RUC system deterring New Zealanders from choosing diesel

Media Release 29 June 2011

RUC system deterring New Zealanders from choosing diesel

Government’s current approach to Road User Charges (RUC) may be reducing the appeal of new diesel cars and removing the present RUC system would provide benefits for motorists and New Zealand as a whole, says the Motor Trade Association (MTA).

The benefits of moving to a pay at the pump system are clear; more motorists would get to enjoy the fuel efficiency gains that diesel engines provide, while New Zealand, as a whole, would need to consume less fuel overall.

The Transport and Industrial Relations Select Committee is currently considering the Road User Charges Bill, and MTA hope that they listen to the input provided by the automotive industry during the recent round of hearings into the future of the RUC system.

Commenting, MTA Marketing and Communications General Manager Ian Stronach said “This is as close to a win-win situation you can get from both an individual and national perspective. Vehicle owners would be able to make their buying decisions without the distortions the market is currently subjected to, while on a national basis, less fuel would need to be imported overall.”

Petrol powered vehicles are currently subject to an excise tax system, which is collected ‘at the pump’. Compared to the cumbersome RUC system, it is simple to administer, motorists have no choice but to comply with it, and crucially, it places costs against vehicle owners based on the overall efficiency of their vehicle; the more fuel you use, the more excise tax you contribute.

The current RUC system for cars and light vehicles provides a straight line or flat rate of tax, irrespective of the efficiency of the vehicle. So, depending on the model, a large capacity, diesel powered SUV pays virtually the same in RUC as a small diesel powered car, despite consuming diesel at around three times the rate. This, in effect, unfairly discriminates against the owners and users of small diesel vehicles.

In the case of a car like Ford’s highly fuel efficient Fiesta Econetic 1.6D model, which has a fuel use rating of just 3.7 litres/100km, the RUC costs equate to an additional consumption rate of 2.9 litres/100 km. Using a ‘taxed at the pump’, excise system would allow for a much fairer and transparent rate to be applied; a rate that motorists would not be able to avoid paying, as some clearly do today.

Of course each time a diesel vehicle replaces an equivalent petrol powered model, it means an overall reduction in the amount of fuel that has to be consumed in New Zealand; that in turn, translates to lower import costs, and fewer carbon emissions.

Modern diesel engines are generally around 30 percent more fuel efficient than their petrol equivalents, but New Zealand is failing to provide an environment that fully recognises that. In some European countries, such as France and Belgium, the advantages of diesel have long been recognised and sales of diesel powered cars account for more than 70 percent of all new cars. In New Zealand, diesel new cars sales levels are currently at around 15 percent. While it would take many years to reach the penetration levels found in some European countries, MTA believes the move to eliminate the current RUC system for light diesel vehicles and replace it with a simpler, more equitable excise tax, would be a positive and effective first step.

ENDS

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