-life cost for private fleet purchasers. However, this option 
presents a financial risk to government and similar information about electric vehicle on-sale 
value could be gained from a lower risk trial (option 3.1). 
Option 3.6 would not be viable at this time as MBIE has already begun the tender process 
for Crown limousine replacements. We understand that the tender document includes the 
following wording to encourage the inclusion of electric vehicles in the tender process: “If it 
meets all the requirements electric vehicles would be welcomed.” 

Page 16 of 35 

Measures that could be investigated further 
The measures below could be initiated in the short-term (next 2 years). You may wish to 
consider which, if any, of these options should be progressed as part of a package to 
encourage the uptake of electric vehicles.  
Measure 4: An electric vehicle programme to co-fund initiatives with other parties 
We could investigate the establishment of an electric vehicle programme that would co-fund projects 
that encourage the uptake of electric vehicles. This option would encourage businesses and local 
communities to develop projects to address the market failures/barriers that are limiting the uptake 
of electric vehicles. This would require a new budget bid.  
In addition to government, there are other parties that have an interest in encouraging 
uptake of electric vehicles, including the electricity sector, manufacturers of electric vehicles, 
businesses seeking to reduce their fuel costs and GHG emissions, and local government. 
An electric vehicle programme could be used to bring together the efforts of these parties 
over a focused period of time. The programme could be used to ensure that the sum of 
efforts to encourage uptake of electric vehicles is maximised by having a greater degree of 
visibility and coherence. This programme would be distinct from the EECA promotional 
Under this option, local government and private sector organisations would be incentivised to 
develop and implement their own projects aimed at increasing the uptake and use of electric 
vehicles. They would apply to have their project co-funded and an investment group would 
assess the projects against a set of agreed criteria. The investment group would be 
responsible for ensuring that the projects represent value for money and contribute to the 
objective of lowering GHG emissions through the uptake of electric vehicles. 
The advantage of this approach is that it encourages innovation by giving local government 
and private sector organisations the flexibility to determine the types of projects that are most 
appropriate for particular market conditions and/or their local communities.  
The co-funding approach encourages partnership by giving both parties the incentive to 
ensure that projects are value for money, and achieve the desired outcomes of encouraging 
uptake of electric vehicles and reducing GHG emissions.  
Examples of the type of projects that could be funded by an electric vehicle programme 
90.1.  trials of electric buses on urban public transport routes 
90.2.  installation of public fast-charging infrastructure at locations where it is not 
commercially viable for the market to do so, but is necessary to form a cohesive 
90.3.  creation and promotion of branded tourism routes (for example, where tourists can 
hire electric vehicles, and preferentially park and charge the electric vehicle at tourist 
attractions, cafes and accommodation along the route) 
90.4.  demonstrations of vehicle types not currently offered in New Zealand (for example, 
electric vans for use by trade employees in business fleets). 
Page 17 of 35 

Auckland Transport’s recent announcement of a Request for Proposal from car share 
operators to launch an electric vehicle scheme in Auckland is also an example of the type of 
project that could be co-funded through an electric vehicle programme. 
Details that would need to be considered 
Details of an electric vehicle programme that would need to be determined include the 
92.1.  The level of funding made available, and over what period – the level of funding could 
vary significantly depending on the level of ambition assigned to the programme. As 
an example, a programme in the order of $2 million over 2 years could be used to co-
fund 8 to 10 trials, demonstrations or small infrastructure projects (for example, 
charging stations). 
92.2.  Co-funding rates for projects – we consider that a maximum co-funding rate of 50 
percent would give both parties the appropriate incentive to ensure that the projects 
were effective and value for money. 
92.3.  Which government department or agency is primarily responsible for administering 
the fund. 
92.4.  Composition of the investment group – the group would ideally be comprised of 
representatives of central and local government, industry and users. 
92.5.  Eligibility and criteria for funding – these would be decided by ministers. 
92.6.  Appropriate level of oversight for allocation decisions – this would depend on the 
level of funding for the programme and the potential cost of individual projects. 
Our recommendation is to consider this option. The Ministry of Transport, NZ Transport 
Agency, and EECA have experience in dealing with similar programmes, and can assist in 
the development and administration of an electric vehicle programme.  
Page 18 of 35 

