The rapid shift from petrol cars to electric vehicles is eroding fuel excise faster than governments expected. A replacement road user charge is inevitable, but a rushed or fragmented scheme could create new problems of fairness, privacy and administration.

Last Monday the Commonwealth restored the full 53.7 cents per litre of gasoline and diesel excise, and restored road user charges for heavy vehicles.

Well before the restoration of excise, sales of vehicles with conventional internal combustion engines (ICE) had fallen to half the new vehicle market, the other half being hybrids, plug-in hybrids, and battery electric vehicles (BEV).

The chart below, constructed from Australian Automobile Association data, shows this sharp fall in ICE vehicles, and equally sharp rise in BEV sales up to June this year. With excise now back to its full level, continuing uncertainties about oil supply, and the withdrawal of some ICE car brands from the Australian market, it’s a fair bet that this trend will continue.

This development has probably surprised policymakers, who tend to think in terms of linear projections, rather than logistic (“S” shaped”) growth that occurs when demand for a good takes off, particularly when there are network characteristics influencing demand – the availability of chargers in the case of BEVs. Aggressive pricing by Chinese manufacturers locked out of the US market........

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