National Electric Vehicle Strategy: consultation paper

RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE

ABOUT:
AUSEV Pty Ltd (AUSEV) is a subsidiary of Boss Capital Holdings Pty Ltd
(BOSSCAP). BOSSCAP is a multi-industry company focused on sovereign capability.

Starting with one import company in 2012, BOSSCAP has vertically integrated its supply chain and rapidly expanded its advanced manufacturing capabilities, making it the only end-to-end solution in the Australian automotive sector. BOSSCAP’s core business units focus on the importation, remanufacture and distribution of American pickup trucks via its fully owned network. Information on all the BOSSCAP businesses can be found at www.bosscap.com.au.

AUSEV was established to accelerate the adoption of electric vehicles in Australia, with a focus on RHD 4×4 EVs and has evolved to incorporate not only Pick-ups but also Light, Medium and Heavy-Duty Trucks. The company is committed to offering an end-to-end solution, including servicing, charging and fleet management. AUSEV leverages BOSSCAP’s experience in remanufacturing and distributing ICE (Internal
Combustion Engine) vehicles to now offer OEMs a solution to either partially or fully manufacture RHD electric vehicles (EV) locally in Australia. Information on AUSEV can be found at www.aus-ev.com.au.

Australia and other right-hand drive countries have previously been neglected by vehicle manufacturers. However, given the new government's EV ambitions, there are extensive opportunities to establish, extend and increase EV manufacturing in
Australia.

AUSEV has established a range of partnerships with EV companies to establish manufacturing onshore in Australia. These include Atlis Motor Vehicles, XOS
Trucks, Zeus Electric Chassis and Via Motors.

Most recently, in a sign of the depth of our relationships, AUSEV was invited and present to participate in the recent Nasdaq listing of Atlis Motor Vehicles.

INTRODUCTION:
AUSEV has established extensive advanced manufacturing and design capability and has built a strong reputation for excellent componentry design, manufacturing and installation.

We strongly advocate for Australian government policy which will support and enable a local EV manufacturing and assembly industry – particularly with respect to light and heavy commercial EVs.

AUSEV believes that there is a unique and unlikely to be repeated confluence of circumstances which together create an opportunity to establish EV manufacturing onshore in Australia. We make this submission to the National EV Strategy to ensure that local manufacturing, assembly and production are considered as key opportunities within Australia's EV, decarbonisation and electrification future.

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE

INTERNATIONAL AND INDUSTRY CONTEXT:
The western liberal economic global order has changed markedly in the few short years since community spread of COVID-19 was first detected in the latter part of
2019.

The global economy is now experiencing a number of substantial, simultaneous and self-reinforcing second and third order economic shocks. These commenced with economic uncertainty at the start of the pandemic, resulted in supply chain dislocation, and most recently has led to reduced global growth forecasts, and high inflation in Australian as well as most advanced economies.

The impact of a recently commenced cycle of increasing central bank interest rates, especially by the US Reserve Bank, has made life difficult for companies importing goods into Australia against a very strong US dollar.

In addition to extreme economic uncertainty, we are experiencing an increasingly uncertain geostrategic and geopolitical outlook. War in Europe and the potential of war in Asia mean that the trade environment that has served Australia so well over the last three decades, now has the potential to expose Australian weakness, particularly in respect of manufacturing.

Australia is at the end of global supply chains which have been severely tested in recent years and months. We lack economic complexity and the ability to make things in Australia. Further the Australian economy regularly fails to commercialise our best research outcomes, so that the Australian economy enjoys only a fraction of the economic benefits which flow from these ideas.

In a few short years, globalisation has turned from an engine of growth and a tool for wealth maximisation, to a potential strategic weakness for our country.

Where economic competition turns to strategic regional competition, a country like
Australia – which is at the end of supply chains, and which has a thin industrial complex with limited manufacturing capabilities - will become increasingly vulnerable to future economic shocks and external threats.

In this context it is critical for the Australian economy to build and enable most aspects of EV design and manufacturing. This is key to increasing the complexity and resilience of the Australian economy.

EV adoption will enable the Australian economy to reduce transport emissions. We urge the National EV Strategy to consider the broader economic context which dictates an urgent need to build capability in Australian EV manufacturing as a means of reducing Australian supply chain vulnerabilities.

