EV SUBMISSION 29 Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

Submission by Toyota Australia to the Inquiry into Electric Vehicles Standing Committee on Economy & Infrastructure November 2017

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Contents 1. Terms of Reference ...... 3 2. Introduction ...... 4 3. Toyota Australia product ...... 5 3.1 Hydrogen electric vehicles...... 5 3.2 Hybrid vehicles...... 6 4. Measures to support low emissions vehicle uptake ...... 6 4.1 Government fleet measures ...... 8 4.2 Taxation measures ...... 8 4.3 Consumer awareness ...... 9 5. Conclusion ...... 10 6. Attachments ...... 11

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EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

1. Terms of Reference

On 8 February 2017 the Legislative Council agreed to the following motion:

That, pursuant to Sessional Order 6, this House requires the Economy and Infrastructure Committee to inquire into, consider and report, no later than 14 December 2017, on —

1. the potential benefits of widespread uptake of electric vehicles in to the environment, including greenhouse gas emissions, air quality, noise and amenity, whereby electric vehicles are defined as vehicles that both: x use one or more electric motors as their sole means of propulsion; and x require recharge from an off-board electricity source;

2. the regulatory, infrastructure, economic, employment and incentive options for supporting the uptake of privately owned electric vehicles;

3. the applicability of electric vehicles in public transport bus fleets and public sector fleets;

4. options for supporting the manufacture and assembly of electric vehicles in Victoria, including transition of workers and suppliers affected by the closure of vehicle manufacturing in Victoria; and

5. the applicability of electric vehicles to the car share providers market.

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EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

2. Introduction Toyota Motor Corporation Australia Limited (Toyota Australia) is a fully integrated manufacturing, sales and distribution operation which manufactured vehicles in Australia for 54 years until 3 October 2017. Toyota retain a significant local presence in Australia beyond the closure of local vehicle manufacturing operations. This includes import and distribution features, maintenance of a significant research and development division, as well as the establishment of a Centre of Excellence at our Altona manufacturing site. In all, 1,300 employees will remain in the new structure. While the transition of the company presented new challenges, for the 14th consecutive year Toyota finished 2016 as the top selling automotive company in Australia, with HiLux and Corolla taking out the number one and two sales positions, respectively. also hit a new record, selling more vehicles in 2016 than ever before. Toyota Australia is continuously contributing to the development of vehicles that meet the needs of local and international markets both now and into the future. Our research focuses on vehicles powered by a range of alternative fuels and vehicles with the potential for automated driving. Meanwhile, we continue to work towards vehicles that are safe for everyone, and that maintain the standards of durability and reliability that people expect from the Toyota brand. Globally, Toyota is actively engaged in creating environmentally friendly, safe and intelligent vehicles that will enable mobility into the future. Toyota Australia specifically will continue to play a key role in achieving this vision through our new R&D entity. As society moves away from fossil fuels, there are a number of alternative vehicle fuels, each of which has strengths and weaknesses. Toyota is responding to this by investing in innovation across a range of vehicles including hybrid, battery electric and fuel cell electric. Toyota Australia is committed to ensuring the latest trends and innovative technologies within the are adopted in the Australian marketplace. The investment in acquiring three units of the Mirai fuel cell electric vehicle from Japan as well as procuring a mobile hydrogen refueller is a demonstration of this commitment to innovative vehicle technology. On that note, Toyota Australia strongly urges the consideration of fuel cell electric vehicles as part of the scope of the Inquiry into Electric Vehicles. Fuel cell electric vehicles use electric motors as their sole mean of propulsion, however do not store electricity in the form of a battery and therefore are not recharged using an ‘external electricity source’. These vehicles create electricity as required using hydrogen gas stored on board and are recharged (refuelled) using equipment at service stations. It is the position of Toyota Australia that fuel cell electric and battery electric vehicles are complementary technologies and will play an equally important role in transitioning Australia to a low emissions transport fleet.

