A report came out in July last year that said Australia’s “do nothing” approach of up-taking electric cars could

A report came out in July last year that said Australia’s “do nothing” approach of up-taking electric cars could cost the local economy over $350 million in the next 20 years, on top of the one million tonnes of carbon emissions that will be added to the environment. Last year in Australia, just under 2000 electric cars were sold, with the majority of those going to commercial buyers. When you compare that to the 1.1 million new cars sold in Australia last year, it really paints the picture. So what’s the issue? Well, there seems to be two: pricing and dealers. As with every emerging technology, the initial entry cost is often high. The cheapest electric car on the market in Australia right now is the Nissan Leaf, which retails for around the $40K mark. But aside from the electric drive-train, everything else about the car was simply on par with vehicles worth half the price. It’s an extremely hard sell for the uneducated car buyer. Your next bet is the BMW i3 which starts at $64K before on road costs. Why did majority sales of EV come from the commercial buyers than from individual buyers? (Hint: you may apply the theory of price elasticity of demand to explain.)




Household consumers look at the short term gains such as lower prices before buying the care as an important consideration. So, they don’t opt to buy the electric cars, though, it could save the cost of fuel and negative externality of the pollution created by the fuel based cars.
Commercial buyers are mostly institutional buyers who have the responsibility and government restrictions to control the pollution and limit their carbon emissions. So, they opt to buy electric cars and look at its overall value and saving during the whole period of useful life. It is the primary reason for that commercial buyers are more in numbers as far as buying the electric car is concerned.
It can also be understood by the price elasticity of demand. Demand of the car is relatively elastic in nature due to the presence of different types and sizes of the cars. So, change in prices affects the demand of cars. It is more applicable to the household buyers and they tend to demand less number of electric cars due to their high prices. Though, it is not the case for commercial buyers. They look at the overall value of the car and less price sensitive. It means that their demand is less price elastic. So, the commercial buyers buy electric cars. It helps them to fulfill their regulatory norms.

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