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE

KEY POINTS:
We propose a range of measures to support onshore manufacturing and assembly of light and heavy commercial EVs:
 Incentives, tax holidays, tax deferments and smoothed multi-year claiming of
losses for companies manufacturing and assembling EVs – including supply
chain.
 Prioritising local component design and manufacture.
 Recognise research and development costs involved in purchasing, trialling,
testing, and componentry design and build, for EVs to be introduced into the
Australian market.
 Harmonise Australian Design Rules and accept US standards to enable
importation of left-hand drive EVs for local remanufacture to right-hand drive.
 Support fast charge infrastructure, including for light and heavy commercial
EVs (freight haulage).
 Mandated fleet purchases across all categories, including larger commercial
vehicles for both public and private sectors.
 Substantial upskilling and investment in training for an EV manufacture and
maintenance workforce.

RESPONSES:

Q1: Do you agree with the objectives and do you think they will achieve our proposed goals? Are there other objectives we should consider?

The objectives set out in the consultation paper effectively feed into the goal of increasing the penetration of EVs on Australian roads by increasing demand and supply of vehicles while improving EV infrastructure, such as through increased access to fast charging on Australian roads.

Through the prism of solving an economic problem with measures which will increase overall use of EVs, and therefore enabling an improved climate outcome, the objectives are a reasonable starting point.

However, it is important that the Australian Government recognises the industrial and economic opportunities posed by EVs.

With a range of technological changes and advances, such as EV chassis supply, roboticized technology, coupled with the need to increase the resilience of supply chains while reducing over-reliance on overseas supply chains, Australian industry now has an opportunity and an imperative to establish a place of prominence amongst EV producers and manufactures. In turn this provides Australian EV producers with the potential to export vehicles and potentially also components into emerging international supply chains for the EV production.

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE

This is a unique and historical juncture in circumstances. For the first time 50 years, low-cost labour and minimum cost, 'just-in-time' supply of goods are no longer the determining factors for the location of vehicle manufacturing.

A local Australian EV industry can include advanced design of vehicles and design and manufacturing of componentry as inputs into international supply chains.

AUSEV and parent company BOSSCAP has considerable and direct experience in the automotive sector with a ten-year history of successfully delivering high quality remanufactured vehicles to the marketplace.

There are a range of companies with similar capabilities, which with the right policy settings have the potential to establish a strong local Australian EV assembly and manufacturing industry.

We strongly encourage the National EV Strategy to fully investigate and interrogate the opportunities for onshore EV manufacturing and measures which may support these opportunities.

Q4: Are there other measures by governments and industry that could increase affordability and accessibility of EV's to drive demand?

There are a range of policy choices available to the Australian Government to drive
EV demand.

Due to Australia’s lack of vehicle emissions standards, dealers are simply unable to attract sufficient stock of EVs for sale. We would anticipate introduction standards will have a significant impact on attracting stock into the Australian market to better satisfy existing and pent-up demand.

Simple subsidies or other forms of EV purchase incentives, while risking some level of economic distortion, are necessary in the short to medium term in order to overcome Australia’s very low level of EV uptake, considering comparable economies' performance in this field.

Fleet purchases of EVs by government departments, agencies and instrumentalities will also serve to establish a local market for importation, sales and distribution of
EVs as well as a second-hand market for EVs which will become available to
Australian drivers. This should include mandated government and agency fleet purchases of light and heavy commercial vehicles, to help establish second hand market acceptance amongst “tradies”, while also driving charging infrastructure.

There is also potential for Government to put in place concessional arrangements for companies willing to integrate EVs into their own commercial fleets. Arrangements might include tax and tariff exemptions and stamp duty relief on resale.

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE

In our view, measures to encourage the development of an Australian EV manufacturing and assembly sector also have the potential to increase the affordability and accessibility of EVs for the Australian market. We have discussed this further in our response to questions in the remainder of this submission.

Q6: What information could help increase demand and is the Government or industry best placed to inform Australians about EV's?

AUSEV considers it is critical to improve and increase measures to educate the
Australian public in relation to EVs.

Over an extended period misinformation in relation to EVs has been allowed to freely circulate in the Australian community, generally without sufficient efforts being made to correct and contest that misinformation.

Misinformation includes messages which emphasise the cost of purchase; which create and reinforce "range anxiety"; which minimise the environmental benefits of
EVs, perhaps by an over emphasis on the environmental impacts of mined battery materials, or the use of fossil fuels to generate the electricity used to charge EVs.

