The electric vehicle (EV) landscape in Australia is evolving, but it’s been an interesting year for those advocating for a shift to greener transport. After several years of robust growth, spurred by early adopters and government incentives like the Fringe Benefits Tax (FBT) exemption on novated leases, the pace has begun to slow. Sales are still increasing, but not at the same rate, as buyers become more discerning, and challenges arise that go beyond the enthusiasm of early adopters.
While manufacturers were initially enthusiastic about fleets leading the charge to reduce emissions, particularly through EV adoption, fleet managers have baulked at the high upfront costs. Whole-of-life cost calculations, a cornerstone of fleet management, often didn’t justify the switch to EVs compared to petrol or diesel options. This hesitation, combined with a perception that much of the EV push was more about marketing than genuine cost-saving, has led to slower adoption rates than anticipated.
With corporate buyers remaining cautious, manufacturers turned their focus towards government fleets, hoping for large-scale adoption driven by environmental targets and policy commitments. However, the response from governments has been varied, with some taking proactive steps and others lagging behind.
Queensland leads the charge
Queensland, through its fleet management agency QFleet, has emerged as a leader in the government sector. The state government did significant planning upfront, identifying 3,638 vehicles (100% of eligible passenger fleet) suitable for EV transition by 2026. Queensland set realistic targets, acknowledging that not every vehicle could be replaced with an EV at this stage, particularly given the limited range of fit-for-purpose vehicles available.
Despite a slow start, Queensland now has more than 1,000 EVs in its fleet, with more vehicles on the way as supply increases. This measured but determined approach has put Queensland at the forefront of EV adoption in government fleets.
Why are they pushing so hard on EVs? QFleet research shows the annual fuel savings of 500 EVs in its fleet is about $908,348, or $1,816 per vehicle.
New South Wales: Ambitious targets, mixed progress
The New South Wales Government has also set ambitious EV targets, aiming for 50% of all vehicle purchases to be electric by 2026 and 100% by 2030. However, the transition has been slower than expected. Unlike Queensland’s top-down approach, New South Wales is leaving it to individual agencies to decide whether they’re ready to transition to EVs, leading to a more fragmented rollout.
Interestingly, New South Wales is exploring ways to optimise fleet efficiency by suggesting agencies replace two internal combustion engine (ICE) vehicles with one EV, recognising the higher upfront costs of EVs. While this strategy could help mitigate costs, and increase fleet asset utilisation, it remains to be seen how practical it will be for agencies with diverse operational needs.
Victoria’s stagnant progress
Victoria, once a frontrunner in EV adoption, appears to have stalled. The state government set a target of 400 EVs in its fleet, and hasn’t moved forward since. Given the widely reported financial pressures facing the Victorian Government, it’s not surprising that the state isn’t prioritising an EV transition that would require significant upfront investment.
South Australia and Western Australia: Slow but steady
South Australia and Western Australia are both in the early stages of their EV transitions. Progress has been slow but steady, and both states are looking to ramp up adoption as more EV models become available and prices continue to drop.
Federal Government: Falling behind
The Government has committed to reducing carbon emissions by setting a target of 75 per cent of new passenger (including ‘sports utility’) vehicle orders to be LEVs by 2025. However, progress has been slow. The federal government has yet to demonstrate a strong commitment to transitioning its fleet to EVs, although there are expectations that this may change as more vehicles become available and prices continue to decrease.
Corporate fleets: Driven by environmental targets
While governments have been slow to adopt EVs, the corporate sector has seen more recent activity, driven in part by the need to meet environmental targets. Companies such as IAG, Schneider Electric, Ausgrid and TransGrid have made significant strides, rolling out EVs and addressing the challenges of charging infrastructure through innovative solutions like Charging as a Service. This model allows companies to install EV chargers at employees’ homes and pay a fixed monthly fee, avoiding the large upfront capital expenditure typically associated with charging infrastructure.
Banks, too, are getting in on the action, with Westpac (100% electric or plug-in hybrid vehicles by 2030) and Commonwealth Bank ordering 111 EVs in 2023 and adding hybrids to the fleet (with a goal of electrifying the fleet by 2030). This shift in the corporate sector is a sign that, while whole-of-life costs remain a concern for many fleets, environmental reporting requirements and corporate social responsibility goals are accelerating the transition to EVs.
Local government
Councils were early adopters of electric vehicles last decade with many purchasing a small number (1-5) to trial. Unfortunately, the pandemic and years of natural disasters have impacted council finances and forced many to focus on core asset management rather than incur additional costs for charging infrastructure and EVs.
Another challenge for local government is the lack of fit-for-purpose electric vehicles to match the diverse range of assets in the fleet. Most passenger vehicles are offered as a benefit, so the decision rests with the employee. And Fleet Managers are still waiting for suitable options to transition light commercials, trucks and plant.
Most councils have net zero targets of 2035, so there will be pressure to buy electric fleet assets later in the decade as executives and elected members refocus their attention to reducing CO2 emissions.
Fleet buyers: A snapshot of EV sales
One useful measure of fleet adoption is the sales data published by the Electric Vehicle Council. For 2024 to date, 21% of EV sales have been to fleet buyers, rising to 23% when including sole traders and trusts. This figure peaked in June at 28%, coinciding with the end of the financial year. However, this remains below the market average of 48-49% fleet sales for new vehicles, indicating that fleet managers are still hesitant to commit fully to EVs.
Tesla, the largest seller of EVs in Australia, has played a significant role in these fleet sales. However, with fleet buyers traditionally accounting for a much higher proportion of vehicle sales, the data shows that the transition is still in its early stages.
The other manufacturer that is selling a large share of EVs to fleets is Kia. Large corporates and government fleets have adopted the EV6, the Niro, and are eagerly awaiting the EV5. Kia have been successful in negotiating 100% supply with many of the corporates (IAG, CBA, Schneider) which is a result of its consistent focus on fleet customers during the last five years.
Looking ahead
As we move further into 2024, the EV market in Australia will continue to evolve. Prices for EVs are expected to drop further as supply chains stabilise and more manufacturers enter the market. Governments and corporations alike will need to balance the upfront costs of EVs with the long-term benefits of reduced emissions and lower running costs. For fleet managers, the key challenge will remain finding the right vehicles that meet operational needs, staying within budget and solving the charging infrastructure puzzle.
The road to widespread EV adoption in Australia is far from smooth, but the momentum is building. With Queensland leading the way in the public sector and large corporates pushing forward with their own EV transitions, the rest of the market will likely follow suit in the coming years.
