The new car market is in a mire, and not just because spending money is tight. Environmental mandate to make things better is dirtying the scene for hardest-hit electrics now.

MORE than a recession makes it hard to sell new cars at the moment - past and present political machination of environmental standards is also casting a dark cloud.

The Motor Industry Association, which represents new vehicle distributors, says Government’s determination to dismantle the previous regime’s Clean Car programme, elements of which the industry cricitised, factors into a scenario of low financial confidence and ongoing cost-of-living concerns that culminates in “the biggest risk to industry to date.”

The impact of a 70 percent year-on-year drop in electric vehicle registrations within a slump in overall passenger car sales means distributors are nowhere near meeting a mandated CO2 reduction target.

Because of this, the industry is relieved the Clean Car Standard - designed to spur the industry to bring in cleaner cars, whereas the now defunct discount encouraged people to buy them - is under review just a year after it finally went fully live.

CCS especially relies on electrics to earn credits used to offset financial penalties whacking many internal combustion models. Diesel utilities that consistently hold high popularity are among those in that position.

MIA chief executive Aimee Wiley (below) says CCS is effectively unworkable without the discount. And without incentives, the cars so vital to making CCS work, electrics, are not selling.

“From an environmental point of view, it (CCS) is important, it's a crucial policy.”

But from an industry point of view right now, when it impacts more or less at the same time as a recession?

“We're a technology taker in a destination market. I think when you're too heavy-handed with policy, you cause problems. And that's exactly what has happened. We've had aggressive policies, knee jerk reactions, sudden changes and it's the industry left dealing with the consequences and trying to grapple with the complexity just to survive.”

New sales traffic is down 13 percent year-to-date, on a 2023 that was already 10 percent down.

Whereas light commercial sales, into which utes figure, steadied in May, the light passenger segment continued a five month decline. 

At 10,186 registrations, last month’s new car count was 23.7 percent lower than May last year and 23.6 percent lower than May 2022.

What’s particularly affecting now is that previously flourishing interest in full electrics and plug-in hybrids has u-turned; 2654 sold year to date against 9541 for the same period of 2023. 

Models that enjoyed popularity last year are, even if remaining as dominant choices within the segment, now achieving monthly volumes far below peak. 

High fliers BYD and Tesla have been hammered; Businessdesk has reported that Tesla’s latest annual accounts, for the year to December 2023, show a 25 percent drop in revenue. It has been selling far fewer cars this year.

Even though that’s also reflective of a global slowing, Wiley says the national trend is as clear an indicator about the need for some kind of incentive, but perhaps tax breaks, including a Fringe Benefit reset to promote electrics, rather than a return to rebates on sub-$80,000 offers. 

CCD was a major loss leader until revised on July 1 to exclude mild hybrids; from thereon it began to make money. Still, the MIA chief holds removing it was “the right thing to do from a fiscal responsibility point of view.” 

However, with it gone and EVs and PHEVs now being hit by Road User Charges, those cars are “are no longer a consumer priority”.

That’s left a worryingly large glut of unsold stock, filling storage spaces - particularly in Auckland, the primary point of entry - with talk some involvers are seeking extra warehousing space, all this amplifying a perilous industry situation not just here but in source countries, where assembly lines are now tuned to breakneck production, emphatically in China, which has the capacity to build 40 million cars; that’s  half the world’s annual global production. Slowing the flow is by no means as easy as it might sound.

“The discount was meant to stimulate demand for that product,” Wiley says.

“So with the Government and their extreme fiscal responsibility saying, ‘let's just cut it, pull a policy, not only pull CCD but also put RUCs on EVs immediately following, and she'll be right, mate’ …. what’s happened is consumers have rejected that policy change and said, 'right, well, if there's no incentive, I don't want an EV.’”

On reflection the industry wonders if the Clean Car rush was driven less by genuine environmental consciousness than by people merely desiring to take advantage of a fat incentive. 

If the latter is the case, then the irony is that the slump since funding ceased at Christmas has triggered astounding discounting that makes many discount-eligible cars even cheaper.

“They (buyers) weren't necessarily making the decisions based on the environment … because if they were, they'd still buy them. They'd still buy them,” Wiley says. 