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EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

3. Toyota Australia product The first guiding principle of Toyota’s global operations includes the directive to ‘undertake open and fair business activities to be a good corporate citizen of the world’. It is evident that there are many challenges involved in tackling climate change and its potential effects on the world, and Toyota Australia recognises that all industries and participants within those industries have a significant role to play in mitigating this impact. The automotive sector must be part of the solution for reducing CO₂ emissions and other pollutants from vehicles that can have a harmful effect on the environment. In relation to specific initiatives within the Australian economy to reduce greenhouse gas emissions, Toyota Australia recognises the important role of the automotive sector in contributing to the Australian Government’s commitment to reduce greenhouse gas emissions by 26 – 28 per cent by 2030 (from 2005 levels). To highlight the priority that strong environmental performance plays in the global mindset of the Toyota brand, Toyota Motor Corporation released the ‘Toyota 2050 Environmental Challenge’ in 2015 (refer Attachment 1). This sets out six challenges to achieve a sustainable society. As part of Challenge 1 “New Vehicle Zero CO₂ Emissions”, Toyota has challenged itself to reduce global Toyota vehicle CO₂ emissions by 90 per cent in comparison with 2010 levels, by 2050. To realise this, in addition to mileage improvement of engine-driven vehicles, Toyota will promote the development of next-generation vehicles with low, ultra-low or zero CO₂ emissions such as hybrid, plug-in hybrid, battery electric and hydrogen fuel cell electric vehicles and further accelerate the dissemination of these vehicles. The achievement of all six challenges outlined in the 2050 vision are contingent upon partnerships with government to deliver the necessary support and regulatory environment to enact such change.

3.1 Hydrogen fuel cell electric vehicles Toyota Australia’s commitment to the introduction of alternative vehicle technology is evidenced by the importation of three units of the Mirai fuel cell vehicle in 2016 to showcase the technology and raise awareness of the potential of hydrogen with government, industry and the general public. Due to a lack of permanent refuelling infrastructure in Australia, a mobile refueller was also procured and is currently housed at the Altona manufacturing site. The goal of showcasing the Mirai is to promote discussions surrounding the required infrastructure to introduce this technology to the Australian market, as well as to stimulate demand for zero emission vehicles. Fuel cell vehicles are fuelled by hydrogen, an energy source that can be produced from both renewable and non-renewable sources. The motor is powered by electricity generated from a chemical reaction within a fuel cell between hydrogen and oxygen from the air, which leaves only water as a by-product. The vehicles offer comparable performance to fossil fuel-powered vehicles, but are quiet and produce no greenhouse gas emissions or other pollutants (refer Attachment 2). The advantages of fuel cell electric vehicles over battery electric include refuelling time, whereby fuel cells can be refuelled in just a few minutes, as well as extended range provided through additional energy density. These advantages are particularly pronounced in commercial transport, including heavy trucks, buses and trains. Toyota Australia’s position is that both fuel cell electric and battery electric vehicles are complementary and that both products are requires for meaningful transport sector emission reductions (refer Attachment 3). We therefore urge that the fuel cell electric vehicles are not overlooked in this Inquiry.

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EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

3.2 Hybrid vehicles As at October 2017, Toyota has a range of five hybrid vehicles with the launch of the Corolla hybrid in mid-2016, and another nine hybrids under the Lexus badge. The Camry Hybrid model is Australia’s best-selling hybrid car which until October 2017 was built locally in Melbourne. In 2017, Toyota sold its nine millionth hybrid car globally, including 85,800 Toyota and Lexus hybrid vehicles delivered in Australia. The vehicles have each saved their owners an average of 2,770 litres of petrol, and together have averted approximately 67 million tonnes of CO₂ emissions compared with similar petrol-powered vehicles. Simply put a ‘hybrid’ is a vehicle with two or more power sources. Most hybrid cars use a normal internal combustion engine paired with an electric motor, but the way these work together means that there are three different kinds of hybrid setup. Beginning with the original Prius, Toyota pioneered the ‘full’ hybrid system that uses two separate powerplants – a battery-powered electric motor and petrol-driven combustion engine – which can work together to drive the vehicle or can each be used in isolation. It is the most popular hybrid system in the world. Proliferation of hybrid vehicles represents an attractive pathway for immediate CO₂ emission reductions within the Australian fleet. However despite launching in 2001, hybrids only represent one per cent of new cars sold in 2016. This sales result demonstrates the challenge faced by manufacturers in supplying low emission product into the Australian marketplace and the necessity for government intervention to assist in the space as outlined below.

4. Measures to support low emissions vehicle uptake To improve the supply of low emissions vehicles, there are a number of government led initiatives that can be undertaken, including: ƒ Low, ultra-low and zero emission vehicle infrastructure: The facilitation of investment for the required infrastructure for low emission vehicles will hasten their introduction into the Australian marketplace. Manufacturers will only commit to the large scale supply of these vehicles once refuelling infrastructure is in place.

