Extract from The Guardian
SUVs are now Australia’s most popular new car to buy. But while owners enjoy tax benefits and more powerful engines, society is paying in ways big and small.
Sun 16 Mar 2025 06.00 AEDT
When South Australian premier Peter Malinauskas proposed laws in January forcing developers to build bigger garages in homes to address the growing problem of giant cars that are too big for conventional carports crowding suburban streets, debate over the idea quickly shifted to housing.
There were fears that by forcing garages in the state to be built at least half a metre wider and 60cm longer, to accommodate the dual cab ute and SUV-mania that has gripped Australia, it could add tens of thousands of dollars to the cost of home construction.
“It’s absurd that in the middle of a climate crisis, the state government would be forcing developers to build bigger garages. All this will do is entrench South Australia’s reliance on car travel,” said SA Greens transport spokesperson, Robert Simms.
“Bigger garage spaces could add tens of thousands of dollars to the costs of a new home in the middle of this housing crisis.”
The dilemma has exposed how Australia’s dramatic shift in vehicle tastes over the past decade toward larger and bulkier vehicles has come with an array of hidden costs which society at large is having to contend with.
‘People love them, but they have consequences’
Beyond requiring more material for their larger chassis and the resulting emissions from production, the negative carbon implications of SUV uptake around the world has alarmed the International Energy Agency, who note SUVs emit globally about 1bn tonnes of CO2 each year.
SUVs are now the most popular new cars in Australia, with an approximate 57% market share in 2024, while light commercial vehicles – which includes utes – accounted for 22%. Passenger cars – comprising sedans and hatchbacks – made up just 17% of purchases.
Prof Paul Roberts, the deputy director of the Western Australian Centre for Road Safety Research, says awareness of SUV’s emissions flew in the face of economy-wide reduction efforts.
“It’s kind of bizarre that at a time when we’re worrying about global warming we’re seeing an increase in cars with these engines,” he says. “There’s no political bravery about this.
“It would be difficult to punish people for owning them, but we don’t have to go that far, we just have to stop rewarding people for choosing these cars, which is what we currently do,” Roberts says, noting tax perks for small business are also encouraging take-up.
Meanwhile, a 2023 analysis found that surging SUV ownership meant Australians were needlessly spending an extra $13bn a year to fuel their cars.
Matt Saunders, a senior economist at the Australia Institute who led that analysis, says the $13bn figure had almost certainly risen due to increased fuel costs and continued uptake of SUVs replacing smaller, more efficient vehicles.
Fuel consumption discrepancies are laid bare when comparing the most popular car of 2024, the Ford Ranger dual cab ute, and the most popular passenger car of the same year, the Toyota Corolla hybrid. An average Ranger owner will spend just over $2000 at the bowser this year, compared with a Corolla driver who will pay about $1100, according to government estimates based on the retail cost for enough fuel needed to travel 14,000km, the average annual odometer reading.
The Ranger is also a far worse polluter, on average emitting about 200 grams of CO2 per kilometre travelled (based on the most popular engine variant), compared with the Corolla’s rate of slightly more than 90 g/km. In urban driving, which involves more stop-start driving at lower speeds, the Ranger’s emissions and fuel consumption are even poorer, while the Corolla is more efficient.
Over a year, the average Ranger will produce 2.81 tonnes of CO2, while a Corolla travelling the same distance will emit about 1.27 tonnes.
Experts say the lasting legacy of the fuel-guzzling SUVs already purchased in recent years will push against the government’s new vehicle efficiency standard and economy-wide efforts to reduce emissions over the next decade as they remain in use on our roads.
“These cars have greater running costs, longer-term, that are inevitably passed through the supply chain,” Saunders says, suggesting the added cost of driving such vehicles for tradies and sole traders was trickling through to the prices they charge.
Owners of larger cars, with their greater chances of being involved in more collisions – especially more damaging incidents – and more expensive base costs have logically faced higher insurance premiums.
An Insurance Council of Australia spokesperson downplayed the influence that a vehicle’s size would have on its premiums, but acknowledged the rising average base price of cars and the fact that repairs are becoming increasingly more complex was contributing to high premiums.
Danny Martin, an industry analyst at IBISWorld, says that while larger cars were not the sole factor behind higher premiums, car insurers were acutely aware of studies showing how much more damage SUVs cause to smaller cars and their passengers and were pricing their products accordingly.
“While riskier policyholders are identified and get higher premiums, insurers do spread risk across all policyholders, so if they’re taking on more riskier policyholders [such as SUV owners] they will raise premiums across the board to protect themselves.”
