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Car importers are grappling with excess stock and high storage costs as demand evaporates for electric vehicles.
Sales of electric vehicles have plummeted since the end of the Clean Car Discount and the introduction of road user charges for the vehicles.
"Under the previous government, the message was simple: transport emissions were a major concern, EVs were the solution, and because EVs were expensive, rebates would make them more affordable to encourage uptake," said Motor Industry Association chief executive Aimee Wiley.
"This combination of incentives and a clear, focused message to consumers produced tangible results. In 2023 January through August, one in four new light passenger vehicles sold were EVs. Fast forward to 2024 and EVs make up just one in 11 new light passenger vehicles sold."
That data includes battery electric vehicles and plug-in hybrids.
She said the change had left some importers in a tricky position with too many cars.
"They've been forced to drastically reduce EV prices, making them the cheapest they've ever been in New Zealand. Yet, despite this, sales remain sluggish."
Wiley said the industry expected demand to recover but it would take time.
She said the drop could be due to a change in government messaging about the importance of low-emissions vehicles for reducing emissions and protecting the environment, as much as the incentives and charges involved.
But Gareth Kiernan, chief forecaster at Infometrics, said the Clean Car Discount had a substantial effect.
"In the 12 months to March 2023, there were 91,526 first-time registrations of hybrid and electric cars in New Zealand - this was a 66 percent increase on registrations in the previous year.
"Along with growing strongly in their own right, registrations of hybrid and electric cars have represented an increasingly larger proportion of total first-time car registrations since the end of 2018."
He said electric cars were 44 percent of total car registrations in the year to March last year.
He said interest would have increased without the incentive but not to the same degree. There were still limitations when it came to things like the charging network around the country and people's concerns about vehicles' range.
He said petrol vehicles had since regained some market share at the expensive of full electric and plug in hybrids.
"However, conventional hybrids have maintained their market share, which reflects the change in the mix of vehicle production worldwide away from pure petrol towards hybrid vehicles.
"Vehicle manufacturers bringing cars into NZ also need to meet the government's Clean Car Standard, which dictates the carbon emissions across the entire fleet of vehicles each company brings in. If they bring in too many higher-emissions vehicles then they effectively have to pay a fine to the government. Thus importing conventional hybrids is an effective way of keeping the overall emissions profile of their fleet down and meeting the targets."
He said electric vehicles were in some cases cheaper now than when the clean car discount was in place, but that had not been enough to stop the slump in sales. "People don't see that, they see the $8000 or whatever that was dangled in front of them, there's not that mindset of 'I've got to go out and get it while it's being discounted'."
Conventional hybrids would become much more common over the coming years, he said. "If you're going to car dealer wanting a petrol vehicle you're going to stuggle to find that, over the next three years I think that's going to become increasingly rare."
Eric Crampton, chief economist at NZ Initiative, said it was largely a timing issue.
"Suppose you were considering replacing your car sometime in the next couple of years - whether for your household, or for a company fleet refresh. If there is a large tax incentive to have your purchase be registered in 2023 rather than in 2024, you might bring forward the purchase. Similarly, dealers with vehicles coming in would want to get them registered and to draw the subsidy ahead of the subsidy ending.
"All of that together would mean that EV numbers from the second half of 2023 will include a lot of purchases that would have happened sometime in 2024, had the subsidy not been known to be ending. That means 2023 numbers were higher than otherwise, and that 2024 numbers are lower than otherwise. At least some of the decline in numbers will be overstated because of that effect."
He pointed to research in Australia that showed about 1000 births were moved to ensure that parents were eligible for the "baby bonus" that came into effect on 1 July, 2004. That date had the largest number of children born in the past 30 years.
He said, if people were willing to change the date their baby was born for financial gain, they would change when they bought a car.
"There will also be a real underlying effect: the change will have made EVs less attractive compared to other cars. But at least some of the observed effect is just the timing issue. And in any case, since transport emissions are covered by the ETS, the change in the subsidy rules will not affect net national emissions. It can only change the sectors in which net emissions happen."
Wiley said more consumer awareness was needed.
"It's time to rethink our approach when it comes to choosing our next vehicle. The priority should be shifting towards safety, efficiency, emissions, and age as the key factors driving our decisions. If we all aim to make our next vehicle the cleanest, safest, and most modern option we can afford, it will significantly impact road safety, public health through improved air quality, and our environmental footprint."