Measure 5: Electric vehicles in bus and transit lanes  
Consideration could be given to investigating the removal of regulatory barriers preventing road 
controlling authorities from allowing electric vehicles in bus and transit lanes. 
Allowing electric vehicles access to bus and transit lanes is a relatively low cost incentive to 
encourage uptake of electric vehicles and bring forward GHG emission reductions. This 
particular measure is perceived by drivers to be of high value relative to other common 
electric vehicle incentives. In Norway this incentive was a key part of changing consumer 
opinion about electric vehicles.5 
In New Zealand, priority vehicle lanes exist in two main forms: as transit lanes (for example, 
T2 and T3 lanes), which prioritise private vehicles carrying multiple passengers; and as bus 
lanes, which primarily prioritise public buses. 
Priority lanes run along congested arterial roads in urban areas and are intended to reward 
forms of travel that make a stronger contribution to network efficiency. Priority lanes offer 
time savings, which provide strong incentives for travel behaviour change. 
Under the Land Transport (Road User) Rule 2004 (the Road User Rule), road controlling 
authorities (RCAs) are restricted from granting electric vehicles access to priority lanes. This 
incentive is therefore not currently possible without changes to the Road User Rule and 
related provisions in Land Transport Rule: Traffic Control Devices 2004. 
At present, transit lanes only exist in Auckland. They operate in two forms.  
98.1.  As ‘priority lanes’ at on-ramps onto the motorways, where vehicles with two or more 
people can bypass the on-ramp signal lights during congested periods and enter the 
motorway ahead of other traffic. 
98.2.  As ‘T2 or T3 lanes’. These operate on arterial roads during peak hours and are 
reserved for cars with two to three or more people. 
Bus lanes exist along main arterial roads in most of New Zealand's main urban centres. 
100.  The NZ Transport Agency is a RCA and manages priority lanes on the Auckland motorway. 
RCAs, like Auckland Transport and Greater Wellington Regional Council, have responsibility 
for determining bus lane location and identifying vehicles that can and cannot use the lanes. 
101.  Providing electric vehicles access to priority lanes would likely provide an incentive for 
ownership. However, there is limited data available to identify what time savings are 
necessary to influence electric vehicle uptake. In the USA, there is evidence that policies 
allowing access to transit lanes have positively influenced the uptake of electric and hybrid 
vehicles.6 NZ Transport Agency research shows a fairly strong relationship between travel 
5 Sourced from a 2014 presentation by Norwegian Transportokinomisk Institutt, on ‘Electrification of road transport in 
Norway’, slide 9. 
6 See two USA studies: (2014) Evaluation of State-level U.S. Electric Vehicle Incentives, The International Council on 
Clean Transportation, p.26; and (2008) Impact of High Occupancy Vehicle (HOV) Lane incentives for Hybrids in Virginia
Journal of Public Transportation, vol. 11, no.4, p.52. 
Page 19 of 35 

time savings offered by bus and car pool lanes and a shift from car to buses or high 
occupancy vehicles.7 
102.  Allowing electric vehicles to access priority lanes will inevitably have some impact on other 
transport objectives. Priority lanes are typically implemented for network efficiency purposes, 
and the inclusion of electric vehicles in such lanes is likely to impact on public transport 
reliability and general congestion as electric vehicle numbers grow. However, without RCAs 
modelling specific corridors, it is not possible to know the precise effects of this incentive, 
either for electric vehicle uptake or on other transport objectives. 
103.  In Auckland, the Onewa Road T3 lane offers a travel time saving of around 20 minutes (this 
resulted in a 120 percent increase in the share of high occupancy vehicles). The priority 
lanes on on-ramps offer time savings between 2 and 5 minutes and have resulted in only a 
small increase in high occupancy vehicles.8 
104.  Many bus lanes in New Zealand may not offer a real time saving to car drivers, given the 
stop-start nature of buses operating in them. The NZ Transport Agency has also advised that 
the four main corridors with bus lanes in Auckland are expected to be congested within 1 to 
3 years. This suggests there are limited opportunities to provide electric vehicle drivers with 
real time savings via bus lanes. Nevertheless access to bus lanes is likely to remain an 
incentive for electric vehicle uptake as it provides the perception of priority access.  
105.  The options considered were: 
option 5.1 – amending existing legislation to allow electric vehicles automatic right of access 
to all bus and transit lanes  
option 5.2 – amending existing legislation to enable RCAs to determine which bus and transit 
lanes electric vehicles can access.  
Assessment of the options 
106.  If this measure is pursued, option 5.2 is preferred. Under this option the Ministry of Transport 
would consider options for amending legislation to give RCAs the power to allow electric 
vehicle access to specific bus and transit lanes. RCAs would retain the power to exclude 
electric vehicles from bus and transit lanes should they choose to do so. 
107.  This option provides RCAs with the flexibility to choose which bus and transit lanes electric 
vehicles can access. This flexibility would allow RCAs to manage conflicting transport 
priorities along a corridor, including electric vehicle promotion and network efficiency.  
108.  There is a risk that this option would not result in electric vehicles having access to bus and 
transit lanes. It is the NZ Transport Agency’s expectation that RCAs are unlikely to be 
interested in granting electric vehicles access to bus and transit lanes. The NZ Transport 
Agency expects RCAs will share its reservations about the potentially negative impact of 
having electric vehicles in bus and transit lanes on network efficiency (that is, vehicle 
congestion and bus reliability). For this reason, it would be important to discuss this measure 
with RCAs prior to any announcement or decision.  
7 , p.23. 
8 Ibid, p.22, 23. 
Page 20 of 35 

