The Government has provided subsidises for electric vehicles so New Zealand can urgently adapt to climate change. This is a carrot approach. A risk for providing a subsidy is that the producer or retailer simply raises their price to absorb the subsidy and the consumer gets no real benefit. Radio NZ article, 28 November, ‘Motor industry predicts used car prices will rise up to 25% under Clean Car Standard’ quotes ‘industry’ as saying ‘but price rises in Japan had soaked up consumer rebates so customers [in NZ] were not much better off’. A price is relative to what somebody is prepared to pay. If a firms knows customers were paying at a previous price; then a government rebate just means the firm can increase the base price of their product by the value of the rebate then they know the customer can pay the higher price because they could before. We can’t say this is what has happened here (yeah right).
But there is a deeper problem, the whole article content contributed by the interviewed people is to warn government to lay off change; its’ going too fast, not enough support, problems, and its going to drive up prices, wow 25%. And the warning acts as a signal to each other that price rises are expected and possible; it can drive inflation to make profit. In doing this the used car industry is actually showing that the private market is not able to adapt quickly to the need to minimise climate change. Private enterprise in this market is actually holding back necessary and urgent adaptation.
The governments carrot and stick approaches are failing to bring about critical economic and environmental change because private enterprise can’t adapt. The best option now is for the government to approach overseas producers directly with an option for a large one off import of EV’s. Overseas producers can tender. The best tender presumably based on the longest range and battery durability rather than a high sport performance (which so many EV producers seem to be going for)! Means a large influx of EV’s is possible. Government can sell them at the cost to get them here (no middle man profit cost for customers to pay) and we get a major transformation of our transport system. If the tender contract was big enough. It could be very cost effective for an overseas producer, one model, one standard, no bells and whistles (like radios) as they can be put in later. Or whatever to keep the cost down.
According to google New Zealand Motor Vehicle sales (for new cars) average 93,713 units a year. And 130,317 used cars were imported into New Zealand during 2021. So if a 100,000 new EV’s were imported you could definitely soak up a huge amount of that demand as the price would be low. And a lower price is likely to bring new people into purchasing an EV. A kick back for government could be trade in’s with the vehicles sold as scrap back overseas, or jobs in recycling.
- Car yards go out of business…. Is that a problem or a benefit? Not a huge impact for used car as they are so much cheaper. Many new vehicle sales are luxury vehicles so the impact may not be catastrophic on the new vehicle market. It is possible the government imports could bring down inflation as firms lower prices to sell stock to stay in business.
- EV’s don’t sell; I don’t believe it at the moment. There is a huge amount of EV interest.
- Financial risk to government – Yes, but not this early in the market. Risk could be removed by preventing private car sales of this particular model. So no price undercutting on the one competition item and ramping up prices on all the others. But at the worst if sales did not happen then vehicles could be sold/rented/leased to the poor so they could get to work and have a life.
- People hate the design looks of the EV and won’t buy it. People bought Skoda’s, Hillman Imp’s… people need transport. And we are long way off great public transport; but this won’t stop that progress.
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