Elephant in the Room - RUC

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Last Updated: Wednesday, 26 February 2025 15:00

Road user charges (R.U.C)

Now in N.Z from April 2024.  Full electrics will pay $76 per 1000km and a Plug in Hybrid $38 per 1000km.  This current system is not very fair for lighter vehicles and for plugin Hybrids who also pay this while using petrol and therefore in addition to the fuel tax.

Currently, two axle non-petrol vehicles under 3500Kg are charged $76 for 1000Km.

The RUC was designed many years ago for heavy vehicles with multiple axles and wheels on each axle, in relation to the weight on each wheel. There are pages of calculations for heavy vehicles of all types and weight and for any trailers they tow. The light vehicle category includes any powered, non-petrol vehicle and includes trucks, Utes, Vans and cars, and they all pay the same above rate with no adjustments.

This leads to unfair charges for smaller lighter cars. For example, a Nissan Micra weighs under 900 kg and travels between 19.5 and 23 km per litre of petrol or diesel. For 1000 km this would use about 51 litres and with petrol tax at 70c per litre would be $35.7.  A diesel version would use 42 litres and pay $76, or over double under RUC.  A Honda JAZZ is 1070 kg and at 17 km/l uses 60L and pays $41 tax. Therefore RUC should be entirely calculated proportionally based on wheel weight.

Examples: A Lexus IS 350 weighs 1760 kg and at 9 km/l pays about $77 in fuel tax for 1000km and for a full Hybrid version at 5 km/l about $35. This car is similar in size and weight to a Tesla M3 or Model Y SR, and maybe a fair rate for RUC. However, considering a BEV is better for the environment than a Hybrid and consumes no imported fuel, it should not be taxed more than the Hybrid. A lighter EV, such as a Mini or Fiat, weighs roughly 200 Kg more than the Micra and Jazz, but will pay double a fair tax under RUC. Over time it is expected that EV batteries will get lighter for the same range and smaller EV's at $76 are therefore not going to be very attractive to the masses.

From the above it would seem a second rate of RUC is required for very light vehicles. Perhaps those under 1500 kg at around $45 per 1000 km. A petition to the Government anyone?

The claim that EV's being heavier are responsible for additional road damage is false.  Current EV's are mostly lighter than many ICE SUV's we see on the roads today, and certainly lighter than the single cab utility vehicles that seem very popular these days.  The Hilux, ISUZU, Jeep, and Ranger are all in the range 2000 to 2400 Kg, Lexus RX are 1900-2000, Range Rover 2500 Kg. Whereas Tesla models 3 or Y range from 1620 to 2000 Kg depending on standard or long range.

While Tesla's were initially heavier than similar sized smaller saloons and SUV's, we have yet to know how the smaller Tesla's will compare. Also, as battery density increases, less cells will be required for an acceptable range thus reducing their weight. This is already happening as the refreshed M3 RWD is now lighter that many equivalent ICE cars. I think it quite feasible that in another ten years or so we will see smaller EV's similar to a Honda Jazz in both range and weight an probably cheaper to buy.

The fact that EV's don't consume any fossil fuel and lower the costs of importing fuel, therefore the reduction in overseas payments should be taken into account. The funds saved could be directed into road maintenance instead. In addition, the reduced pollution will improve the health of residents and reduce the cost of health care.  

There are rumors of a special RUC rate for BEV, but so far requests to the Govt to suggest one have been ignored.

Alternative Comparison

The recent concerns by the motor industry that the proposed RUC for EV's is too high raises a different comparison. The issue actually comes down to just what is fair for a fully electric vehicle. As covered above, the difference in weight between similar sized ICE and EV vehicles is small, with many ICE cars being heavier. So what is a fair comparison?

In terms of environmental impacts, most would now agree the order from worst to best is: ICE, Hybrid, Plug-in Hybrid, and full BEV. Therefore it makes sense that the Government should also be encouraging the public to purchase in that order and definitely not the reverse. That raises a valid question of why an EV should pay any more RUC than that incurred by a similar sized Hybrid, even ignoring the full savings in overseas funds not buying any fossil fuel.

Comparing Hybrids on the RightCar website shows most SUV sized Hybrids have economy ratings in the 5 to 6 L/100Km range. Quoted fuel costs are based on 14,000 Km per year. Taking an average of 5.5 L/Km traveling 14,000 Km a hybrid uses 14000/100x 5.5 liters or 770 litres.  At the quoted tax of 89c per liter it costs the hybrid owner $685. For the EV at $76 per 1000Km, the cost is 14*76 = $1064 or 50% more - so why would one want to own a BEV?  The RUC needs to be less than $49 per 1000Km to provide any tax advantage for an BEV.  The plug-in Hybrid would then be $34 and that is probably still too high when considering the range on petrol versus that on battery, which typically when new is about 10:1. Having to pay two taxes when using petrol is totally wrong. Hybrids need two odometers to be totally fair.

Wrights Law:

This states that for every doubling of production the unit cost decreases  by 28%. Based on initial production of Tesla's to the current volumes this has held true. If it continues from the current production of 1 million vehicles per year to 20 million by 2032 we can expect a Model 2 to cost around NZ $20,000.
It will also apply to ICE vehicles in reverse, as volumes drop by similar amounts and your current $20,000 car will need $70,000 to purchase new.  This, of course ignores general inflation offsetting the 28% effect of the law.

EV Subsidy

With the change in Government signaling the end of this, I wonder if this decision had been fully thought through. Its been reported that some 17,000 EV's have been purchased in 2023. If these owners had instead bought ICE vehicles and assuming for a similar price, the cost difference to the country over one year is just the fuel alone.  If one assumes that each travels 15,000 Km per year, and an ICE gets 10 Km per litre, it uses 1500 litres at about $3, for a total of $4500 per year or the cost of the subsidy after 18 months.  Taking the 17,000 electric vehicles into account, it means some $76 million in fuel imports were saved. Just those EV's alone are going to repeat that saving for every year of their lifespan, or close to $1 billion. If the electric fleet continues to increase at the same rate, the total saving is also going to increase by some $76 million each year.

Road Maintenance

The basic reason NZ roads are in a poor state is the minimal funding allocated to maintenance. N.Z.T.A are not to blame when they claim lack of funding. The government receives just over $3 Billion per year in fuel excise and road user charges per year. If just half of this was allocated to road maintenance it would be more than three times that currently spent. In the light of the $500 million the current National Government has promised, it looks like the NZ public is still being ripped off. Presumably the rest went on new roads and infrastructure, but does this amount to some $30 billion over the last ten years that maintenance has been virtually ignored?