Mild hybrids losing rebate, utes set to be clobbered even harder, carbon neutral zone shifts.

ALTERATION to the Clean Car Discount scheme enhances Government favouritism of highly electric-involved choices, retracts rebates from some popular cars and adds more cost burden to one-tonne utilities, including the one whose standing as the country’s favourite new vehicle maintained last month.

The change to the 'feebate' scheme arrives because the ideal of it self-funding hasn’t worked out.

Revisions coming on Clean Car’s second anniversary, July 1, suggest unavoidable impact on popular vehicles’ prices and impress that any brand without an electric vehicle to sell will feel more heat.

Fees paid by higher-emitting vehicles, specifically one-tonne utes, will dramatically increase – by $2600 for light commercials, the equivalent of a 4-5 percent price increase. Rebate and penalty thresholds change. The carbon neutral zone shifts; cars that previously escaped penalty now suffer it. Others that have benefitted go without.

The refresh has drawn criticism and concern from the new vehicle industry, particularly for excluding almost all of the mild hybrids highly favoured by consumers, but has been welcomed by a group encouraging greater electric car uptake.

Previously, any vehicle emitting less than 146 grams per kilometre in CO2 could achieve a Government cheque.

That limit has dropped to 100g/km; an output beyond the reach of not just almost all fully fossil-fuelled cars but also a severe challenge for most mild hybrids – the drivetrain designed for CO2 reduction most popular with Kiwis. It is within the remit of plug-in hybrids, when they work optimally. Battery electric vehicles are zero emissions.

Conversely, the threshold for what qualifies as a high emissions vehicle has also been brought back, from 192 grams of CO2 per kilometre to 150g, the median point of the current carbon neutral zone.

The maximum CO2 penalty is rising from $5175 to $6900 for new vehicles, and from $2875 to $3450 for used imports.

The rebate paid out on new electric vehicles reduces, from $8625 to $7015, with no change to the eligibility cap of $80,000, whereas it will increase from $3450 to $3507 for used imports. The rebate paid out for plug-in hybrids is also pared back.

The changes have proven true industry speculation that fewer discounts and more penalties would be unavoidable, given the accelerating rate of rebate pay out.

Approached for comment were the Motor Industry Association, which fronts for almost all new vehicle distributors, Toyota New Zealand – the new car market leader whose sales push centres on mild hybrid technology – Ford New Zealand, whose Ranger utility has stood firm as a top-selling new vehicle despite carrying a penalty now set to rise again, and DriveElectric, an independent organisation pushing for greater uptake of electric cars.

The MIA has significant concerns about several changes, chief executive Aimee Wiley said. 

Keeping the eligibility criteria for a full rebate was welcomed, as that addressed inflationary pressures for new vehicle prices, but the association was disappointed that its request for the creation of a specific light commercial vehicle cap at $85,000 was not undertaken. It says as consequence, light commercial vehicles will be disproportionately impacted.

“Our most significant concern is the timing for the change.

“Such a short notice period for industry to prepare … will cause difficulties for the new vehicle sector for two key reasons,” Wiley argued.

“The first relates to makes and models that have long wait lists and where customers have paid deposits in advance for those vehicles and have an expectation about the overall purchase price for those vehicles.

“The second relates to forward supply orders that have already been committed to by new vehicle importers and distributors. A longer notice period for these changes would have enabled industry to have adjusted some of those orders in the light of upcoming changes to CCD rebates and fees.”

The MIA anticipated a reduction in rebates, an increase in fees and adjustment to the bands for eligibility for rebates. However, it is concerned almost all mild hybrids are now outside the scheme.

“If sales for these vehicles drop because they no longer attract a CCD rebate, this could negatively impact the downward trend of CO2 emission improvements from vehicles entering the New Zealand fleet.”

A factor influencing today’s changes has been that the scheme has failed to stop interest in a specific target, diesel utes, which even with penalty loadings retained popularity, to point the Ranger maintained as the top-selling new car for most months.  

That run continued into April, when it achieved 929 registrations, with Hilux the second most popular choice of new vehicle, on 653. Next was the Toyota RAV4.

Those utes are now to be be penalised even harder. The average penalty for Ranger seems set to lift from $2645 to $5290, and for Hilux it will go from $2990 to $5635. The hardest hit one-tonne utility appears to be Mitsubishi Triton, which lifts from $4025 to $6670.

Ford New Zealand communications manager Tom Clancy said: “Regarding Ranger, no doubt anytime the Government adds costs to items, it changes behaviours and what people can afford.