Martin likened it to home insurance in flood-prone areas. “Insurers acknowledge some homes are more likely to flood, but they want to still offer cover, so they make up for that likely loss by charging people in less risky zones a little bit more,” he says.
Newstead says while larger vehicles are now the most popular among Australians, he did not believe society is aware of their higher road safety risks.
“Yes, people love them, but they have consequences. As a country, we have not asked ourselves if this is something we should be encouraging, or maybe [should be] thinking about disincentivising,” Newstead says.
‘Society is wearing all the cost’
Malinauskas is not the first to propose larger parking spaces as a solution to car bloat. Standards Australia is simultaneously mulling extending the size of car spaces in off-street parking lots.
The plans have been slammed for their potential to add tens of thousands of dollars to the price of new homes and even more to construction costs of public infrastructure.
Marion Terrill, an independent transport expert, believes such moves would be “an insane response”, instead suggesting nudges away from larger cars – such as more small car-only parking or higher licence fees, and requiring speciality training qualifications to be able to drive SUVs.
“You need to say, yes you can drive that vehicle, but you can pay for its true cost … They are hogging public space, which is something in scarce supply,” she says.
Terrill notes the weight of SUVs and dual-cab utes likely does less damage to roads than heavy trucks, but says their presence in urban environments are making cities more congested and dangerous for small cars and pedestrians.
“If I’m in a little hatchback next to an enormous vehicle, not only can fewer cars fit in the lane, but I can’t see past them, so my natural instinct is to slow down,” she says.
Fewer cars passing through each change of lights adds up, Terrill says. “This is costly to society as people are delayed, time is wasted.
“Society is currently wearing all the cost.”
‘Disturbing’ tax perks
A range of tax perks, mostly aimed at small businesses and strengthened during Covid, have assisted the surging uptake of larger vehicles.
Economists say that while the various incentives were designed to subsidise commercial vehicles for small businesses who needed towing capability above a sedan’s, wide goalposts for qualification have meant many sole traders who do not traditionally require larger cars – like graphic designers – have been able to take advantage.
In 2024, an Australia Institute analysis found there were at least 1.5 utes registered for every technical or trades worker in Australia. That was under a broad definition for the occupation class that also includes bakers, among other professions.
Additionally, inadequate policing of the rules has meant small business owners and sole traders are buying larger vehicles through the tax concession but using them as their main car for personal and family transport.
“The proliferation of commercial vehicles being used as passenger vehicles is quite frankly disturbing, and we’re just not having the conversation about it,” Prof Stuart Newstead, the director of Monash University’s Accident Research Centre, says.
A boosted threshold to the instant asset write-off scheme and temporary full expensing policy – both of which were ended or shrunk in June 2023 – allowed businesses to deduct a car’s full cost (routinely above $100,000) in one year, so long as they could carry a payload greater than one tonne.
Separately, heavy vehicles – such as utes, vans and 4WDs which can carry more than a tonne – are exempt from the fringe benefits tax.
Additionally, a luxury car tax exemption for any commercial vehicle that can carry twice the weight in payload than it can carry in people – which almost every dual-cab ute on the market can meet – has subsidised US-style pickup trucks such as the Dodge RAM and Chevrolet Silverado, making them cheaper than some sedans. This exemption is estimated to have cost Australians more than $250m in foregone tax revenue in 2023.
The rise of salary-sacrificing programs for employees that taxes cars at a concessional rate has also contributed to the surge in popularity, Terrill says, adding that Australians are jumping at the chance to upgrade to more expensive cars thanks to the tax perks and other programs.
‘You can charge more’
Crucially, car manufacturers also want to sell more of their larger cars. Automaker profit margins are tightly held secrets, but an industry source told the Guardian that most companies see little return in making smaller vehicles.
While larger cars require more materials and are costlier to produce, there is an even greater increase in how much consumers are willing to pay for SUVs and large utes that can be a work and family vehicle compared with their manufacturing price.
“People think there is more value in these cars, so due to that perceived value you can charge more,” the source says.
This dynamic is seen in Ford’s fleet priorities. The company’s F150 pickup truck is by far its most lucrative vehicle, with its profits understood to be responsible for about 90% of Ford’s global profits, funding losses from smaller cars.
In recent years, Ford has pulled out entirely from markets where large cars are not popular, especially in Asia. In the US, it has not sold a four-door sedan since 2019 and has since stopped in Australia too.
“Manufacturers aren’t actually making any profits on sedans,” the source says.
No comments:
Post a Comment