Information that places these and other issues into context is critical. For example, providing information on the Total Cost of Ownership of EVs establishes a clear benchmark against which to compare ICE ownership versus an EV, which may be more expensive to purchase, but cost far less to operate.

Information being made available on daily average vehicle usage will serve to clarify the real range constraints on EV owners.

Balanced and well researched information and educational materials on these and other matters relevant to EVs are critical to establishing the costs and benefits of energy transition more broadly and moving to EV vehicles specifically.

It is critical that government and industry play their parts to ensure information is interesting, accessible, clear, truthful and backed by both government and non- government sources.

Q 9: In addition to fuel efficiency standards for passenger and light commercial vehicles, would vehicle efficiency standards be an appropriate mechanism to increase the supply of heavy vehicle classes to Australia?

Fuel efficiency standards ought to be applied in an equitable and fair manner across passenger, light commercial and heavy commercial vehicles. The commercial vehicle sector involves a number of challenges in respect of emissions reductions. It is however clear that without the imposition of standards, incentives or mandates at some level, the chances of an effective and timely transport energy transition are greatly reduced.

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE

Emissions standards across classes of vehicle will clearly reduce emissions. At the same time, it is possible to implement policy settings which will see local manufacturing emerge and flourish, in a relatively short period of time.

AUSEV recommends the government consider and implement incentives and mandates to support local manufacturing as well as active industry policy, guided by employment and viability metrics.

Key elements of this are likely to include:
 strategic government investment enabling and supporting local
manufacturing.
 project facilitation including access to land for industrial development which is
proximate to transport and supply chain networks (rail, port and intermodal)
 fast tracked and streamlined approval processes for critical capabilities such
as EV manufacturing and supply chain.

Q11: What policies and/or industry actions could complement vehicle fuel efficiency standards to help increase supply of EV's to Australia and electrify Australian fleet?

AUSEV supports the implementation of tax incentives to support Australian EV manufacturing, especially in hard to resolve EV categories such as light and heavy commercial vehicles and trucks.

There is a near term opportunity for Australian companies to produce Australian made vehicles locally, both for sale to the domestic market and also for export.
Manufacturing incentives have the potential to enable local build of a locally made
EV fleet.

Economy wide or industry wide measures are likely to have the greatest impact in increasing EV supply to the Australian market. For example, mandating a 30% of light and heavy commercial EV sales within the near term (eg by 2030/32) will have a transformative effect on both the supply of light and heavy EVs to the Australian market, but will also place substantial pressure on the transport sector and its suppliers to quickly implement charging infrastructure.

Mandates can take a range of forms, introduced at a low level initially to enable fast implementation/start dates, with a 'ratchet' mechanism increasing the mandated level of EVs sold, year-to-year.

We would also note the very high costs associated with R&D testing of trial vehicles.

While the existing vehicle production, distribution and sales system is sufficiently well established to fund this work, the establishment of a category of vehicles suitable for
Australian conditions is a work in progress requiring substantial testing and development.

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE

AUSEV would advocate to ensure that purchase, testing and componentry development, including remanufacturing (manufacturing and engineering required to make left hand drive vehicles into right hand drive vehicles) of electric vehicles,should have access to funding available for R&D activities.

Alternatively concessional taxation arrangements should be made available to enable current costs and losses associated with these activities to be claimed against future year income. This will improve access of companies undertaking these activities to long term funding, while providing greater runway and certainty for the establishment of an Australian assembled or manufactured vehicle sector. This incentive would be particularly valuable over the short to medium term.

Similarly, zero interest loans for companies developing an electric vehicle assembly and manufacturing sector in Australia would provide significant short to medium term support and certainty for investors.

Finally, establishment of EV precincts by local and State authorities, with support from the Commonwealth, has the potential to align and encourage collaboration between supply chain partners.

Q13: How could we best increase the number of affordable second hand EV's?

Mandated EV purchase for government and corporate fleets is the most certain and fastest way to increase the EV second hand market.

It is critical that light and heavy commercial EVs should be included in these mandates. It is relatively straightforward for governments to simply impose mandates on its own agencies using light and heavy utility vehicles, for example, departments delivering services, and state-owned utilities.

It is important that action is also taken to encourage private companies using large commercial vehicle fleets to also adopt EVs. This includes fleets of light and heavy commercial vehicles across privately owned utilities and their service providers, as well as large resource companies.

