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Fuel Efficiency Standard Panel – EV Summit 2022

Fuel Efficiency Standard Panel – EV Summit 2022

by Katie
28/11/2022

Speaker 1:

Please join me in welcoming our speakers, Paul Sansom from Volkswagen, Sam Johnson from Polestar, Rob Giltinan from the NRMA, and Zoe Daniel, the member. Please do. [inaudible 00:00:32], Zoe, for a moment there I forgot the name of your electorate, the member for Goldstein. Had to look that up. As a New South Welshman, have no need to know, unfortunately.

                Thank you all for joining us. So I’m not going to do a long introduction of everyone. Instead, I’m going to ask you to make some introductory remarks of your own, and in a selfish attempt to try to shape some of those remarks. We’ve, of course, been speaking quite a lot about the need for fuel efficiency standards in Australia. Not only to finally have them in place, but also to ensure that we have strong ones that resemble the rest of the world in order to provide certain benefits to Australia. So, can I start you all off by… Please do introduce yourself, make some introductory remarks, but also tell us as leaders, both in politics and industry, and also representing motorists, of course, why that is such an important subject to you. Paul?

Speaker 2:

You’re starting with me. [inaudible 00:01:20]. Good morning, everyone. Thanks for the introduction. So Paul Sansom, I’m the group managing director for Volkswagen in Australia. And Volkswagen’s made up of passenger cars and commercial vehicles, but also of Audi, Škoda, and recently we launched in Australia, Cupra, which is our Spanish brand, made from Barcelona. So I’ve got five unique European brands that I’m representing, and this conversation has been one that we’ve been consistently talking to for many years now, actually. So culminating in this morning’s announcement from the minister, obviously we’re delighted to hear that the minister is starting a process of consultation with the industry to introduce some fuel efficiency standards.

                It was really interesting, from my point of view, to listen to Mike Cannon-Brookes saying that there’s not a demand issue, there’s a supply issue. It was closely followed by the minister saying, “The supply issue is caused entirely by lack of policy leadership,” so that you can see what’s happening and this is why it’s so important. I’m sitting here representing probably 180 dealers around the country and with thousands of customers. And one in two of those customers are walking into our showrooms every day, asking for an electric vehicle. And we can’t satisfy that demand because we haven’t had leadership in policy.

                So these targets that we’re talking about are incredibly important because the conversations I have with five different headquarters across Europe, they say, “Well, what’s the situation in Australia, Paul. And is there some legislation that we’ve got to adhere to? Is there some potential penalties that we need to be aware of, that are financial?” And I say, “No, there isn’t.” And they say, “Okay,” and move on to the next market. And those other markets are getting all the supply. And that’s why our consumers here in Australia have been getting shortchanged with the latest and safest technology that’s the lowest carbon emissions. So these targets are incredibly important. So I’m very encouraged by announcements this morning, Bay.

Speaker 1:

Thank you. And Sam, Polestar, of course, only sells electric vehicles. So I think maybe a misapprehension out there is that this doesn’t matter to a company like Polestar, that this is easy, you just bring all of the cars that you have. Can you reflect on that?

Speaker 3:

Absolutely. I mean, the decision makers, when they’re sending EVs to a country, need to make sure that, that country has the right policies that supports EVs. Otherwise, it won’t have the appropriate demand and consumer uptake. So, for me in Australia, being even in EV company in its own, I have to still convince our decision makers to bring supply to Australia rather than other right hand drive markets like the UK. We’ve got such strong demand and supply policies in place. So I have to convince them. Australia has got a huge potential for EVs and the momentum is really there now, but we have to put all the things in place. But we do have very good policy support and future policy plans being put in place, that I can now go back to my decision makers and say, “Hey, we’ve got a good environment here in Australia. Give me the supply that we need, to satisfy the demand.”

Speaker 1:

Wonderful. And Zoe, of course, you’re in your unique position as a representative in our parliament. We’ve heard you speak about this issue and related issues, quite a lot. Why don’t you start us off with why, why is this such an issue for you?