ƒ Introduction of supportive regulations and infrastructure to facilitate the introduction of vehicle co-operative intelligent transport systems (C-ITS) technology: The proliferation of C- ITS technology will have numerous benefits to the Australian light vehicle consumer, one of which being improved driver behaviour. Benefits of introducing C-ITS equipped vehicles include smoother braking, lane changing and freeway entering / exiting, resulting in a more consistent traffic flow and consequently fuel efficiency savings for Australian drivers. On the demand side, there are many initiatives that can be undertaken by industry and government alike that will support the purchase of low emissions vehicles. These initiatives include: x Consumer incentives: Monetary and non-monetary mechanisms to promote the sale of low emission vehicles can be introduced by federal, state and local governments. Suggested incentives include: - Purchase rebates for low emission vehicles. These reduce the price gap between standard internal combustion engines and more technologically advanced low emissions vehicles (e.g. hybrid and hydrogen fuel cell vehicles) - Amended stamp duty/vehicle registration calculation. This would see the formula used to develop the costs of stamp duty and vehicle registration being focussed on incentivising more fuel efficient vehicles (e.g. stamp duty based on vehicle CO₂ figure, registration costs 6 6 of 13

EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

replaced with a user-pays approach which is administered via duties on petrol use). Alternatively all state based taxes and charges could be replaced by a fuel tax so that consumers pay more for using fuel but less for buying a new, cleaner vehicle - Preferential traffic/parking conditions for low emission vehicles (e.g. access to transit lanes, preferential parking access in CBD’s etc.) - Rebates for trading in older higher polluting vehicles for newer low emission vehicles

ƒ Low, ultra-low and zero emission vehicle infrastructure: The benefit of significantly increasing the infrastructure required for low emissions vehicles (e.g. plug-in hybrid electric vehicles, hydrogen fuel cell vehicles) is three-fold; it promotes the sale of these vehicles by manufacturers, increases vehicle appeal to consumers as there will be sufficient infrastructure in place to support the ongoing use of these vehicles and improves Australia’s energy security through the supply of alternative fuels.

ƒ Consumer education: One of the biggest impediments to introducing new or emerging technology is scepticism and information gaps held by consumers. While manufacturers play a key role in advertising and promoting new low emission technology, governments also play a significant role in assisting in the spread of information on these technologies. This can be done via coordinated and active promotion of low emission vehicles included in government fleets, as well as public awareness campaigns designed to increase the knowledge of low emission vehicle technology to Australian consumers.

ƒ Government fleet purchasing policies: While fleet policies play a role in directly creating demand for low emissions vehicles, it is also an important signal to the wider community as to the benefits of these vehicle types as well as a promotion of the models on offer within the Australian market. By incorporating low emissions vehicle conditions in fleet policies, it also ensures government takes a leadership position in stimulating this market which will have a direct positive impact on the overall emissions of the Australian economy. A specific policy change, like mandating that all non-Euro 6 government fleet vehicles be changed over within two years, would send a strong signal to private fleets on the importance of this initiative.

ƒ Amended tax measures: There are a number of taxes and charges involved in the purchase and ongoing use of light vehicles. While initiatives such as changes to stamp duty and registration costs have been referenced above (‘consumer incentives’), there are additional changes to the tax system that could be also considered for stimulating demand for low emission vehicles. This includes tax write-offs for small businesses for purchase of low emission vehicles.

ƒ In-service emissions testing: Similar to the Japanese Government’s Shaken program and the United Kingdom’s MOT initiative which require regular emission testing of on-road vehicles at the owner’s expense. These measures not only contribute to limiting emissions over the life of the vehicle but also work towards reducing the age of the country’s vehicle fleet through increased vehicle turnover.

ƒ Eco-drive education programs: The introduction of eco-drive programs for vehicle owners at touch points with state road authorities i.e. licence testing or renewal, vehicle registration etc. or through law enforcement agencies i.e. for recipients of speeding fines and so forth. Toyota Australia’s own internal eco-drive program saw participants demonstrate a 10 per cent improvement in fuel efficiency when applying their learnings relative to their usual driving behaviour.

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EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

The following section outlines additional information on several of the recommendations outlined above.

