By Fitch Solutions
- New Zealand’s electric vehicle (EV) market is set to experience exponential growth from 2021 onwards as the national government starts to implement its carbon reduction policies.
- The country’s Labour and Green party coalition will drive long-term growth in EV sales as they will likely improve the incentives offered for EV adoption in 2021 and drive New Zealand to lead the Asia region in EV adoption.
- New Zealand will also increasingly offer a supportive environment for hydrogen fuel cell vehicles (FCVs) over 2020-2030 as the government is committed to transforming New Zealand into a more productive, sustainable and inclusive economy.
We believe that New Zealand’s electric vehicle (EV) market is set to experience exponential growth from 2021 onwards as the national government starts to implement its carbon reduction policies. On December 2 2020, New Zealand’s prime minister Jacinda Ardern announced that all government departments, ministries and agencies will be required to exclusively buy EVs as part of the Government goal to make the entire public sector carbon neutral over 2021-2025. This will, however, exclude its military where there are no electric alternatives for its vehicles. The government currently has 15,870 vehicles in its fleet which will be replaced over 2021-2025. We have therefore revised up our forecast for EV sales over this period to an average annual growth rate of 64.4%, up from an average of 29% previously. We now expect EV sales to reach an annual sales volume of 32,690 units by the end of 2025, up from our previous forecast of 11,154 units. Furthermore, given that the government directive placed increased emphasis on battery electric vehicles (BEVs), and we believe that this will be duplicated in the private EV market, we expect BEV sales to account for a greater share of the country’s EV sales. We now forecast BEV sales to account for 80% of New Zealand’s EV sales by the end of 2025, up from our previous forecast of 67%.
New Zealand’s Labour and Green party coalition will drive long-term growth in EV sales as they will likely strengthen the incentives offered for EV adoption from 2021. Not only did Prime Minister Jacinda Ardern’s Labour Party deliver a convincing victory in the country’s October 2020 elections, but the party also won an outright majority of over 61 seats in the 120-seat parliament, thereby boosting the government’s policymaking capabilities (especially when it comes to environmental policies). Despite having the mandate to form a government soon after the elections, Ardern inaugurated her cabinet in early November 2020 after she fostered a partnership with the left of centre Green party that had been a longstanding ally of Labour. We believe that this Labour-led coalition will strengthen the country’s EV adoption incentives and will result in New Zealand becoming a leader in EV adoption within the Asia region. The country’s current incentives include;
- EV owners are exempt from paying road user charges until end-December 2021.
- EV owners pay lower ACC (a fund that covers the cost of accidents) motor vehicle levies.
- EV owners can access bus lanes.
- EV owners can get preferential parking.
We note that in July 2019, the government proposed a discount of up to NZD8,000 on purchases of new zero-emissions vehicles, coupled with a proposed charge of up to NZD3,000 for new vehicles that emit more than 250g of carbon dioxide per kilometre. Furthermore, the government proposed a discount of up to NZD2,600 for used imported EVs while they also look to add an additional charge of up to NZD1,500 for more polluting used vehicles. This indicates that the government is committed to decarbonising its transport industry, and with the Labour Party achieving an outright majority in the recent elections will see incentives strengthened from 2021 onwards. We, therefore, forecast that New Zealand’s EV sales as % of total domestic vehicle sales will reach a high of 49.9% in 2029, up from only 1.8% in 2019. This will outperform the likes of South Korea (19.51% of total sales), Hong Kong (15% of total sales) and China (13.7% of total sales).
Lastly, we believe that New Zealand will increasingly offer a supportive environment for hydrogen fuel cell vehicles (FCVs) over 2020-2030 as the government is committed to transforming New Zealand into a more productive, sustainable and inclusive economy. According to its Minister of Energy and Resources, the country’s drive towards sustainability includes its goal to reach 100% renewable electricity by 2035 and to transition to a carbon-neutral economy by 2050. According to New Zealand’s Ministry of Environment, in 2016 the transport industry was responsible for over half of the country’s CO2 energy emissions. Furthermore, we forecast that New Zealand’s vehicle fleet will expand at an average annual rate of 2.5% over 2020-2029, to reach a fleet size of over 4.7mn units by the end of 2029, up from 3.65mn units in 2019. This indicates that as the country shifts towards carbon neutrality, its vehicle fleet size will boast strong potential for hydrogen FCVs, especially its heavy commercial vehicle segment with a fleet size of just over 1mn units in 2029. This is because we believe that new Zealand’s FCV market will likely follow that of Australia and be initially dominated by hydrogen fuel cell trucks and buses. The first hydrogen fuel cell trucks are expected to reach New Zealand roads in 2021, as New Zealand-based Hiringa Energy and US-based Hyzon Motors have announced an agreement that secures access to Hyzon’s FCVs for Hiringa and its fleet partners. However, for faster adoption of FCVs, the country will have to introduce purchase and operating incentives.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.