Speaker 4:

Because it’s an issue for my community. I was voted in on a climate platform, and I come from a community in Melbourne that is a highly educated and socioeconomically, largely wealthy community, and does have comparatively high uptake of EVs. But there’s still frustration in my community around lack of supply, around lack of charging infrastructure. And I do think that there is a sense within the community of a two tiered system around electric vehicles, where a lot of people can’t access them because of cost. People who are renting, don’t have access to charges in the environments in which they live. So it is something that came up during the campaign, but I think it’s part of a broader changing attitude in this country where people began to feel, and I think the election result reflected it, that their government wasn’t acting on the will of the community on these kinds of things. And that was reflected in the vote.

                I would say that I’m pleased to see the minister launch the discussion paper intent. I know that I popped down to the press conference while everyone else was still in here, old habits die hard. And the first question he was asked was, “Is this a carbon tax?” Which takes us back to the old days of the end of the weekend and all sorts of other culture war tactics that have been used around this issue. And I agree with what Robyn Denholm said, that in part, this is educational, but it’s also to do with bringing all of the community along and giving all of the community access to, not only electric vehicles, but all sorts of environmental technologies that take us forward as a country.

Speaker 1:

I’d quickly like to say, unfortunately, Emma Harrington has had urgent family medical emergency. So thank you to Rob for agreeing to jump in last moment, and for putting you on the spot. But speaking about bringing the community along as, if I’m not mistaken, the largest membership organization in the country, representing motorists, particularly in New South Wales, but doing operating across the country. Your organization has been very vocal underneath four strong standards. But what does that reflect in terms of where you see the communities on this issue?

Speaker 5:

Yeah. So thanks, Bay. And I had a couple of hours this morning at least, to put into Google what an EV was. So I’m well prepared for today. I joined the organization back in 2017, and at that point, the board and the executive made a pretty strong commitment that we were going to concentrate on what we could do to support a future, because we knew, based on the conversations with manufacturers that, that was ultimately where we needed to be. We have 2.8 plus million members now, and we have the advantage of being able to go and test policy positions quite regularly, test purchase propensity and those sorts of things. And back in 2017, when we went and asked them about electric vehicles, and you might remember we did a code paper at that point, we received a lot of pushback from the membership. It was incredibly negative.

                And whilst we always like to support the membership and put their views forward to Australian governments, we also sometimes need to take a leadership position. And that’s what we decided to do when we announced $10 million to invest in a charging network in New South Wales and to concentrate on having that regional, because we knew that ultimately that wasn’t going to be a focused area of commercial operators who were putting charging infrastructure at the time. So we made the decision to concentrate on the policy angle and the infrastructure angle. And we’ve done a lot of work over the past five years in doing that, particularly with the New South Wales government on their recent reforms, and also the ACT government, two of the leading jurisdictions in the country in terms of support for EV.

                What we have seen now, and the important point, I guess, to make is that over five years, we’ve seen sentiment shift really significantly. And the most recent data that we’ve got is just this week, which shows that now nearly 60% of the membership are showing a desire to purchase an electric vehicle as they’re next, and that more than a quarter have actually actively gone and researched about purchasing a next vehicle. So it’s moved dramatically in that short timeframe, and we’re not seeing any of the negativity come back from the membership now like we did just five years ago. And one of the things that we are doing with the New South Wales government, is running electric vehicle drive days, which we saw as a really important tool to get people behind the wheel and to give them an understanding of what it’s like to own and operate an EV. And we’ve only just started that program, which we’re hopefully going to expand into the ACT as well, and run it for the next 18 months at least.

                But what we see from sentiment shift, when people are unfamiliar with the vehicle but then have an experience, is that shifts further again, and all of the kind of anxiety and the range anxiety and those types of issues disappear pretty quickly. And we see a lot of enthusiasm built up around EV, which is great. So we’re doing a lot on that side, but where we’re probably lacking in terms of leadership at a policy level is at the federal level. New South Wales and ACT, as I said, have done great things, really, really great things. But recently we’ve seen the federal government take a leadership position, and start to shift. Look at FBT, look at the import tariff. We feel that a CO2 standard is the obvious missing link that can help supply, moving forward.