“And the reason they'd still buy them is because the price points have never been better,” she said, noting that many distributors have discounted their fare to point they will be massive loss leaders. 

“If you actually had money and wanted a new electric car, now's the time to buy one. I've never seen them so cheap.”

The decline has been savage and now almost certainly means there’s “100 percent” likelihood some distributors will be rethinking their EV representations now.

“Anything with a plug was accounting for between 25 and 30 percent of light passenger sales last year. That’s fallen to around five to six percent so far this year. Another 10 percent's gone to mild hybrid and the rest has gone to petrol combustion.

“Not only are we selling fewer cars, but the cars we're selling are different to last year. 

“The reason that's a problem is because the new vehicle industry order in advance and we can only deal with what policy we know. 

“So when they placed the orders for these cars, we had a CCD, we had an exemption on RUCs, we had strong demand.

“The ships keep coming with EVs … and consumers don't want ‘em.

“Distributors have to meet the market, and when we live in a time where if you've got product that has weak demand, then the cost of holding that product becomes incredibly high.”

There’s nothing to suggest electrics won’t one day return to favour - they are clearly elemental to the future - but the unknown is when.

“The reason it's tough is not just the economic recessionary points … that’s a cycle we've been through before,” Wiley observes.

“Things boom, you sell more, things bust and you sell less. 

“What's making it really hard for industry right now is the (Government) policy changes as well. And it's not just that the policies are changing, it's the impact of the policy changes.”

CCS enacted fully in mid-2023 with fleet milestones of 145g grams of CO2 per kilometre for cars and 218.3g/km for utes.

This dropped to 133.9g/km for cars and 201.9 for utes on January 1 and so far the industry has not come close to achieving that, with respective year to date actuals of 152.4 and 235.1. The latter has gradually increased as the year progresses.

The target for next year, 112.6g, seems a forlorn dream and those for 2026 and 2027, respectively 84.5g then an ultimate target of 63.3g, were never thought to be realistic.

That CCS is now being reviewed by Transport Minister Simeon Brown is controversial. He’s been criticised by the pro-electric vehicle lobby for trying to push through urgent legislation that would allow him to effect changes without approval from Parliament.

In the last week of May the Minister reportedly introduced an amendment under urgency, the Land Transport (Clean Vehicle Standard) Amendment Bill, that would give him powers to change the targets without having to go back to Parliament.

EV advocacy organisation Drive Electric is upset Brown has only consulted importers, but Wiley says the industry felt compelled to offer advice, to point of preparing a paper whose detail she cannot discuss, to protect its future.

In current state, CCS loads penalties of $45 per gram of excessive carbon dioxide (half that for used cars) multiplied by the sum of emissions above the target from every vehicle sold. 

With present consumer demand being “for products that attract penalties” distributors are nervous around managing and trading whatever credits that avail. “They're trying to balance the supply and demand,” says Wiley. “We're consuming a lot of credits at the moment and industry are nervous.”

Drive Electric says diluting CCS on top of the discount’s removal could add 30 million tonnes to NZ’s emissions by 2030, which could cost the Government up to $680 million in emissions credits bought to meet Paris Agreement commitments.

Brown could well announce amendments within weeks, but even if quickly enacted, there is no quick respite for distributors because supply arrangements are not easy altered. Wiley says they will need to months to rejig; probably at least the rest of the year.

In hindsight, had CCD and CCS been simpler and more realistic in its ambition from the outset, it might have survived, she believes. 

“The ambition of that government was never supported by industry because they knew they couldn't achieve it. The settings were wrong but that doesn't mean we didn't need policy. I just don't think we got it right the first time.”

On the other hand, there’s concern now consumers might use Brown’s dismantling of CCD and perhaps CCS as an opportunity to imagine the environment's not a concern. 

The industry would prefer customers always bought the safest, most environmentally prudent choices.

“I think that every single New Zealander - every human on the planet - buying a car has a responsibility to buy better … because it's that new technology, regardless of motive power, that makes a difference,” Wiley says. 

“If you're buying a cleaner car that’s safer and newer, we can turn over our fleet and we can recycle, we can dispose of the heavy emitters. That's the best thing we can possibly do for our climate impacts.”