Fuel economy and fuel price – big cars

If you spend more time in Australia than just on a short holiday or business trip, you might notice that the fuel price is very low in Australia in comparison to most countries in the world and that there are many big cars on Australian roads. Especially the omnipresent ute. Furthermore, a “hoon-culture” of “car-enthusiasts” is very distinct. Does all that have an effect on the average fuel economy. I wanted to find out.

The International Energy Agency (IEA) published 2019 a report, which – among others – adresses this question (“Fuel Economy in Major Car Markets: Technology and Policy Drivers 2005-2017“). That report investigates the fuel economy of newly registered light-duty vehicles (LDVs,) across the world from 2005 to 2017. LDVs are a category defined as passenger cars, passenger light trucks and light-commercial vehicles below 3.5 tonnes. For a better readability I will use the term “car” for LDV.

Average fuel consumption among the highest in the world

The average fuel consumption between countries differs substantially among countries, ranging between 5.2 l/100 km and 8.9 l/100 km. A big difference can be seen between

• advanced economies with a fuel price below USD 1/l –
  Australia, Canada and the United States, where average fuel consumption is in the 7.9 to 9 l/100 km range

and

• advanced economies with fuel prices above USD 1/l –
  European Union, Turkey, Japan and Korea, where fuel use per kilometre ranges between 5.2 and 6.5 l/100 km.

Australia consumes more than the global average car fuel consumption, reflecting larger and, therefore, less efficient vehicles.

Australia in 2017 had an average fuel consumption of 7.9 litres/100 km whereas e.g. Germany had 5.9 l, Italy 5.2 l and the USA 8.6 l/100 km. That means that Australian cars burn about 52% more fuel per 100 km than cars in Italy and 34% more than in Germany.

Heavier and larger vehicles

Advanced countries with relatively low population density and low fuel prices have larger shares of SUV/utes than other advanced economies. This is the case especially for Australia where about 30% of car sales were large SUV/utes (like e.g. Ford F-150, Toyota Hilux, BMW X5, Isuzu D-Max or Audi Q7) in 2017. In the same year, small SUV/utes (like Toyota RAV4, Honda CR-V) accounted for 29% in Australia. Whereas the European Union, Japan and Korea, with much higher population densities and higher fuel prices, have smaller vehicles. In Japan, large SUV/utes had only 2% market share and small SUV/utes were just 9% of car sales in 2017. Large SUV/utes accounted for less than 5% of the car market in Germany, France, Korea and United Kingdom.

Also, vehicle weight is closely correlated with fuel use. 70% of new cars sold in 2017 in Australia weighed more than 1 400 kilograms. This ranks Australia among the world’s highest average vehicle weight markets. In contrast, around 70% of new cars in France and Italy weighed less than 1 400 kg, ranking them the most fuel-efficient among the countries assessed.

Furthermore, the report also found that city cars in the Europe Union are 15% more efficient than comparable ones in Australia. In general, it can be said that average fuel consumption in advanced economies with fuel prices above USD 1/l is more efficient than in similar vehicle size market segments in economies with fuel prices below USD 1/l.

Fuel economy improvement rate slowed down

Between 2010 and 2017, the overall average fuel consumption in advanced economies with fuel prices above USD 1/l improved by 15% and in advanced economies with fuel prices below USD 1/l improved by only 9.5%.

However, between 2015 and 2017 the average fuel economy improvement rate slowed down to 1.4% per year globally. And in advanced economies even to only 0.2% per year. Key drivers of the recent developments include the rapid decline of diesel sales in several major vehicle markets. This is most notable in Europe. Worldwide, 76% of new Cars sold in 2017 were petrol ones and just under 17% were diesel.

The growing consumer demand for larger vehicles is also a major determinant. Australia has had a particularly high market share of SUVs and utes, closing in on 60% in 2017.

Mandatory fuel economy standards have an effect

The fuel economy improvement rate of countries after implementing fuel consumption standards or efficiency-based purchase incentives was nearly 60% higher than countries without standards and incentives. The higher improvement rate is also reflected by the higher market share of electrified cars (hybrids, plug-in hybrid electric vehicles (PHEVs), battery-electric vehicles (BEVs) and fuel cell electric vehicles). Regulated countries are amongst others Canada, China, European Union, Japan, Korea or the United States. Wheras Australia has no regulations but some incentives like Brazil, Chile, Malaysia, South Africa, Thailand and Turkey.

Fuel saving technology – turbocharging

Turbochargers enable the recovery of energy from exhaust gases. This allows the engine to operate closer to its optimum efficiency throughout the drive cycle. In addition, vehicles with the same power rating can be produced with smaller engine displacement and lower engine weight, further reducing fuel consumption.

Nevertheless, the diffusion of turbochargers in petrol engines is lower in Australia where engine displacement remains far larger than elsewhere. The lower share of turbocharged petrol vehicles in Australia may be partly due to lower fuel octane values.

Electrification is going to be crucial

The electrification of cars is going to be crucial to ensure that fuel economy can be effectively improved. Countries that currently have high average fuel consumption values, like Australia, could benefit the most from electrification since electrified vehicle efficiency is less dependent on size and weight.

The uptake of fuel saving electric powertrain technologies (hybrid, plug-in hybrid and battery electric) is higher in countries with regulations and incentives than those without. The market share in 2017 for electric powertrains only reached 1.1% in Australia where there are no federal fuel economy regulations, though several states provide incentives up to 4% of the vehicle price (Queensland Government, 2018; NSW Government, 2018).

No clear policy towards electrification

Unfortunately there is no clear policy in Australia regarding electric vehicles (EVs). A patchwork of conflicting regulations and road-user taxes between states and territories is inhibiting take up of EVs.

The Australian federal “emissions reduction minister”, Angus Taylor, has ruled out policies used elsewhere to drive EV uptake. These policies might include direct subsidies to consumers or a ban on new fossil-fuel car sales from 2030 or 2035 as promised in countries including the Germany, the UK, India, Thailand and Japan. Instead, the Australian federal government is spending billions of dollars on subsidies for the enormous twin cab utes that dominate Australian car sales.

However as of May 2021, Canberrans who buy electric and other zero-emissions vehicles automatically receive two years’ registration for free. The Australian Capital Territory already waives stamp duty for clean cars, and has promised households and not-for-profit organisations interest-free loans of up to $15,000 to buy them.

On the other hand also in May 2021, the Victorian parliament passed the country’s first road user charge – a tax on every kilometre driven – for EVs and hybrids. The Victorian government argues that it had to impose a new tax on EVs because drivers of those vehicles don’t pay fuel excise. This makes about as much sense as taxing nicotine patches on the basis that those giving up smoking aren’t paying tobacco excise any more.

But the New South Wales government just announced it will waive stamp duty on electric vehicle purchases and provide subsidies for 25,000 new purchases as part of a $490m strategy to drive uptake of EVs.

Conclusion

The 2019–20 Australian bushfire season was a major climatic event and the largest wildfires Australia has ever seen. At the same time, Australia is among the countries in the world with the highest average fuel economy and CO2 emissions per km. To change this is to increase the number of electric vehicles. A road user charge for electric vehicles should be many, many years off. Not now and not before Australia has a reasonably priced electric vehicle market and the right level of supply. The uptake of EVs needs to be encouraged.