Speaker 1:

Sorry, if I can come back to you for a moment. So we heard this moment that, I guess, the starting gun has been fired, the firing gun has been started. And there will be a process from hereon now. What job do you think there is for the parliament and for parliamentarians, particularly on the cross bench, to do throughout this process?

Speaker 4:

Well, I have to be blunt, and I think on this, it’s exert pressure for fast and timely action. I think everyone in this room knows what needs to happen. I think the minister knows what needs to happen. And I think a lot of people in the community know what needs to happen. So I understand from a perspective of de-risking what has been a hot political potato for a long time, that the government wants to do a process of consultation and a discussion paper. So let’s make it a quick chat. I would like to see the results of that discussion if, let’s say, it’s a month long process of submissions that we might see by the end of the year, what that’s yielded. And then there’s the actual writing of the regulations, and that will take time. But of course, in the volatile political environment that we’re in, we want this through in this parliament at worst, and preferably sooner than that. So I think that’s where I’m at with it, pushing for that. And that’s not from me necessarily, that’s from my community that I know wants this.

Speaker 1:

It is a pause worthy [inaudible 00:11:52] this year. Absolutely agree. Sam… Samantha, sorry. You’re in a position, you’ve launched the car, an electric car in the market this year. You’ve seen firsthand what that appetite and the consumer attitude to electric vehicles is. Are there any insights there that you can share [inaudible 00:12:08], both how it’s gone, launching a vehicle in the market, how that’s performing, but also what have you heard back?

Speaker 3:

Well, I think for Polestar, I mean, we have a moonshot goal of a net zero emissions vehicle by 2030. So this is really strong to our beliefs in bringing electric mobility to Australia. We’re seeing a real shift in consumer behavior. People are talking about EVs being their next car now rather than their second car or something they’ll do in the future. So sentiment is really changing for us. As a EV brand coming to the market first time, two years ago, we looked at what the modeling was like and the infrastructure, and said, “Well, it’s really in its infancy, but we can just feel the momentum is going to be there.” When we go to today, there has been a huge shift in that demand. But we need to bring all the things into place, all the things we’ve been talking about today, to have the infrastructure for consumers to be able to feel comfortable in buying an EV. But the fuel efficiency standards in being able to have the supply of EVs is the strongest thing that’s needed at the moment.

                But on the incentive side and the consumer side, the demand side, we still do need to have a federally or a national consistent model around incentives, and at a threshold that really understands that costs have gone up. So the input costs have gone up. The prices of cars have gone up, and not just EVs, petrol cars as well. But the thresholds haven’t changed incentives for EVs. So really, they need to reflect that higher cost, to be able to bring more people into their EV space, rather than people at the higher end saying, “Okay, well, I’m just going to buy a petrol car. It’s easier. It’s cheaper.” So, that needs to happen. And being consistent across Australia as well, where there’s different incentive amounts or thresholds. There’s different amounts. Some have different stamp duty incentives, registration incentives, road user taxes. It’s just very varied and so is the administration for businesses.

                So something we’ve really tackled with as a business coming to Australia, is all the different ways that you have to provide EVs and these incentives to consumers. And education as well. And I think you spoke about that as well. That is a key thing because there’s a lot of consumers out there that don’t know that there are incentives and benefits available. We assume that they do, but they don’t. So it’s a lot more. So yes, we do need to really open up that supply to Australia, to satisfy the demand that is there now. But there is so much more demand, that we need to really catch up with the rest of the world. So Zoe, I agree, things do have to happen more quickly. We have to accelerate to be able to catch up because we are way behind, and we can’t go at the same pace the other countries have gone. We have to do it faster.

