National Electric Vehicle Strategy: consultation paper

31 October 2022

NATIONAL ELECTRIC VEHICLE STRATEGY
Via ‘Consultation Hub’ - Department of Climate Change, Energy, the Environment and Water

INTRODUCTION

Woolworths Group welcomes the opportunity to submit to the Commonwealth's consultation on the proposed goals, objectives and actions for the upcoming National
Electric Vehicle Strategy (“the Strategy”). We wholly support the development of a nationwide strategy that establishes clear objectives with environmental imperatives at its core, a reformed, unified and consistent regulatory approach, and the clarity needed for business to accelerate and invest in decarbonised vehicles and operations.

Summary

● Woolworths broadly supports the proposed goals and supporting objectives. The
final strategy should aim to decarbonise the entire vehicle fleet, from light passenger
vehicles to light and heavy commercial vehicles, regardless of technology. For now,
the preferred technologies for lighter passenger and commercial vehicles appear to
be battery electric, while for heavier vehicles we expect to see a mix of both battery
electric and hydrogen technologies.

● Priority should be given to improving the supply of, and access to, electric vehicles
(EVs) across all vehicle classes nationwide, including regional and remote Australia.
This will achieve the Strategy’s other goals of improving affordability, spurring
demand and reducing emissions.

● A harmonised policy environment is critical to attracting OEM interest in Australia,
including: a single approach to Road User Charges (RUCs); stamp duty and vehicle
registration incentives; more flexible freight and delivery operating hours; and
widespread recharging infrastructure.

● Aligning vehicle weight and dimension specifications to those in other, advanced EV
markets would open Australia to a wider range of suppliers.

● Adopting fuel efficiency standards and higher fuel quality standards will encourage
EV supply and that of lower emissions, internal combustion engine (ICE) vehicles in
the interim.

● Vehicle recharging infrastructure is critical to EV-uptake and should include the use
of existing refuelling infrastructure, recognition of home-based recharging and
incentives for property owners to install chargers.

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● Demand should be sequenced with the availability of sufficient grid infrastructure,
and renewable energy generation to deliver the best environmental outcomes.
Battery EVs could help support the electricity network transition to variable
renewable generation as a source of grid balancing, similar to grid-connected
stationary battery energy storage systems (BESS).

● For heavy vehicles, incentives require a longer timeframe as these vehicle classes
are less advanced in the decarbonisation journey than passenger vehicles. Shorter
term, addressing the significant upfront purchasing cost would accelerate the
transition.

● Potential incentives include:
○ Time-limited reductions or exemptions on stamp duty, registration fees and
RUCs until EV uptake is established, or total cost of ownership is competitive.
○ Dedicated EV delivery zones, particularly in inner-urban areas
○ More flexible delivery times for EVs, noting their amenity benefits

● Government should support Australia’s role in the EV value chain, with particular
opportunities in assembly, component manufacturing and after-sales support.

Background - Woolworths Group’s logistics operations

Woolworths Group (Woolworths) is Australia’s largest retailer and private sector employer, with over 170,000 team members and about 28 million customers served each week across more than 1,300 stores nationwide, including over 1,000 supermarkets. As a result,
Woolworths, through both its supply chain arm, Primary Connect and online business,
WooliesX, operates one of the largest logistics businesses in Australia, including 2,400 haulage trucks and light commercial vehicles (LCVs), both directly and via contractors. We also have a fleet of 800 passenger vehicles nationwide for team members.

Our scale and expertise mean we can help lead broader change across Australian industry and communities with respect to the decarbonisation of road transport fleets. Transport forms part of our 30-year climate change strategy to deliver on our Paris Agreement-aligned targets to restrict temperature rises to no more than 1.5 degrees Celsius. Our ambition is to be “net positive” in our emissions profile by no later than 2050 - that is, our business removes more greenhouse gas emissions than it generates.

Woolworths is committed to a 63 per cent reduction in Scope 1 emissions and a 19 per cent reduction in Scope 3 emissions from 2015 levels by 2030. Our targets and pathway to achieve these reductions have been verified by the UN-backed Science Based Targets initiative. Decarbonising our vehicle fleet is a critical element to achieving this goal, and alternative fuels and electrifying our fleet present both opportunities and challenges.

In 2018, we began trialling larger EVs for supermarket deliveries, testing their capabilities and needs as a long-term technology solution. We are also trialling seven electric Last Mile

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delivery vehicles across Sydney, Melbourne and New Zealand, which have been converted to electric from standard ICE vehicles.

