The cost of cutting carbon
At the end of January, the Climate Change Commission issued its draft advice to the Government, setting out an ambitious range of action New Zealand must take to achieve net zero carbon by 2050. The Commission believes the goals are achievable in terms of technology, money, and legislative settings but says changes must be fair and equitable. The Commission’s proposed targets and actions are very ambitious. In response to those who have said it is too much, too fast, or has a misdirected focus, the Commission Chair, Dr Rod Carr, said: “If not this now, what when?”
Planning for your future in the motor trade has never been more important, with rapid action proposed to reduce the country’s emissions to net zero by 2050. The Climate Change Commission draft report recommends carbon emissions be cut by 2 percent each year between next year and 2025, by 17 percent each year between 2025 and 2030 and 36 percent each year between 2030 and 2035. Electric vehicles and green energy (hydrogen, biofuels) are critical elements in the proposals. In the short term, there will be a push to bring in mostly low emission, or no emission vehicles, with a ban on importing ICE vehicles expected in about 10 or 12 years.
What it could mean for you
MTA’s sector specialists and Advocacy and Strategy Manager share their thoughts on what it might mean for the industry: Overall, MTA predicts vehicles will become much more expensive to buy and to fuel. Fewer will be imported, fewer will be sold. Owners are likely to hold on to their cars for longer. In the very short term, over this year and next, there may well be a bubble of buying by people wanting to avoid the higher costs that are coming.
We expect demand for cars to gradually reduce as prices increase and people are encouraged to use public transport, biking, walking, ride sharing to get around. The new trend to work from home may also lead to households needing fewer cars or at least using them less (which could translate to less fuel bought and longer gaps between routine servicing). There is likely to be less stock available on the new and used import market with fierce international competition for hybrids and EVs. Production of new electrified vehicles may also fall short of demand, which will affect supplies to New Zealand. Used domestic vehicles will also be highly sought after. One direct impact we expect is a gradual reduction in the number of dealerships, perhaps fewer brands, more online browsing and buying, fewer sales staff, growth in technical skills. However, those who can work the new situation to their advantage are likely to do well. We do not see the Kiwi culture of car ownership changing to the same extent the Government is hoping.
Much of the success of the Government’s target to have 1.3 million electrified cars on the road by 2035 will depend on public, corporate and government agency willingness to pay the price. We suspect that price will be too high for many. One of the direct results is likely to be many people choosing to hold on to cars for longer. This will obviously be of direct benefit to repairers. However, at the same time, there will be a rapidly growing influx of hybrid and EVs coming into the country. Repairers need to prepare for this, particularly those in the cities, as electrified vehicles require additional technical skills and some specialist equipment. Individual businesses will need to consider whether they want to make the investment in staff and equipment to take on this work, and when. The overall volume of vehicles coming through for regular maintenance may reduce if people use their ICE vehicles less often (high fuel costs, working from home, using more public transport are all likely to have an impact). There will be a tipping point for many independent repairers to determine when and how they should adjust their business to meet the growth in hybrids and EVs, but it is too early to predict just when this will be. For those who want to stick to ‘old school’ repair work, there is bound to be plenty of it for many years to come. However, your technicians will have to stay up to date with technology. And remember, the ‘dunger’ of 2035 will be a 2020 model vehicle..
The push for more low emission and no emission vehicles will have a direct impact on fuel sales. Lower emission cars need little or no fuel and we can expect steadily increasing taxes on fossil fuels to also translate into a drop in sales. Over time, we expect a reduction in the number of fuel sites, particularly in manned sites. Those with additional sources of revenue will obviously do better. There is no sign of hydrogen becoming a viable alternative within the next five years, perhaps in 10? Biofuels are also likely to be a slow starter but may provide an income stream for some operators with demand likely to grow from the heavy vehicle fleet. The growth of electrified vehicles raises the possibility of installing charging points on members’ sites. Research shows most people will generally charge up at home overnight, however, they will be looking for top-ups, and for longer charges when travelling between towns. The question for the service station sector is, are there enough EVs to warrant investing in charging equipment? And are service stations, in particular your service station, the best place for these? Charging times will grow shorter but giving the public a reason to stop at your charging station will be the key to success. Heavy vehicles require longer, slower charging and their needs will be different again. Service station operators with fuel tanks due for replacement within the next few years will need to think very carefully about whether to make that investment, and whether/if hydrogen or biofuel should also be considered.