Speaker 1:

Now, Paul, one of the criticisms we hear about fuel efficiency standards is that, even if we set very strong ones, even in line with the rest of the world, over the next decade, decade and a half, we just can’t get cheaper electric vehicles or things like electric utes that Australians love. You run the Australian arm of the… What is it? Second largest volume manufacturer of vehicles in the world. Why can’t we have cheaper electric cars on electric utes?

Speaker 2:

Well, we can, frankly. So just to give you some numbers, the Volkswagen group, by the end of this decade, 50% of the cars that we produce and sell worldwide, will be battery electric vehicles, by the end of the following decade. So the end of 2040, a 100% of the cars that we sell across 14 brands or so, will be battery electric vehicles. The plants and the factories that they’re produced in, will have net zero emissions. The transformation is profound in our company. And the more that transformation gathers pace, the more choice there is. And there’s already choice from our group today that’s on sale, that are much more affordable, by the way, EVs than they are on sale here in Australia today.

                In Europe and in other markets, and the reason I come back to that, I think the starting gun has been fired today, which is great. But it is only a start, is that these fuel efficiency standards that we hope are implemented. And Chris Bowen said, “If we implement…” And I wish he had said when. And there is a need for consultation. I agree it needs to be fast. Because we’ve been talking about it for so long. And we need to get it into the market now, because it will unlock some production that comes certainly from our company and many others in the market to give the consumers greater choice for more affordable EVs.

                But that is just the start. And I would go on to say the targets aren’t, that’s not the panacea. There’s a huge amount of work we’ve got to do as an industry to not only get greater supply and product and choice and make it more affordable, there does need to be incentives work in Australia. But they work in EVs in the rest of the world, they need to work here as well. Some that have been announced, like the FPT, stamp duty and the instant asset write-off, luxury car tax can go on electric vehicles, for instance, and the rest. But incentives with home charging and incentives for industry to set up infrastructure around the country.

                And I do agree with, Sam, your point around harmonization. What’s emerging very quickly, is a patchwork across the states. That’s very difficult for us as manufacturers to then advertise anything nationally, because you’ve got a different price in one state you have in the next. That’s no good for the consumer. It’s confusing. It’s confusing for the dealers. We have to harmonize that. So I call for a federal policy on this. And I hope what Chris was saying earlier on, is that he can start working with the states to bring some harmony to the incentives, which are much needed. It’s come up, time and again, there’s an education piece. So I said one in two customers are now talking about buying an EV. So they’re fairly well educated. They still need more. But the other half, there’s a long way to go with that education. And there’s a lot of myth busting to be done around EVs that we can do, and we have a responsibility as manufacturers, as well as many other parties.

                So look, I think we should be ambitious if the ute comes up often. At the moment, they’re probably a lot of those. Some manufacturers are already building electric utes. Whether they’re destined for Australia, I can’t tell you that. Our company has got a big proportion of volume in North America where the ute is also popular. This is another popular market here. There are other ute markets. I’ve got absolutely no doubt that somewhere sitting in a confidential office in Wolfsburg in Germany, someone’s designing an electric ute. It will be made available, left and right hand drive. There will be electric utes in our market. If we set ambitious goals, it’ll accelerate that pace of change.

Speaker 1:

Wonderful. I’m about to open up for audience questions. So if you have them, be ready. But one more question for me, just because I’m very selfish. We’ve been talking a lot about speeding up the consultation process. So Rob, I’m going to throw it to you. Consultation to the federal government on fuel efficiency standards, where do they look like go?

Speaker 5:

So just, I guess, to give some context, if you look at the state commitments to net zero 2050, I think there needs to be a plan put in place across every sector to enable us to achieve that. We, given that we’re an advocate for the consumer, feel that the biggest difference we can make is in the transport sector and particularly in light vehicles. For a CO2 target, if you have a look at the rest of the world, we’re a long way behind. The Triple A did some modeling around this. I think it was back in 2016 or 17. And there’s a general consensus now that, that is effectively redundant. It needs to be sharpened significantly.