109.  This risk could be mitigated through consultation with RCAs. Matters relating to 
implementation of the option will need to be tested with RCAs to consider how they could be 
110.  This incentive would result in minor costs for RCAs. There would be costs involved in 
altering signage to identify electric vehicle accessible lanes, and also to make it clear the 
lanes that do not afford electric vehicles access.  
111.  The NZ Transport Agency advises that changes to systems to enable identification of electric 
vehicles for enforcement purposes could range between $60,000 and $200,000 to enable. 
However, this work may be able to ‘piggyback’ on other projects.  
112.  Option 5.1 would be the simplest way to ensure this policy is implemented. However, it 
would reduce the flexibility RCAs have to manage their networks. Should electric vehicle 
numbers grow, and impede the flow of other traffic in a priority lane, RCAs would have no 
recourse to mitigate this. A mandatory policy would also mean electric vehicle access could 
not be revoked until the regulation expired or was amended.  
Page 21 of 35 

Measure 6: Road user charges (RUC) exemptions and discounts for electric vehicles 
Consideration could be given to introducing a RUC exemption for light electric vehicles from the 
date each vehicle is registered in New Zealand, for a finite period of time (for example, 5 years). 
This option would require a change to the Road User Charges Act 2012. 
113.  The New Zealand land transport system is largely funded on a user pays basis. Anyone 
using New Zealand’s roads contributes towards the operation and development of the land 
transport system. Vehicle operators pay for their road use through either fuel excise duty 
(FED) or road user charges (RUC), and through a portion of the annual vehicle licensing fee. 
114.  The Road User Charges Act 2012 (the RUC Act) requires that all vehicles that do not pay 
FED through tax on fuel purchases9 (that is, including electric and diesel vehicles) be subject 
to RUC, unless exempted.  
115.  The scope for exemptions is defined in section 37 of the RUC Act. It allows the Governor-
General to, by Order in Council, specify the period during which road user charges are not 
payable in respect of light electric vehicles. An Order in Council made under section 37 of 
the RUC Act must specify the date on which the exemption expires, and may, from time to 
time, be amended to provide for a later date. 
116.  The Road User Charges (Exemption Period for Light Electric RUC Vehicles) Order 2012 
makes light electric vehicles exempt from RUC until 30 June 2020.The definition of electric 
light vehicle in the RUC Act includes all vehicles with “motive power wholly or partly derived 
from an external source of electricity”. In practice, the exemption includes pure electric 
vehicles and PHEVs. 
Previous Cabinet decisions 
117.  In May 2009, the Cabinet Economic Growth and Infrastructure Committee: 
117.1.  agreed that the Road User Charges Act 1977 and Road User Charges Regulations 
1978 be amended to exempt light electric vehicles from paying road user charges 
117.2.  agreed that a road user charges exemption (that is intended to apply until 1 percent 
of the light vehicle fleet is electric) will apply until 2013, with the ability to reassess the 
percentage of light electric vehicles in the fleet and extend the exemption [EGI Min 
(09) 10/7 refers]. 
118.  In April 2012, Cabinet agreed to extend the existing exemption from RUC for light electric 
vehicles until 30 June 2020 [EGI Min (12) 6/6]. This decision reflected a slower than 
anticipated rate of uptake of light electric vehicles.  
Benefits of the RUC exemption for light electric vehicles 
119.  The RUC exemption does not address information or coordination problems. It is a financial 
incentive that is designed to encourage electric vehicle uptake by reducing their operating 
120.  We have not formally evaluated the RUC exemption, so we do not know exactly how 
effective the RUC exemption is at incentivising the uptake of electric vehicles in practice. 
This includes knowing the extent to which consumers are aware of the RUC exemptions, 
9 Note that FED is also charged on CNG and LPG. 
Page 22 of 35 

and its potential value. For instance, motorists who have previously driven light petrol 
vehicles are unlikely to consider the saving on RUC as distinct from overall fuel costs. 
121.  Stakeholders, such as the Sustainable Business Council and Fleet Management 
Association, have said that their members consider the RUC exemption to be an important 
consideration when making fleet purchase decisions.   
122.  We undertook analysis of whether electric vehicles would be reliant on the RUC exemption 
for an economic advantage over conventional vehicles based on current costs. We found 
that, based on current vehicle and fuel prices, the RUC exemption is an important factor in 
determining whether the total cost of ownership for electric vehicles is competitive with 
comparable petrol and hybrid vehicles. The RUC exemption therefore plays an important 
role in determining whether it makes economic sense for fleet buyers to purchase electric 
vehicles in the short to medium-term. 
123.  The analysis compared the per kilometre operating cost of different vehicle types, based on: 
123.1.  fuel cost (2015 prices) 
123.2.  ACC costs  
123.3.  annual vehicle licensing  
123.4.  RUC (where applicable)  
124.  The analysis did not cover capital (that is, purchase price), maintenance costs or 
125.  The following breakdown shows the costs for both petrol and diesel vehicles using 4 litres 
per 100 kilometre and electric vehicles using 12 kilowatt-hours per 100 kilometres.10 It shows 
that efficient petrol vehicles have similar operating costs to electric vehicles paying RUC.  
10 Conventional Toyota Prius hybrids use 4 to 4.5 litres per 100 kilometres of petrol in the real word, and Nissan Leaf 
electric vehicles achieve around 13 kilowatt-hours per 100 kilometres. 
Page 23 of 35 