4.1 Government fleet measures Federal and state governments represent some of the largest fleet customers in Australia, purchasing around 30,000 to 40,000 new vehicles per annum (2.7-3.6 per cent of new vehicles sales). While fleet customers typically prioritise whole of vehicle costs in their purchasing decisions, government fleets in particular often factor in additional selection criteria due to their broader economic and social objectives. Preferential treatment for locally manufactured vehicles is an example of this. With the cessation of local vehicle manufacturing, this criteria will require amendment to consider the changing marketplace for new cars. With government in a position to be an exemplar in the environmental space and through its ability to set the standard for fleet purchasing decisions more broadly, the public sector is in an ideal position to demonstrate environmental leadership. Governments can play a key role as an early adopter of new vehicle technology and accompanying infrastructure. This is demonstrated by the Victorian Government electric vehicle trial in 2010-14, for which Toyota Australia provided four plug-in Prius vehicles. This program was subsequently shifted to include both Melbourne and Sydney, linking several councils, car-share company GoGet and Toyota Australia. It should be acknowledged that fit-for-purpose vehicles will continue to be needed within the government fleet mix and this requirement should continue to be a leading factor in purchasing decisions. While these vehicles may not consistently deliver optimal environmental outcomes, the need for quality, durability and reliability for particular government agencies must remain a priority where appropriate. We recommend that the Victorian Government implement the following measures to influence the purchasing decisions of government fleet managers: x Revisit the weighting placed against environmental outcomes versus other factors x Introduce a fuel efficiency target for government vehicle fleets x Consider reducing the age at which vehicle changeover occurs to accelerate the distribution of modern low emission vehicles within the community A more fuel efficient government fleet also has flow on benefits to purchasers of second hand vehicles. The relatively high turnover of fleet vehicles provides an injection of low emissions vehicles into the second-hand market, reducing the emissions of the Australian car park as a whole.

4.2 Taxation measures The reform of existing vehicle related taxes and charges presents a significant opportunity to encourage the purchase of more efficient vehicles. Currently taxes applied at the national level are not designed with environmental outcomes as a leading factor. While there are examples of state based taxes and charges that are developed with vehicle emissions at their forefront, these are applied inconsistently and the benefit provided is often insufficient to stimulate vehicle demand. State-based taxes In relation to state-based tax regimes, there are number of actions that can be implemented to encourage the uptake of low emissions vehicles, however these cannot be considered in isolation. It is clear that based on past or existing state-based practices, these measures alone will not be sufficient to drive sales of environmentally friendly vehicles in a meaningful way. However, they are a part of a

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EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles holistic framework to progressively modify consumer purchasing behaviour and increase the attractiveness of low emission vehicles. On this basis, Toyota Australia supports a number of amendments to state taxes including: x Stamp duty: This could be waived on a temporary or permanent basis for vehicles that meet CO₂ emissions criteria to encourage the rapid take up of this technology (as per the ACT’s Green Vehicle Scheme).

x Vehicle registration: This could be waived/reduced for low emission vehicles. For instance, the Victorian Government’s $100 hybrid vehicle discount is a welcome measure in this space, however the quantum of this concession may be deemed insufficient to drive hybrid sales in isolation.

x User pays approach (based on fuel use – substitute for stamp duty/registration/third party insurance): The environmental impact of motoring occurs due mainly to the use of vehicles, rather than the ownership of vehicles. Therefore the replacement of state taxes with a tax based on usage, as represented by fuel purchase, would send a strong message of encouragement for environmentally friendly vehicles. Therefore consideration should be given to replacing state stamp duty, registration and third party insurance charges with one state tax on fuel sales. Replacement of the Luxury Car Tax While acknowledging the Luxury Car Tax (LCT) is an Australian Government mechanism, it should be noted that Toyota Australia supports the abolishment of the LCT due to the discriminatory and inequitable nature of this tax. This position was most recently confirmed in our submission to the Productivity Commission automotive industry review in 2013. However, if there is an ongoing revenue requirement, Toyota Australia recommends that the LCT be replaced by a high emissions tax (HET) that is directed towards supporting the Australian Government’s light vehicle environmental policy objectives such as incentives for low emission vehicles and associated infrastructure. A HET replacing the LCT should encourage behavioural change in purchasing decisions that preference environmentally friendly vehicles. The HET could levy a charge on vehicles that are on the higher end of the CO₂ spectrum for the particular vehicle category. This would have the effect of encouraging the early introduction of new technology to the Australian market. Alternatively the replacement for the LCT could levy a charge on all vehicles which exceed the average CO₂ emissions (calculated annually) for passenger, SUV and commercial vehicles. Allowance would need to be made for those vehicles for use in mining, construction, agriculture and other sectors which have a particular requirement for load bearing, emission intensive types of vehicles. As well as fuel efficiency, the replacement for the LCT should also consider additional concessions for alternative fuel engines, including hybrid, electric and hydrogen fuel cell. This would facilitate a holistic approach to transport emissions that tackles both CO2 and noxious emissions.

