Blue Jackie: Road User Charges Amendment Bill — Second Reading 
Blue Jackie: Road User Charges Amendment Bill — Second Reading 
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Dr JACKIE BLUE (National) 
: 
 I am pleased to speak on the second reading of the Road User Charges Amendment Bill. The bill amends the Road User Charges Act 1977 to enable regulations to be made exempting light electric motor vehicles from road-user charges. The Government sees the bill which will exempt owners of light electric vehicles from paying road-user charges for 4 years as a first step towards encouraging the uptake of such cars. 
At present light electric vehicles weighing up to 3.5 tonnes are classed as diesel vehicles for the purpose of road-user charges. That results in a cost of approximately 3.6c to 4c per kilometre money that is used largely to develop and maintain the roading system. 
 The Government sees private vehicles continuing to be the most significant mode of transportation for most New Zealanders. The statistics are that 84 percent of people go to work by car truck or motorbike and that 70 percent of all freight in New Zealand goes by road. The environmental impact of the widespread use of private vehicles needs to be taken into account. Therefore it is important that the Government encourages the use of alternative fuel technologies in order to help meet our environmental obligations over time. The Government considers that the bill will encourage the uptake of electric vehicles. 
Alternative fuel technologies can make a significant contribution to improving the efficiency of our vehicle fleet. Importantly electric cars can also decrease our reliance on imported fossil fuels and improve our energy security. Combining highly efficient electric motors with our competitive advantage in renewable electricity generation will reduce the greenhouse gases produced by the transport sector as well as the harmful emissions affecting air quality. 
The road-user charge exemption will come into effect on 1 October 2009 and will apply until 2013. The Government will reassess the initiative at that time. The initiative will have the effect of aligning the treatment of electric vehicles with that of biofuels. The bill is about the Government supporting a new fuel technology and encouraging a change to it. 
The bill also provides for 42 days’ notice of a road-user charge increase. That has been done to minimise potential revenue loss caused by pre-purchasing of the road-user charge by the heavy motor vehicle industry following notification of a road-user charge increase. The bill provides that heavy vehicle road-user charge licences will expire 1 month after an increase comes into effect. 
The history of that particular issue is that in 2008 road-user charge rates were increased without notice to operators at a time that coincided with high fuel prices. Operators were unable to pass on the increases to customers straight away and publicly demonstrated against the increases. For heavy motor vehicle operators the road-user charge represents a major cost of doing business. Changes in road-user charge rates that cannot be passed on to consumers in a timely manner will significantly decrease marginal profitability. Notification will improve businesses’ liability to operate by providing them with time to pass on the costs of road-user charge increases. 
It is important to note that notification carries a risk of revenue leakage through large-scale pre-purchasing of the road-user charge. The level of anticipated revenue leakage from notification of the next road-user charge increases for light motor vehicles scheduled for 1 October this year is not known. On the one hand the road-user charge is a pre-purchase system and there is a benefit associated with paying the Government money ahead of time but on the other hand light motor vehicle owners have also historically not pre-purchased significant quantities of the road-user charge. Although notification of road-user charge increases will also be given to light motor vehicle owners pre-purchasing is expected to have little impact on revenue. 
The Ministry of Transport has assessed the bill and says that the bill’s two distinct outcomes will not have a significant effect on economic growth. The two distinct outcomes are to enable the exemption of light electric motor vehicles from their requirement to pay the road-user charge and to provide notice of increases to the road-user charge to all diesel motor vehicle owners. 
There is no doubt that electric motor vehicle technology can make a significant contribution to improving the efficiency of the motor vehicle fleet. Increasing the proportion of light electric motor vehicles in the fleet decreases reliance on imported fossil fuels and improves energy security. Combining highly efficient electric motors with New Zealand’s competitive advantage in renewable electricity generation will reduce the greenhouse gases produced by the transport sector as well as the harmful emissions affecting air quality. Light electric motor vehicles are also much cheaper to operate per kilometre than conventional motor vehicles. 
The global market for electric motor vehicles is already severely constrained. It is expected to remain that way over the next decade due to the low production volumes of first-generation electric motor vehicles. Until economies of scale start to reduce prohibitive battery costs early electric motor vehicles will have a price premium of roughly double to quadruple that of a conventional motor vehicle. For example a $20000 conventional motor vehicle becomes a $40000 to $80000 electric motor vehicle. 
New Zealand is not initially viewed as a priority market with manufacturers focusing on large subsidised markets that can absorb the technology premium so hastening the transition to large-scale production and a more accessible product is something we need to do. Although New Zealand is not a light electric motor vehicle manufacturer the Government plays an important role in the uptake of electric motor vehicle technology. Part of that role is to remove barriers that could prevent or delay the uptake of a market for light electric motor vehicles in New Zealand. One barrier is the requirement to pay the road-user charge. That view was reinforced by the Energy Efficiency and Conservation Authority market research in 2008 in which 52 percent of 524 respondents stated that having to pay the road-user charge would affect their decision to purchase a light electric motor vehicle. 
As light electric motor vehicles are not exempted under Section 4 of the principal Act their owners are required to pay the road-user charge. The current road-user charge rate for a light electric motor vehicle weighing 3.5 tonnes or less is $36 per 1000 kilometres. It costs the owner of a light electric motor vehicle approximately $432 per annum based on an average travelling distance of 12000 kilometres per year. In comparison with the upfront capital cost of early electric motor vehicle technology the road-user charge would appear to have a very minor influence on the purchasing decision of an individual or a business. However the general negative perception about the road-user charge particularly of owners of petrol motor vehicles who have not previously paid the charge make it a barrier to the uptake of electric motor vehicle technology. 
The National Party promised in the lead-up to the 2008 general election that owners of light electric motor vehicles would be exempt from paying the road-user charge. The proposed exemption is transitional and limited in scope and is not intended to set a precedent for road-user charge exemptions. The objective of the amendments proposed in the bill is to mitigate a perceived barrier to light electric motor vehicle uptake that is imposed by the requirement to pay the road-user charge. Exemption from the road-user charge will provide light electric motor vehicles with a comparative advantage in operating costs and also signals the Government’s broad support of electric motor vehicle technology to the emerging market. 
In summary with the bill we are delivering on an election promise to exempt light electric motor vehicles from the road-user charge. Exempting electric cars from road-user charges for 4 years is a first step towards encouraging their uptake. The Government is keen to encourage the uptake of electric vehicles though we see the use of private vehicles continuing to be the most significant mode of transport for most New Zealanders. Therefore it is important that we encourage the use of alternative fuel technologies to help meet our environmental obligation over time. We believe that alternative fuel technologies will bring a big contribution to improving the efficiency of our vehicle fleet. I commend the bill to the House.