126.  The analysis shows that if there was no RUC exemption, a solely financial analysis would 
exclude electric vehicles from any rational business decisions (unless there was a significant 
rise in the price of petrol or major drop in electric vehicle purchase prices). 
Cost of RUC exemption 
127.  Currently, electric vehicles make up just 0.02 percent of the fleet. Based on our modelling of 
projected uptake, we would expect to see 30,000 electric vehicles (or about 1 percent of the 
fleet) in the New Zealand fleet by 2033 under a ‘status quo’ scenario. The financial 
sustainability of the RUC exemption would need to be addressed at this point.  
128.  The cost of exempting 1 percent of light electric vehicles from RUC is approximately $22 
million per year (2015) from the approximately $3 billion which goes into the national land 
transport fund annually. Forgoing this revenue means that: 
128.1.  less funding is available for delivering roading improvements, which could require that 
delivery is spread over a slightly longer time frame 
128.2.  more of the revenue burden is carried by a decreasing proportion of road users, 
which could require proportionate increases in FED and RUC to achieve the same 
level of funding. 
Options considered 
129.  The following option is consistent with existing government policy, and can be implemented 
under the RUC Act. 
Option 6.1 – extend the blanket RUC exemption for light electric vehicles to a date beyond 
30 June 2020. 
130.  The following amendments to RUC for electric vehicles would require amendment of the 
RUC Act. 
Option 6.2 – introduce RUC exemption for light electric vehicles from the date individual 
vehicles are first registered in New Zealand, for a finite period of time. 
Option 6.3 – introduce a lifetime exemption from RUC for all the light electric vehicles first 
registered in New Zealand before a specified date. 
Option 6.4 – extend the RUC exemption to include heavy electric vehicles. 
Option 6.5 – provide a discounted rate of RUC for heavy electric vehicles. 
Option 6.6 – provide a discounted rate of RUC for heavy passenger electric vehicles. 
131.  Note that no amendment to the RUC Act is proposed for this year’s legislative programme. 
Assessment of the options 
132.  If this measure is pursued, option 6.2 is preferred. A RUC exemption for light electric 
vehicles from the date they are first registered, for a finite period of time, would help manage 
the cost of foregone revenue (within the 1 percent limit already agreed by Cabinet). It is also 
more equitable than the current exemption because owners of electric vehicles would begin 
paying their fair share towards the land transport system after the finite period ended. We 
would need to do more work to determine an appropriate exemption period. A risk of this 
option is that it could be politically difficult for a future government to close off the exemption. 
Page 24 of 35 

133.  If you do not want to pursue an amendment to the RUC Act, you could consider option 6.1. 
Based on our preliminary assessment, the RUC exemption for light electric vehicles could be 
extended to 2025 without exceeding the 1 percent limit already agreed by Cabinet, even with 
a boost in uptake levels as a result of a government package.11  
134.  We do not recommend that option 6.3 be pursued. While this option would incentivise early 
uptake, it could create some unwanted market distortions (for example, a ‘bubble’ of electric 
vehicles registered prior to the exemption close off). Such distortions would substantially 
increase the amount of revenue foregone and would further exacerbate the inequity of the 
RUC exemption. 
135.  We do not recommend exempting or discounting heavy electric vehicles from RUC. Heavy 
vehicles do significantly more damage to the roads, and therefore have a greater impact on 
maintenance costs. It would also be a further deviation from the user pays model, and is 
likely to face political resistance.  
136.  Currently, there are very few electric heavy vehicles on the road. Nationally, there is 1 fully 
electric truck, 3 hybrid trucks, and 80 electric trolley buses in Wellington. 
137.  If pursued further, we would need to consult with industry to consider their views on the 
matter, and get a better indication of likely rates of uptake. This would inform the projected 
costs of the exemption. We would also suggest limiting the scope of the changes to reduce 
the risk of higher-than-expected revenue losses (for example, option 6.6 – a discount for 
heavy passenger electric vehicles).   
138.  A risk with all the options above is that the overall cost cannot be defined accurately 
(essentially it will be demand driven). Also, there could be perceptions of unfairness from 
manufacturers or users of other low emission technologies, such as hydrogen vehicles. 
139.  If a change to the RUC Act is required following ministerial decisions on the RUC exemption, 
the Ministry of Transport could explore whether the exemption should also apply to other low 
emission vehicles. 
11 If we assume that a package of measures to encourage the uptake of electric vehicles doubles the baseline rate of 
uptake, we could see 30,000 electric vehicles in the New Zealand fleet by 2029. However, it is very difficult to project 
future uptake of electric vehicles off the current low base (approximately 400 vehicles). Actual uptake in 10 years’ time 
may vary significantly from current projections.  
Page 25 of 35 

