My ECONS101 class doesn't start for a couple of weeks, but I figures I would post this now. In yesterday's New Zealand Herald, there were two stories related to changes in electric vehicle policies, and the resulting changes in consumer behaviour.
First, this article talks about the removal of the electric vehicle subsidy scheme (which I discussed earlier here and here and here):
EV sales drove off a cliff in January, as expected, with a carrot gone and stick about to hit.
At the same time, light commercial sales jumped 53 per cent with the abolition of the “ute tax” and “ICE” passenger vehicle sales surged.
With the clean car discount gone, petrol and diesel vehicles - less than half the market during most months of 2023 - accounted for 96 per cent of new vehicle registrations in January 2024, according to Motor Industry Association (MIA) figures.
There were just 244 new registrations of new battery electric light vehicles during the month compared to 3469 during December - when sales spiked in the final month of the CCD - and 448 in January 2022.
Consider the change in relative prices here. When one good (Good A) gets more expensive relative to some other good (Good B), consumers will tend to buy less of Good A and more of Good B. There is no surprise here. Removing the 'clean car discount' subsidy from electric vehicles makes them more expensive to buy, relative to petrol and diesel vehicles. Consumers respond by buying more petrol and diesel vehicles, and fewer electric vehicles.
The figures here probably overstate the impact of removing the subsidy. Some consumers who were thinking about buying an electric vehicle this year probably pushed their purchase decision forward to the end of last year instead (and there is some evidence for that).
Removing the clean car discount wasn't the only recent policy change that will affect electric vehicle owners though. As this second New Zealand Herald article reported:
Kevin Parker’s Outlander plug-in hybrid vehicle is getting on in age, and its electric battery is down to around 15km of driving range even when fully charged.
Since Parker lives in a rural Marlborough, he said, the battery “only gets him to the end of the road” - meaning, for most of every journey, he uses petrol.
Under changes to road user charges, this means he faces paying both petrol taxes (on his fuel) and road user charges (for driving an EV) for most of every journey - a change he said made his vehicle “not economically viable”.
Like some other plug-in hybrid owners, he wants to remove the electric plug, to avoid the Government’s new road user charges.
As I note in my ECONS101 class, rational decision-makers tend to try to capture benefits, and avoid costs. This is a clear case of avoiding costs. Since plug-in hybrid vehicles will now attract additional costs, it makes sense for some drivers to remove the plug from their vehicle. That will especially be the case where the benefits of having the plug are low. If you only get 15 kilometres of travel from the battery, the costs in additional road user charges are going to far outweigh the benefits of having the battery.
None of these changes in behaviour should be unexpected though. When the costs and/or benefits associated with decisions change, some decision-makers will change their behaviour.
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