In addition to the potential to mandate the take-up of light and heavy commercial
EVs by larger companies, other measures may be used to encourage early and extensive adoption. For example, a mechanism to recognise and monetise the reduction in emissions associated with purchasing an EV utility vehicle, rather than an ICE utility vehicle. This measure would in turn allow the longer term benefits of an EV vehicle to be incorporated into its immediate cost of purchase.

For the purpose of remanufacturing vehicles from left hand drive to right hand drive, the Australian Design Rules are out of alignment with the equivalent regulations for the US car market. The ADRs may mean that it is necessary to re-fit components of an imported car which has been produced by one of the large US car makers. We

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE would recommend efforts to better align the ADRs with the manufacturing practices of global car makers, particularly when it is intended to make EV versions of these vehicles available to the Australian market.

Q15: What actions can governments and industry take to strengthen our competitiveness and innovate across the full lifecycle of the EV value chain?

In addition to the establishment of fast charging infrastructure, it is critically important to ensure that the national electricity grid is able to support EV charging, wherever and whenever EVs are plugged in.

Further EVs can be used to support the network in ways that will make them part of the solution using Vehicle to Grid technology to form part of national battery storage infrastructure. Participation in these networks by EV owners should be mandated or heavily incentivised to maximise utilisation of EV batteries within the electricity system. This may potentially also create an additional income stream for EV owners which will defray the initial cost of purchase.

Training including apprenticeship, and internship opportunities are critical to meeting the many challenges around the establishment of charging infrastructure. In addition, due to very high national employment levels and an unemployment rate currently under 4%, skilled labour migration must be considered a key component of resourcing the many projects required to support energy transition.

Finally, strong State and federal government support is required to facilitate
Australian projects for battery minerals exploration and extraction, downstream processing for these minerals, as well as onshore battery cell manufacturing.

With an extraordinary level of natural resources across the spectrum of critical minerals, Australian industry has the opportunity to undertake extensive value-add activities onshore, greatly increasing our export income opportunities.

Q16: How can we expand our existing domestic heavy vehicle manufacturing and assembly capability?

AUSEV is working to establish light and heavy commercial EV manufacturing in
Australia. We recommend consideration of measures to incentivise local design and manufacture of EVs.

In particular we note the research costs associated with purchasing and testing vehicles for the Australian market, as well as the development and design costs associated with developing componentry.

Other measures such as subsidies, tax holidays, tax deferment and claiming early year losses against future income should also be considered. In particular we

National Electric Vehicle Strategy
Suggested Responses
RE: NATIONAL ELECTRIC VEHICLE STRATEGY RESPONSE propose these measures to help Australian industry to overcome the substantial short-term barriers to local design, manufacturing and assembly of Evs.

Substantial work is required in relation to workforce development and alignment for local manufacturing of EVs. For example, courses to upskill mechanical, ICE-based expertise to electric and EV-based expertise.

Ahead of an increase in the number of EVs on Australian roads, maintenance and repair expertise for these vehicles must be skilled-up and made available. This means massive EV upskilling across TAFE, registered training organisations, and retraining for existing diesel mechanics.

To support a vertically integrated EV sector, as well as the national energy transition challenge, measures to support local refining of critical and battery minerals Is strongly supported, as well as development of onshore battery manufacturing. We note that the Federal Government's election commitment to invest $100 million in an
Australian made battery precinct, and we strongly support this measure.

Q17: Is it viable to extend Australian domestic manufacturing and assembly capability to other vehicle classes?

AUSEV is working to establish local manufacturing of Australian light and heavy commercial EVs. A key obstacle to local manufacturing and assembly in other vehicle classes is likely to be the restrictive design and application of Australian
Design Rules.

AUSEV has found a number of circumstances where components, used by global
US car makers, installed in US made cars, are not able to be approved under the
ADRs because the US system provides for manufacturer self-certification, which does not comply with ADRs.

Under the ADRs an accepted remedy for this situation is to purchase and install a lower quality component, which has specifically complied. In our view this is not an optimal solution as the replacement component is a lower quality solution, than would be the case if the installed component had been able to be accepted under
ADRs.

AUSEV views vehicle safety as the number one priority and for this reason we would seek an alternative solution which results in higher quality and safety outcomes.

Unfortunately, this situation also creates a barrier against the importation vehicles which can be remanufactured (modified from left-hand to right-hand drive); or for local assembly and manufacturing.

Without a realignment to suit global and international standards, the ADRs will pose a barrier to local manufacturing and assembly capability to other classes of vehicles.

National Electric Vehicle Strategy
Suggested Responses