The Productivity Commission’s interim report on Australia’s net zero transformation has prompted strong responses from automotive industry bodies, who warn that phasing out electric vehicle (EV) purchase incentives could stall the country’s progress on transport decarbonisation.
The Commission’s draft report, Investing in cheaper, cleaner energy and the net zero transformation, recommends scrapping the Fringe Benefits Tax (FBT) exemption for EVs—also known as the Electric Car Discount—while calling for new incentives to cut emissions from heavy vehicles.
The National Automotive Leasing and Salary Packaging Association (NALSPA) and the Electric Vehicle Council (EVC) have both welcomed the focus on heavy transport but say removing EV incentives for passenger vehicles would be a step backwards.
NALSPA: incentives are complementary, not redundant
NALSPA chief executive Rohan Martin says the FBT exemption is delivering on its intended goal and remains a vital policy to drive EV adoption.
“We agree with the Productivity Commission’s assessment that Australia needs consistent and comprehensive incentives to reduce emissions and achieve net zero,” Martin says.
“The Commission also concedes that to change behaviour, light vehicle drivers may need ‘a purchase incentive to encourage buyers to choose more fuel-efficient vehicles’.
“But it is both inconsistent and wrong in our view to suggest the government should phase out the EV FBT exemption and state-based incentives that are helping to drive EV uptake.”
Martin argues that the Commission’s view that the New Vehicle Efficiency Standard (NVES) makes the FBT exemption redundant does not hold.
“The NVES and the FBT exemption are complementary, not interchangeable. Globally, the most successful EV transitions have followed a clear roadmap: a mix of purchase incentives and strong emissions standards,” he says.
With the transport sector expected to become Australia’s largest source of emissions by 2030, Martin says supporting more Australians to switch to EVs remains essential.
“The EV Discount is currently supporting around half of all new EV purchases. It’s also shaping the second-hand market and helping consumers in outer suburbs—including many nurses, teachers, and firefighters—access cleaner, lower-running-cost vehicles,” he says.
EVC: proposal sends mixed signals
Electric Vehicle Council CEO Julie Delvecchio also welcomed the Commission’s support for zero-emissions trucks but said its stance on the FBT exemption undermines broader efforts.
“The Commission’s report gets one thing right and one thing very wrong,” Delvecchio says.
“It rightly recommends targeted support for zero-emissions trucks but then inexplicably proposes scrapping the very incentives that are finally helping everyday Australians afford an electric car.”
She warns that withdrawing EV incentives would send mixed signals during a critical phase of Australia’s EV transition.
“If we’re serious about net zero, we need to accelerate – not decelerate – the shift to clean transport,” she says. “The Electric Car Discount has been a game-changer, especially for fleets and everyday workers who couldn’t previously afford to go electric. Removing it now would be like ripping out the charging cable halfway through the trip.”
Delvecchio says countries that have achieved high EV uptake have done so by supporting consumers.
“Purchase incentives are not only helping everyday Australians afford cheaper-to-run cars, but they also drive lasting shifts in consumer behaviour. Once people go electric, they rarely go back, and the savings can reach up to $3000 a year.”
She adds that scrapping the FBT exemption could mean slower EV adoption, more pollution, and continued reliance on fossil fuels.
“More EVs on our roads mean reduced emissions, improved air quality, and long-term savings for drivers. These benefits must not be undermined by premature policy changes.”
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