Government agrees to slash road user charges for plug-in hybrids

By RNZ

Owners of plug-in hybrid electric vehicles (PHEVs) like the popular Outlander plug-in will pay less in road user charges (RUC) after a change of heart by the Government.

Transport Minister Simeon Brown on Tuesday announced that owners of plug-in hybrids would pay $38 per 1000km driven under the taxes to pay for road upkeep (plus an admin fee of $12.44 or $13.71 each time you pre-pay for a block of 1000km online or over the counter).

Government MPs accidentally voted for a Labour idea to reduce proposed RUC rate for plug-in hybrids at select committee.

Interestingly, Simeon Brown is open to keeping the lower rate as the bill goes through last stages.https://t.co/vxXmLLQsuT

— Thomas Coughlan (@coughlthom) March 15, 2024

The vehicles can be charged from mains power like an electric vehicle, but can also use liquid fuels such as petrol.

Owners of plug-in hybrids had argued they would end up paying more than others because they used both electric batteries and petrol, which particularly affected older vehicles with less battery power.

Brown originally proposed a rate of $53 per 1000km - a 30 per cent discount on what a diesel vehicle would pay - but Labour and the Greens proposed lowering the fee to $38 after the feedback at the select committee.

Transport Minister Simeon Brown. Photo / Mark Mitchell

The committee then voted the change through unanimously - a change the Government had not apparently intended with committee chair Andy Foster, of New Zealand First, seeking to have the vote taken again.

Foster’s request was denied and the Government’s decision now means the lower rate will be applied when the law is passed.

“Having a reduced RUC rate for PHEVs recognises that these vehicles use both petrol and have a battery to power the vehicle. This change seeks to balance the need for these vehicles to fairly pay for the use of the road and the variable range of fuel efficiencies within PHEVs,” Brown’s statement said.

He acknowledged that not having a reduced rate would have meant owners of the vehicles would be required to pay a full RUC and claim back on any petrol tax paid, which would be “administratively difficult and open to fraud”.

Brown said it was temporary, with broader changes to be made to bring all vehicles into the RUC scheme instead of paying petrol excise tax.

“The reduced RUC rate for PHEVs is a temporary measure to lessen distortions while we get to work on transitioning the entire vehicle fleet to the road user charges system and away from fuel excise.

“Increased fuel efficiency of vehicles and the rise of electric vehicles, hybrids, and PHEVs has created variances in what motorists pay for use of the road. This has meant that less fuel-efficient vehicles, often owned by low-income households, end up paying more in fuel excise duty than owners of later model, more fuel-efficient, vehicles.”

Labour leader Chris Hipkins said the decision on plug-in hybrids was a good thing.

“It’s quite a difficult area to make a good evidence-based decision because some plug-in hybrids you could operate almost exclusively on electricity without using fuel. Others will be using a much higher proportion of fuel and will therefore be paying fuel tax on that,” Hipkins said.

Labour leader Chris Hipkins. Photo / Mark Mitchell

“The decision is going to be somewhat arbitrary but I think leaning in favour of a regime that gives a bigger discount is probably better at this point.”

Labour’s transport spokesman Tangi Utikere said the news of cheaper RUC charges for plug-in hybrids is a win for owners of the cars, and the climate.

Utikere said the fact the Government voted the amendment through in the first place shows it was “shambolic”, but the decision now was “absolutely” a win for Labour.

Labour MP Tangi Utikere chairing Parliament's Health Select Committee.

“It’s very clear, the Government had a 30 per cent [rate] as their rate but that’s alongside no other incentives, no other initiatives. What we were looking at previously was that we had the clean car discount in place so ... in response to submissions, we felt a 50 per cent discount was appropriate.

“We put that forward and it’s wonderful to hear that that’s what’s going to be in place ... this is just another example really of a Government that’s shambolic. End of the day, the winners are going to be the climate and also those who have plug-in hybrids.”

Would have paid 70 per cent more

Motor Industry Association chief executive Aimee Wiley welcomed the RUC rate for plug-in hybrids being lowered to 38c per 1000km.

Under the originally, proposed rate, analysis showed that PHEV owners would have paid 70 per cent more in RUCs and fuel tax than non-plugin hybrid owners paid in fuel tax, Wiley said (hybrids are not subject to RUCs).

“[But] we are disappointed that a fairer rate has not been introduced for BEVs [purle battery electric vehicles] also, as the higher rate will likely discourage some buyers.”

Some EV owners have calculated that the 78 cent per 1000km RUC will work out to roughly twice what an efficient petrol car will pay in fuel tax

Wiley said the BEV rate should have been benchmarked to the average contribution of equivalent petrol-engine vehicles and not the full RUC rate [for all sub-3000kg vehicles],” Wiley said.

- RNZ, with reporting by Herald staff