                But we need to have ambition because if you don’t have ambition, you’re not sending a market signal to manufacturers and to jurisdictions overseas. And so, if you have a look at what’s going on around the world, have a look at what the international energy agency saying, have a look at the member feedback that we’ve got, we feel that we should have the ambition to look at 2035. And to say, at that point, we have to have the overwhelming majority of sales to be zero emissions, if not all sales to be zero emissions. There’s definitely a phasing process to go through to achieve that. But we need to do it now because we need to catch up, is the overriding message.

Speaker 1:

I’ll open up to audience questions and I’ll let everyone do closing remarks and let the rest of you answer this. But I think we have people with microphones. So if you get a microphone, you get a question, I think, is the system. Wayne’s coming around with one now.

Speaker 6:

Yes. My question is not about the consultation period, but about the notice period. When a minister called Paul Fletcher was in charge of this policy in 2017, before he went silent, he was talking about an eight year notice period. In other words, the mandatory efficiency standards would not be introduced until 2025. What are the views of the panel and what is a reasonable notice period for consultation with the industry?

Speaker 2:

Maybe I can answer that and say that the industry has actually been calling for these standards for some time. And we’ve got the most… Well, I would call it bizarre or unique situation in Australia, where the industry set its own standards. Now you heard Mike talk about those earlier on, their voluntary standards. It’s a relative low bar. We know we can do better. But the industry’s been waiting for this. I’m representing Volkswagen here today, but I can tell you there could be any other CEO of an automotive company sat here will be saying the same thing. We’ve been calling for these standards because our customers are queuing up in our showrooms. I don’t know if you’ve seen some of the viral videos that have been going around social media. The queues outside electric vehicle showrooms at the moment are phenomenal. Some of the new brands that have been launching, there’s a huge interest in this.

                So the message really is that, back then or even when these standards were introduced in Europe or the UK where I’m from, back in sort of 2005, we were having that discussion, there was a transition. Back then, there wasn’t an electric vehicle. There wasn’t much choice. A lot had to be worked out. We’ve heard a lot earlier on, that the blueprints were already there for us to follow in Australia. We don’t have to reinvent the wheel here. We can just take the very best of what we see in other countries, that we’ve seen from some of the speakers already this morning. The most important thing is the products are there. The products are there, they’re on sale and they’re being used by customers all around the world. We can bring them here if we get the circumstances right. So we don’t need as much notice period as perhaps we thought, when we were talking about it back in 2017. The world’s moved on. And by 2030, we’ll have moved on again at a dramatic pace. The pace of change that we feel today, it’ll never be this slow again.

Speaker 4:

Can I just… I totally agree with what Paul said. And I think there’s no case for eight years when the manufacturers have known this was coming and the products exist. I’m curious how long you think you do need. Is two years long enough?

Speaker 2:

The consultation process you’re talking?

Speaker 4:

Yes.

Speaker 2:

No, I think that’s too long.

Speaker 4:

No, but implementation.

Speaker 2:

Implementation. If we had some standards today, we could start bringing some cars tomorrow. We really could. But I don’t want to overemphasize that. In fact that’s a game changer. It really is. Not just for Volkswagen, for all automotive companies. It’ll open up the doors to more affordable EVs in our market. I’ve got no doubt about that.

Speaker 5:

And just further, I think the notice period, as long as you’ve got a mandate in place and you have a phase set of targets looking at a particular end date, it’s probably less important. But, given the fact that we’ve got sulfur levels reducing to 10 parts per million at the end of 2024, 2025 probably makes reasonable sense, which is a pretty short timeframe, from my view.

Speaker 1:

Have a question on this side of the room?

Speaker 7:

Yeah.

Speaker 1:

If you could please introduce yourself when you ask the question.

Speaker 7:

Scott White from the Delegation of the European Union. Thanks for such a great event today. Paul, this is another one for you please. I was just wondering, we have been hearing about supply chain issues in many manufacturing sectors. I’m just wondering how much that is a factor in your being able to meet demand. Of course, not just in Australia, I’m talking globally here. In terms of manufacturing, how many issues you are seeing around supply chain constraints, that kind of thing, at the moment?