Measure 7: Fringe benefit tax on electric and hybrid vehicles 
We recommend that a review be conducted within the next 2 years of the basis for calculating the 
taxable value of the fringe benefit for electric and hybrid vehicles. This review would ensure that the 
lower running costs of these vehicles are adequately recognised. 
140.  Fringe benefit tax is a tax on non-cash benefits provided in connection with employment. The 
tax is intended to leave an employee neutral between receiving a fringe benefit and receiving 
the equivalent monetary remuneration. Consequently, fringe benefit tax should not distort 
choice, unless it results in overtaxing the benefit, such as through an overvaluation of the 
benefit provided. 
141.  Electric and hybrid vehicles attract a higher amount of fringe benefit tax as their purchase 
prices are higher than those of equivalent conventional vehicles. The Sustainable Business 
Council and Business are of the view that reducing the fringe benefit tax on electric vehicles 
would have a significant nudge effect on the purchase decisions of fleet managers.  
142.  For the purposes of fringe benefit tax, the annual taxable value of an employee’s vehicle 
benefit is calculated as either 20 percent of a vehicle’s cost price, or 36 percent of its book 
value. These proportions are proxy estimates of the fixed and running costs that the 
employee would bear if they owned the car themselves. Fringe benefit tax applies to these 
143.  Little is known about the extent to which fleet purchase decisions are being influenced by 
fringe benefit tax. In our view, however, it is more likely that other barriers, such as the 
limited (travel) range of pure electric vehicles, are playing a far greater role in company 
decisions not to purchase electric vehicles for their fleets. Also, many employees use motor 
vehicles solely for work purposes rather than as a non-cash employment benefit, and would 
be unaffected by changes to fringe benefit tax rules. 
144.  Nevertheless, a potential issue with the fringe benefit tax regime could be the method for 
calculating the taxable value of the fringe benefit. The regime assumes that the calculation 
used to value the fringe benefit of a conventional vehicle correctly values the benefit of an 
electric/hybrid vehicle. However, although the purchase price is higher, the running costs of 
electric/hybrid vehicles tend to be lower than for conventional vehicles. By using the same 
proportion of cost price (or book value), the calculation ignores these key differences. 
145.  Despite the expectation that the purchase price of electric vehicles will continue to fall over 
time, it is unlikely that it will fall below that of conventional vehicles. This means that in the 
future the potential for the tax calculation to overvalue the fringe benefit of electric/hybrid 
vehicles will remain.  
146.  Where the tax regime overtaxes the fringe benefit of electric vehicles, this would have the 
potential to distort vehicle choice in favour of conventional vehicles and away from 
electric/hybrid vehicles. This brings a risk that the tax calculation will continue to potentially 
overvalue and overtax the fringe benefit of electric/hybrid vehicles.  
147.  The options looked at to address this concern were: 
option 7.1 – exempt electric vehicles from fringe benefit tax 
option 7.2 – allow the fringe benefit tax on an electric vehicle to be calculated on the basis of 
the cost price/book value of an equivalent conventional vehicle 
Page 26 of 35 

option 7.3 – review the basis for calculating the taxable value of the vehicle benefit for 
electric/hybrid vehicles within the next 2 years. 
Assessment of the options 
148.  If this measure is pursued, option 7.3 is preferred. This would remove any perception that 
the fringe benefit tax regime is influencing companies to favour conventional vehicles over 
electric/hybrid vehicles. It would also preserve and strengthen the existing policy settings of 
the fringe benefit tax regime. 
149.  Tax officials note that this review work would have to be prioritised against other items on the 
Government’s tax policy work programme. The timing of any review should also take into 
account the likelihood of continued large variations in the cost structure of electric vehicles, 
to ensure any amendment would appropriately reflect the benefit provided, over a longer 
150.  Option 7.1 is not preferred as it would be inconsistent with New Zealand’s broad based tax 
settings. It would also compromise equity goals by affording a tax advantage to those 
companies and employees where an electric/hybrid company car is made available for 
private use. 
151.  Option 7.2 is not preferred because it would also, although to a lesser extent, be inconsistent 
with the current broad based tax settings and would compromise equity goals within the 
current framework. Such a change would create a discrepancy between the effective 
taxation of a fringe benefit vehicle and the equivalent cash remuneration. 
Page 27 of 35 