“But New Zealanders will still need utes for towing, work at the job site and every other task under the New Zealand sun.” 

The Auckland-domiciled brand predicts a consumer shift toward the diesel Ranger with a 2.0-litre biturbo powertrain.

“It’s also still one of the most capable with power, towing and overall performance. So the Ranger BiTurbo may become a more popular option for Ford customers. It may also become a good option for customers currently in competitor vehicles that are now hit with higher fees.”

Some popular sports utilities are also in for a stormy time. The Ford Everest, which in most formats has the same 3.0-litre V6 turbodiesel as some Rangers, will face a $5923 penalty, up from $3278, and the Hyundai Santa Fe will have a $4715 impost, up from $2070. The Mitsubishi ASX lands a $3220 impost, up from $575.

Popular NZ-new choices in editions that lose carbon neutral status and now face impost include the Toyota RAV4 ($1265), MG ZS (2415), Mitsubishi Eclipse Cross ($2818) and Mitsubishi Outlander (from $460 to $3105).

‘Saddened’ is how Toyota New Zealand chief executive Neeraj Lala describes his reaction.

The Palmerston North-based brand was first to publicly support legislative aspiration for lowering CO2 and remains on track to meet Government’s long-term goals, from tailoring its fleet to best accomplish emissions reduction.

 “Many of our customers have placed orders in good faith … with a clear idea of what the rebate or fee will be as part of their affordability decision.”

 “… I am saddened by the fact that many of them, who have waited extended periods for their vehicles due to us not being able to supply them fast enough, will now be penalised by either reduction of rebate or increase in fee with very little notice.” 

Speaking specifically to commercial vehicles, Lala reiterated long-standing concern that sectors, including agriculture and construction, were penalised by a significant fee increase when there were no suitable low emission options available yet.

 The brand is disappointed mild hybrids will no longer receive rebates, saying the technology had made tangible difference in reducing tailpipe emissions over the last four years. TNZ will continue to sell hybrids, plus it is adding a battery car before year-end.

Drive Electric chair Mark Gilbert said Clean Car has already turned New Zealand from a laggard to a leader when it comes to electric vehicle adoption but it was accepted that incentives were necessary to continue rate of adoption.  

“While we’ve made some great progress increasing new EV sales, at the end of 2022, there were still only 65,000 registered EVs. This is still just 1.5 percent of the entire vehicle fleet. There’s more to do.

“Research has shown that the clean car discount is popular with New Zealanders, so let’s keep it going until we get close to price parity between EVs and petrol cars. This discount won’t be needed forever - perhaps only another few years. In the meantime, it makes sense for the Government to make the design of the scheme fiscally neutral. 

“The changes to the Clean Car Discount appear designed to encourage even cleaner vehicles entering our fleet; this will mean more PHEVs and BEVs coming in and over time fewer petrol and diesel vehicles.”

In respect to increase in incentives on pre-owned import electrics, he said supply of those was a real challenge. “This is because EVs are a relatively new technology.

“We will need more secondhand EVs that are New Zealand-new to ensure a wide range of New Zealanders can access e-mobility. Additional EVs brought in today under this scheme, are future secondhand vehicles.”

Today Government said the trends to date suggest Clean Car is set to reduce 230 percent more emissions than originally estimated by 2025, which Transport Minister Michael Wood said had exceeded industry and Government projections. 

“The scheme is facilitating an increase in the number of EVs entering the fleet we did not expect until 2027. 

“As planned we are further targeting the scheme to maintain its success, and ensure it will be self-funding until its next review,” Wood said.

In original form, Clean Car’s seeding fund of $304 million severely eroded, through income from penalties running well below the rate of pay out - $161m in fees against $367m in rebates as of March.

As part of this month's budget, the discount's repayable crown grant will also increase by $100 million. 

In noting that more than 100,000 Clean Car Discount rebates had been paid out since introduction in 2021, Government has acknowledged the scheme’s success was greater than its self-funded model could sustain. 

Wood expects the increase to used vehicle rebates will encourage more lower and middle income earners to buy a lower emission car. Another change brought after outcry is introduction of a special discount for low emission disability vehicles.

 The new schedule steers clear of the Clean Car Standard, another regime of penalty that has only just fired up and aims specifically at the automotive industry, though some involvers have signalled they will forward any costs it brings to recommended retails. 

The scheme also works off C02 emissions, of which vehicle importers are expected to meet targets with each vehicle that is registered. High emitting vehicles are able to be offset by lower emitting vehicles, but if the limit is breached, fines enact. Along the same lines, if an importer is under the limit, credits are issued, which can be traded.