4.3 Consumer awareness As demonstrated by the volume of new vehicle sales of both hybrid and electric derivatives (1.1% of new vehicle sales in 2016), consumer appetite for alternative fuelled vehicles in Australia is low versus other OECD countries (3.5% in the US and 2.1% in the EU in 2014). This purchasing trend toward petrol vehicles is demonstrated by sales of Toyota Australia’s local vehicle model line-up. Both the Camry and Camry Hybrid were manufactured at our Melbourne-based plant with a price differential of approximately $5,000, with a significant proportion relating to the cost of the hybrid powertrain. Of the 26,485 Camry’s sold in 2015, only 5,891 (22%) were Camry 9 9 of 13

EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

Hybrids. In an environment of low fuel prices, the incentive to purchase environmentally friendly vehicles diminishes. Given the reduced resonance of fuel savings as a motivator to purchase a hybrid vehicle for instance, demand side incentives play an important role in promoting the uptake of these vehicles. This is evidenced in overseas markets, such as the US Government’s tax credit of up to $7,500 USD to lower the upfront cost of plug-in electric vehicles. It is clear from Australian and overseas evidence that in the absence of strong monetary and/or non- monetary incentives, the substitution from petrol/diesel vehicles to alternatives such as hybrids, fuel cell and battery electric will be gradual. We therefore again encourage the Victorian Government to consider measures to stimulate the purchase of these vehicles. As raised above, government fleet policies also raise awareness of the benefits of alternative fuelled vehicles and provide an important signal to consumers of the importance and advantages of these technologies. Governments should demonstrate leadership in this space, both at the bureaucratic and political level, as a means to set the direction for broader Australian fleet purchasing patterns. Being an early advocate of technologies such as hydrogen fuel cell vehicles for example, places government in a position as an environmental exemplar and advocate. This will in turn have flow on effects in terms of the positive perception of this technology by the rest of the economy. As well as encouraging partnerships between government and vehicle manufacturers from a fleet perspective, Toyota Australia also encourages broader relationships, whether they be the establishment of education programs and facilities informing the general public of vehicle technology and driver behaviour, through joint technology road shows throughout Australia or other awareness raising activities. 5. Conclusion Toyota Australia appreciates the opportunity to make a submission to the Standing Committee on Economy & Infrastructure’s Inquiry into Electric Vehicles and would welcome the opportunity to provide additional details on the recommendations proposed. As outlined above, zero emission vehicles have an important role to play in reducing economy-wide emissions, however as evidenced by overseas, government support is an essential element of the successful proliferation of these products, from both a supply and demand perspective. State Governments have an important role to play in this space with a number of policy levers at their disposal including fleet procurement, tax measures, product subsidisation and consumer awareness. We commend the Victorian Government for their commitment to reviewing these aspects through the establishment of this review, however acknowledge that national leadership is also critical for the achievement of meaningful emissions reductions from the transport sector. We also reiterate the important role that fuel cell electric vehicles will play in the future transport mix and that this technology is complementary to battery electric vehicles while achieving the same zero emission outcome. Finally, the next generation of zero emission vehicles will require significant infrastructure investments and cooperative partnerships between government and industry will be required to facilitate the provision of this infrastructure. We would welcome the opportunity to work closely with the Victorian Government in this area. As stated in the introduction of this submission, Toyota has a global challenge to radically reduce new vehicle CO₂ emissions but we cannot achieve this alone. We look forward to working collaboratively with the Victorian Government to achieve an environmentally friendly Victorian vehicle fleet through an integrated approach to emissions reduction.

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EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

6. Attachments

Attachment 1: Toyota Environmental Challenge 2050

Attachment 2: fuel cell electric vehicle infographic 11 11 of 13

EV SUBMISSION 29 Toyota Motor Corporation Australia Limited Submission to the 2017 Inquiry into Electric Vehicles

Attachment 3: Toyota low emissions product line-up

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