Measure 8: Tax depreciation rates for electric vehicles 
We recommend that you consider inviting relevant industry groups (for example, Drive Electric, 
electric vehicle manufacturers) to discuss with tax policy officials the case for having higher 
depreciation rates for electric vehicles. It would be expected that the industry would prepare an 
economic case and support its arguments for a higher rate of depreciation for income tax purposes.   
152.  MRP and Zero Emission Vehicles Limited have suggested that government could consider 
accelerated depreciation rates for electric vehicles. Currently electric vehicles are 
depreciated at the same rate as passenger vehicles (30 percent (diminishing value) or 21 
percent (straight line) over 5 years). Residual value for passenger vehicles is estimated at 25 
percent of cost price. 
153.  We understand companies that calculate residual vehicle values are making low estimates 
for electric vehicles (from $5,000 to $15,000) even though their original purchase price is 
higher than similar conventional vehicles. This is likely to be because electric vehicles are 
new to the market so there is a lack of information about their resale value and there is 
uncertainty about durability, potential technological developments and battery life. 
154.  Lower than average residual values act as a further disincentive to fleet buyers by increasing 
their overall fleet’s vehicle costs. The standard tax depreciation rate for passenger vehicles 
is thus perceived as unfair, in part because they receive a poor return on investment. They 
perceive that the total cost of ownership over a 5-year period will be higher for electric 
vehicles, but they are unable to deduct the tax on the additional cost from their taxable 
earnings annually. An accelerated tax depreciation rate for electric vehicles would therefore 
help make them more cost-effective and competitive with conventional vehicles. 
155.  The impact identified by relevant industry groups is a question about the timing and value of 
tax depreciation deductions rather than a permanent tax effect. When the asset is disposed 
of, the Income Tax Act 2007 requires a wash-up to calculate if the relevant tax depreciation 
rate has correctly spread the cost of the asset over its economic life. 
156.  Tax policy officials advise that proposals for accelerated depreciation would be inconsistent 
with the Government’s revenue strategy, which supports a broad-base low-rate tax system 
and generally avoids tax concessions. Keeping the tax bases as broad as practical 
minimises the distortionary impact taxes can have on decision-making in terms of consumer 
choice and decisions to produce goods and services. The primary function of the tax system 
is to raise revenue to finance government expenditure in a fair and efficient way; its function 
is not to encourage particular types of economic activity. If the Government wishes to 
encourage a particular economic activity it is preferable for this to be done in a transparent 
way by direct funding rather than through the tax system. 
157.  That said, the policy principle behind tax depreciation is that the deduction should match the 
economic life of the asset. Within these parameters, and keeping in mind the principles of 
New Zealand’s broad-base low-rate tax system, there may be a case to consider whether 
the current tax depreciation rate that applies to the entire New Zealand passenger vehicle 
fleet is appropriate for electric passenger vehicles.   
158.  Relevant industry groups (for example, Drive Electric, electric vehicle manufacturers) can 
discuss their concerns with Inland Revenue directly. Industry would be required to make an 
economic case for change, including a clear indication of the fiscal costs.  
159.  Depreciation rates for electric passenger vehicles are not administratively determined by 
Inland Revenue and any work on this issue would need to be prioritised against other items 
on the Government’s tax policy work programme. 
Page 28 of 35 

Measures to be progressed outside of the package 
160.  We have assessed the following measures as having merit, but being more suitable for 
progression over the medium-term as part of wider reviews within the relevant departments 
or agencies. 
Measure 9: Amending ACC levies for plug-in hybrid electric vehicles (PHEVs) 
We recommend that this issue be deferred until there is a wider review of the NZ Transport 
Agency’s annual vehicle licensing classification system. 
161.  The owners of PHEVs pay more in ACC levies than equivalent diesel or electric vehicle 
owners. This is considered to be inequitable and a disincentive to ownership. 
162.  This anomaly results from the way in which ACC levies are collected as well as the way in 
which PHEVs are classified by the NZ Transport Agency and ACC. 
163.  ACC levies are collected from vehicle owners either exclusively through annual vehicle 
licensing (as is the case for electric and diesel vehicles), or through a combination of annual 
vehicle licensing and the ACC motor vehicle levy placed on petrol. Under this system a 
petrol driven vehicle pays a lower ACC levy as part of their annual vehicle licence compared 
to a non-petrol driven vehicle (for example, pure electric and diesel vehicles), as they are 
also charged an ACC levy at the petrol pump. 
164.  PHEVs are overcharged because they are classified as ‘non-petrol driven’ vehicles. Non-
petrol driven vehicles are charged a higher ACC levy as part of their annual vehicle licence 
as it is assumed they do not pay a levy on petrol. However, as PHEVs may use petrol for 
approximately 40 percent of their travel, they end up making additional ACC levy payments. 
165.  We estimate that (under the new ACC levy rates on petrol from July 2015) PHEV owners will 
pay, on average, an additional $15 to $40 per annum in ACC levies beyond what other non-
petrol vehicle owners are paying. 
166.  This additional levy equates to a net cost to consumers of approximately $4,000 per annum 
(assuming the 2014 level of PHEV ownership: 220 vehicles in the fleet).  
167.  Our preliminary modelling suggests PHEV numbers may increase to 2,600 or 0.07 percent of 
the vehicle fleet in 2020. In this scenario, the cumulative cost of the additional ACC levy 
would reach approximately $159,200 by 2020 (assuming 2015 prices and no increase in the 
ACC levy rate on petrol or change in PHEV fuel economy).  
168.  The options considered to address this anomaly were: 
option 10.1 – defer this issue until there is a wider review of the NZ Transport Agency’s 
annual vehicle licensing classification system 
option 10.2 – undertake a review of the levy rate charged on PHEVs by ACC and amend if 
Page 29 of 35 

