Let’s look at the HiLux Rogue. It’s worth $79,000.
It emits 220 grams of carbon for every kilometre it travels. The new limit for utes will be 210 grams when the scheme starts. So the Rogue will be 10 grams over. There’s a $100 penalty per gram, paid by Toyota.
So the new fuel efficiency standards (aka the “ute tax”) mean this car will cost Toyota $1000 to sell. They are saying they’ll pass that price on to consumers.
But that’s not quite the whole story. The way the tax works, Toyota can get benefits from selling Hybrid Camrys. If they come in under the limit, Toyota gets a credit and it can use that credit so it doesn’t pay any penalty on the HiLux rogue.
The hybrid Camry emits 96 grams per km. That’s well under the limit of 141 grams for passenger cars. 45 grams less, times $100 a gram. It creates a benefit for Toyota of $4500 every time they sell one.
If Toyota sells more hybrid Camrys than HiLux Rogues, Toyota doesn’t have to pay any penalties. And it doesn’t have extra costs to pass on to HiLux buyers. Hooray? Don’t cheer just yet if you’re a ute buyer.
The next chart shows emission for a few HiLux models. Some are under the 210 gram limits, although that limits gets tighter each year.
Right now Toyota sells more Hiluxes than hybrid Camrys. Quite a lot more. There were more 4×4 Hiluxes sold in February than all hybrid sedans put together, in fact.
The point of the policy is to put more Camrys in people’s driveways.
Australia’s cars have changed dramatically in the last 15 years, with big utes and big SUVs taking over as a common kind of family car, and small SUVS taking over from hatchbacks. This policy is about winding that back a bit, and getting car companies to sell a few smaller cars if they can.
So if Toyota needs to sell more Camrys than HiLux Rogues, what will they do?
One option would be to cut the price of hybrid Camrys a bit and put up the price of Rogues a bit.
That way they sell more Camrys and less Rogues. This is how the ute tax will work in practice: the biggest thirstiest utes will get more expensive because companies can’t afford to sell too many of them. You’ll go shopping for a ute and after you check out the prices come home with something slightly smaller than you initially intended.
The family that was going to buy a RAM buys a Ranger, while their neighbour that was going to buy a XLT Ranger buys a XL ranger. Meanwhile the person who was going to buy a LandCruiser gets a Kluger, etc. And the person who was shopping for a hybrid Camry ends up with a pure electric BYD.
If that happens then the ute tax has worked as intended.
But this is not the only way the ute tax will work. Another thing the big car companies can do is put better technology in their vehicles so they use less fuel and emit less carbon. Australia has been getting sent some of the oldest and worst engines in the world for years now because we’ve had no fuel efficiency standards.
That isn’t just bad for carbon pollution, it means we’re breathing in more benzene, etc too.
America and Europe have been tightening up their standards so they get the good stuff. Better technology is out there but manufacturers are dumping their inefficient engines on us.
The RAM and the Chevrolet Silverado and all those giant cars you see straddling two spaces down in the Coles carpark? Those companies wouldn’t be bothering us if the efficiency standards were in place.
And as the efficiency standards ramp up, those utes will have bigger and bigger penalties placed on them.
The RAM and Ford F150 and the Toyota Tundra could all become quite rare and quite expensive. They might still be available if companies can pay the penalty. But the penalty becomes quite steep as the efficiency standards get stricter.
In the first year (2025) the limit is 210 grams per kilometre for utes but it falls to 180 grams in 2026, forcing companies to work even harder to sell low-emissions vehicles.
And then it falls to 110 grams in 2029. If Toyota’s HiLux Rogue is still emitting 220 grams of carbon in 2029, it will attract a $11,000 penalty. They won’t want to sell too many of them without tweaking the engine or selling a lot of EVs too.
And that’s the point of the ute tax, not forcing any one family to buy something, but trying to change the decision just enough for just enough people to make a difference to the kind of cars on the road.