                And a second question, just out of curiosity actually. I was wondering, one of the things that perhaps might account for the popularity of utes or pickups in Australia, might be towing capacity. So I’m just wondering if perhaps anyone on the panel could shed some light in terms of how EVs or larger EVs go with towing, and whether that can perhaps help [inaudible 00:25:09] some of the potential concerns on the part of Australian consumers. Thanks.

Speaker 1:

[inaudible 00:25:13] interrupting us that we start with maybe Samantha on the supply chain question, if that’s okay.

Speaker 3:

Yeah. No, that’s fine. I think, globally, I mean, obviously China’s been shut down with COVID for a while for us, and there’s been other areas of semiconductor issues and everything. We’re only now having the factories all starting to ramp up again and start to get that production going. So, supply is definitely an issue now globally and having to fight for. Like in our company, every country has to fight for why they deserve to get that supply and what they’re going to do. And they must not be stock sitting on the ground. It must go out the door. So I think, globally, everyone has to fight for the supply at the moment. As supply ramps up globally, again, they’re going to send the EVs to the countries that have fuel efficiency standards in place.

Speaker 1:

Sorry, Paul, to interrupt you.

Speaker 2:

No, that’s fine. Yeah. And actually probably that’s a great question. Thank you for it because… Or two questions, cheeky. But I think it’s great. To damper my enthusiasm around, if we had the standards today, would bring the customer. There is a global supply chain issue on combustion engines and electric vehicles that we are all grappling with, particularly our company at the moment. But we are seeing some light at the end of the tunnel, we’ve had a real compound effect. We had obviously the pandemic, and the impact that, that had on the supply chain. We’re still feeling the ripple effect of that in certainly in logistics. We then had the outbreak of war in Europe that had another very detrimental effect on the suppliers, quite a lot of component suppliers in South Ukraine, which are doing an amazing job by the way. They’ve reopened, which I think is just testing me to the resilience of that nation under this horrific situation they found themselves in.

                And then we had another shutdown in Shanghai, where, for our group, we’ve got 19 component suppliers there. So the compound effect of that has had a dramatic impact on the supply chain that we’ll still feel for the remainder of this year and into next. But we are seeing some light at the end of the tunnel, whether it’s combustion engine or a battery electric vehicle. Battery electric vehicles do have probably two to three times more semiconductors in them than a combustion engine vehicle. So there’s more delay, but again, that’s another supply issue. But let’s just say, the world was… Please, goodness, there is going to be a moment when the world all calms down a little bit and some of these major impacts start to slow down there. But let’s say, all things are even and supply wasn’t a problem. The only reason then it would have left as an issue in Australia for getting supply of electric vehicles is lack of policy, which comes back to what we’ve talked about this morning.

                To answer your question on towing, no difference. That electric vehicles can tow just the same as a combustion engine type vehicle.

Speaker 1:

Now we are just about out of time, but I’ve got to annoy the organizers a little bit and give one speaker the opportunity to give closing remarks. Apologies to the rest of you, but it’s going to be the speaker who added the most color to our panel, Ms. Daniels.

Speaker 4:

Thank you. Well, look, I’ll just close by saying, what’s happened today with the announcement that the ministers made in regard to the discussion and what this piece might look like, is just a piece, and it’s just a start of a process in a particular area of a much larger dynamic that’s going on. So I think we need to see it that way. And at the moment, I’m kind of with a notebook going, “Okay, that piece, that piece, that piece. What’s the next piece?” And I think that the next piece, if we are talking about finally creating some policy certainty in these areas, is to say, “There will be no new car sales of fossil fuel vehicles in Australia after 2035.” Japan’s done it. Vast areas of Europe have done it. The industry needs certainty, consumers need certainty. And I think that is the next step. And even surveys of Australians show that 65% of people support that. The political will finally is there. And I say, spend the political capital while you’ve got it.

Speaker 1:

I gave you collecting remarks. Please join me in. Thank you.

 

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