Assessment of the options 
169.  Option 10.1 is preferred. While there is an equity issue related to the overpayment by PHEV 
owners, the cost involved in removing this anomaly is considerably greater than the 
expected net benefit to consumers. ACC estimates that the one-off cost of changing the levy 
rate charged as part of the annual licensing of PHEVs would be between $0.5 million and 
$1.2 million. The NZ Transport Agency estimates that reclassifying PHEVs in the Motor 
Vehicle Register would cost between $60,000 and $200,000. 
170.  The additional cost of the ACC payment to the individual PHEV owners is also unlikely to be 
a disincentive to purchasing these vehicles as it is hidden within annual vehicle licensing 
171.  Should you wish to pursue option 10.2, the following steps would need to be taken. 
171.1.  You would need to write to the ACC Minister to request that ACC undertakes a 
review of the PHEV levy rate.  
171.2.  Should ACC consider it appropriate to amend the rate charged on PHEVs, both ACC 
and the NZ Transport Agency would need to collaborate to design an operational 
policy to identify, classify, and charge PHEVs with a new levy.  
171.3.  You would need to write to the NZ Transport Agency Board requesting that they 
direct the Agency to collaborate with ACC in this process.  
172.  Note that ACC and the NZ Transport Agency would need to develop this operational policy 
prior to June 2015. ACC need to consult on levy changes before seeking Cabinet approval 
and the next cycle of consultation is set for August 2015. Missing this deadline would delay 
consultation until the 2017 consultation cycle, or necessitate an out-of-cycle consultation, 
which would in turn increase the cost of this process.  
Page 30 of 35 

Measure 10: A road user charges (RUC) rate for plug-in hybrid electric vehicles (PHEVs) 
We recommend that officials investigate setting a RUC rate for PHEVs shortly before any RUC 
exemption is due to end. 
173.  When the RUC exemption ends, PHEVs will have to pay RUC as well as FED on any petrol 
used. They could apply for a refund of FED, but the burden of doing so may be a 
disincentive for uptake of PHEVs, and increase the NZ Transport Agency’s administrative 
costs. We can investigate setting a RUC rate for PHEVs shortly before any RUC exemption 
is due to end. 
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Measure 11: Removing battery import duties 
We recommend that this issue be considered in the context of New Zealand’s participation in the 
Environmental Goods Agreement negotiations at the World Trade Organization. We will continue to 
work with the Ministry of Foreign Affairs and Trade (MFAT), MBIE and the New Zealand Customs 
Service to establish the impact of any future changes to the tariffs on electric vehicle batteries 
174.  New Zealand has joined 17 other World Trade Organization members (including China, the 
European Union, Japan and the USA) in negotiations towards an Environmental Goods 
Agreement in the World Trade Organization context. 
175.  The possible inclusion of electric vehicles in any final Environmental Goods Agreement 
outcome may have a noticeable impact on the global uptake of electric vehicles through 
faster and deeper cost reductions, for not only electric vehicles but also associated 
technology including batteries and charging infrastructure.  
176.  Replacement batteries for electric and hybrid vehicles are subject to a 5 percent import duty, 
which may add to battery replacement costs for owners. This duty represents a relatively 
small component of the cost of replacing a battery, but any reduction in battery replacement 
cost would ‘nudge’ consumers to consider electric vehicles as an affordable option. 
177.  The 5 percent import duty is in place to assist New Zealand manufacturers of batteries. 
Though such domestic manufacturers appear to no longer exist, Cabinet has agreed that the 
rate remains in place until 30 June 2017. 
178.  MFAT advises that import duties on replacement batteries for electric vehicles continue to 
play an important role as negotiating coin in the context of trade negotiations, particularly the 
negotiations towards an Environmental Goods Agreement.  
179.  MFAT is opposed to any unilateral action to reduce import duties on replacement batteries. 
Import duties on a range of environmentally friendly technologies, including electric vehicles 
and replacement batteries, may be reduced in accordance with an eventual Environmental 
Goods Agreement outcome, assuming that these technologies are part of the final package. 
180.  Further analysis is required on the impact of tariff duty on imports of replacement batteries 
for electric vehicles, noting that in 2014, 98 percent of the $12.8 million trade in lithium-ion 
batteries entered free of tariff duty. 
181.  We will continue to work with MFAT, MBIE, and the New Zealand Customs Service to 
establish the impact of any future changes to the tariffs on electric vehicle batteries. 
182.  We consider this the preferred way forward. Given the removal of duties requires Cabinet 
approval, it would be preferable to have the input and support of relevant departments and 
183.  MBIE advises that if the recommendation is to put in place a new tariff concession scheme, 
this process would take approximately 4 months (this includes the policy development 
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Measure 12: A feebate scheme to encourage purchase of low emission vehicles 
We recommend that feebates not be pursued as a measure for encouraging the uptake of electric 
vehicles. We recommend that feebates should be further investigated as a mechanism for reducing 
GHG emissions across the vehicle fleet as a whole.  
184.  Feebate schemes reward purchasers of low emission vehicles with a rebate on the purchase 
cost while vehicles with higher emissions are charged a fee.12 We previously advised that 
feebates could be a way to provide a subsidy to purchasers of electric vehicles without 
imposing a cost on government, as the fees charged to higher emissions vehicles can fund 
the rebates to lower emissions vehicles. 
185.  Feebates reward the consumer ‘up front’ for future cost savings and related long-term 
societal benefits of reduced GHG emissions. Feebates aim to improve vehicle emissions 
performance across the vehicle market rather than incentivising electric vehicles per se.  
186.  Feebates have been implemented in France, and feebate-like systems are in place in other 
areas such as the Netherlands and California. Evidence suggests the French and Dutch 
systems have been effective in achieving reductions in GHG emissions from new vehicles, 
but the impact on the uptake of electric vehicles is less clear. In France, uptake of electric 
(both pure electric and PHEVs) and hybrid vehicles is low (3.4 percent of the new vehicle 
market in 2013). In comparison, in other markets the uptake of the three classes is higher 
(for example, Japan with 21 percent of all new vehicles in 2013, Norway with 12.8 percent, 
the Netherlands with 11.3 percent, and California with 10.3 percent). 
187.  After further analysis we conclude that feebate systems are unsuitable solely as a 
mechanism to encourage the uptake of electric vehicles. International studies have found the 
major impact of feebates is to incentivise improved emissions performance of existing 
vehicle models, rather than achieving a shift in the models purchased. Increased uptake of 
electric vehicles may be an indirect effect of feebates. However, the costs of establishing a 
feebates scheme solely to encourage electric vehicle uptake would outweigh the benefits (if 
that was measured in terms of additional electric vehicles being purchased). 
188.  While we do not recommend that feebates pursued as a measure for encouraging the 
uptake of electric vehicles, we consider feebates should be further investigated as a 
mechanism for reducing GHG emissions across the vehicle fleet as a whole. We note that 
feebates are reported to be a relatively simple way to begin reductions in fuel consumption 
and GHG emissions in countries that have not yet developed programmes for this purpose. 
We intend to provide analysis in further advice to you scheduled for May 2015. 
12 The rebate/fee would be applied at the time the vehicle is first registered. 
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Measure 13: Recognition of alternative low emission vehicle designs 
We recommend that changes to the regulatory framework for recognising alternative vehicle 
designs not be pursued as a measure for encouraging the uptake of electric vehicles. However, this 
issue should be further investigated as a mechanism for reducing GHG emissions across the 
vehicle fleet as a whole. 
189.  One approach car manufacturers have taken to reduce the price of electric vehicles, and to 
make them travel further on a standard battery charge, is to make the vehicles smaller and 
lighter than traditional cars. New Zealand road safety standards and classifications, however, 
prevent a number of smaller electric vehicles from operating on our roads.  
190.  A number of alternative low emission vehicles can legally be used in Europe and Japan, but 
not in New Zealand. For example, the French manufacturer Renault makes a vehicle called 
the Twizy. This vehicle gets acceptable ratings in the European New Car Assessment 
Programme crash testing, but cannot be used in New Zealand as it does not meet existing 
vehicle classifications. Google’s proposed small driverless car would also not be able to be 
used in New Zealand as it falls outside our current standards.  
191.  Currently, there may be ways to resolve these issues within the regulatory framework13, but it 
is not clear whether this is an efficient or robust method for assessing alternative low 
emission vehicles.  
13 For example, the NZ Transport Agency is able to “declare that a vehicle is a mobility device or is not a motor vehicle” in 
certain cases. The NZ Transport Agency exercised this power to declare Yike Bikes (a small folding electric motorbike 
made in New Zealand) not to be motor vehicles in September 2014. 
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Measures that were not considered worth progressing 
Measure 14: Lower registration and annual vehicle licensing fees for electric vehicles 
We recommend that no change to registration fees be considered, given first registration fees are 
currently differentiated on motor size. We also recommend that annual licensing fees not be 
differentiated to favour better performing vehicles as adjustments to existing fees would not provide 
sufficient economic value to act as an incentive. 
192.  The Sustainable Business Council suggested fees for first registration of vehicles favour 
better performing vehicles. As with annual licensing fees, the bulk of the fee payable at first 
registration is the ACC levy. The next highest component of the fee payable is the 
registration fee, which is currently differentiated on motor size.  
193.  Most passenger cars (between 1301 to 2600 ccs) are charged $112. We understand the first 
registration fee payable by an electric vehicle would be around $90.  
194.  The effectiveness of this option may be limited by the relatively small one-off cost of 
registration compared to the purchase price of the vehicle. However, given on-road costs are 
advertised at the point of purchase, this would likely have a nudge effect on consumers. 
195.  The Sustainable Business Council also suggested that the fee for annual licensing 
(commonly known as ‘registration’) of vehicles be structured so that better performing 
vehicles are charged less.  
196.  The bulk of the annual licence fee charged to motorists is the ACC levy. The licence fee itself 
only amounts to $43.50 (excluding GST). Given its low value, any adjustment of this fee to 
reflect vehicle performance would be a very weak incentive to purchasers.  
Measure 15: GST exemption for second-hand electric vehicles 
We do not recommend further consideration of a GST exemption for electric vehicles. 
197.  MRP suggested a GST exemption be provided for second-hand imported PHEVs to 
incentivise their importation to New Zealand over Australia. We note that New Zealand has a 
broad based tax system under which GST is applied at the same rate to all goods and 
services. Exempting individual items from GST does not align with government policy and 
has not been provided for other consumer items. 
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