Our expanding transport fleet is split into three categories (see Appendix A for further detail):

● Last Mile Operations: A fleet of over 1,000 temperature-controlled, <4.5T GVM Light
Commercial Vehicles (LCVs), in which a refrigerated body is attached to 2-door cab
chassis. eComX’s Last Mile fleet operates across every state and territory in
Australia and delivers groceries purchased online to Woolworths customers.

● Supply Chain: A fleet comprising over 1,100 owned road trailers and over 60
contracted carrier partners, providing end-to-end delivery of over 1.4 billion cartons of
fresh food and other consumer goods to Woolworths Group stores and external
partners, across 18 distribution centres nationwide.

● Tools of Trade: Over 800 passenger vehicles for use by our team to work across the
country, and we own and operate, or contract out, over 700 trolley collection vehicles.

SUBMISSION

● Our submission concentrates on the transition of commercial trucking fleets to zero
emission vehicles. We commend the government on its recognition and inclusion of
commercial trucking fleets in the Strategy’s consultation paper, as it represents a
considerable opportunity for Australia to become world leading in both uptake,
supply and support of zero emission trucks.

● Woolworths is a nationwide business and we support an integrated, whole-of-
Australia policy for EVs. We strongly encourage a unified, nationwide approach to
support the uptake of EVs, like that seen in Europe. Harmonisation of state and
territory policies minimises complexity and uncertainty for industry and support
investment. From an operational perspective, a fractured policy environment creates
significant barriers to transitioning to EVs.

● The availability of EVs across commercial vehicle classes, access to EV charging
infrastructure, and the cost and complexities associated with deploying fleet EV
charging infrastructure at Woolworths’ premises represent the greatest barriers to an
accelerated uptake of EVs in Australia.

● In relation to EV availability, Australia is a unique market that presents challenges to
global EV suppliers, including:

○ a vast geographic spread
○ a comparatively small population (unit sales)
○ right-hand drive market
○ relatively low proportion of renewable energy generation
○ an inconsistent and uncertain policy environment
○ restricted width (2.5m) for heavy vehicles compared to international markets

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GOALS AND OBJECTIVES

● Woolworths broadly supports the proposed goals and objectives, though note their
interrelated nature. For example, improving supply and vehicle choice will lead to
improved affordability and lower emissions. And while we support a rapid transition
to EVs, there are constraints in global vehicle supply and supporting infrastructure
that must be considered. The sequencing of the transition must balance the
environmental, technological and economic objectives of the Strategy.

● We observe the following with respect to the Strategy’s goals.

○ Expand EV uptake and choice: There is considerable latent demand for EVs
across Australian industry already. However, fragmented and inconsistent
regulation (e.g. RUCs), technical requirements unique to Australia (e.g. vehicle
width and weights), large distances that create “range anxiety” for recharging,
and considerable upfront costs of EVs and EV charging infrastructure at
present, prevent this demand translating to EV uptake.

○ Make EVs more affordable: We support this across all vehicle categories.
Initial indications suggest the total cost of ownership (TCO) for electric LCV
fleets may be presently 1.5-2.0x that of ICE vehicle fleets when taking into
account the cost of EVs, EV charging equipment and associated site
electrical infrastructure changes / upgrades required to support EV fleet
charging at scale. This presents a considerable challenge to accelerating the
transition to EVs. The fastest and most equitable means of improving
affordability is to remove the regulatory, technical and financial barriers that
limit supply of EVs in Australia, which restrict choice and inflate costs.
Maximising the supply and selection of EVs in Australia via regulatory and
taxation reform would more effectively and equitably achieve the affordability
aim than direct subsidies that accrue to only parts of the community.

○ Reduce emissions: This is the ultimate objective of Australia’s net-zero
emissions ambition. EVs are one means of achieving that. However, given the
considerable increase in demand for electricity that mass adoption of EVs will
prompt, the transition should be sequenced to ensure the electricity used is
itself sustainable, and not derived from fossil fuels.

○ Save Australians money on fuel: This should be considered within the
context of the long-term viability of the road network, its maintenance and
development, as well as costs associated with the necessary supporting
infrastructure - the electricity grid and recharging/refuelling infrastructure.
Savings on fuel costs that are offset by increased costs elsewhere for site
electrical infrastructure upgrades to support fleet EV charging at scale will
not achieve the goals of the Strategy. The Strategy should address the
financial requirements to support critical road infrastructure nationwide under
a single revenue system (e.g. RUC) as existing fuel excise diminishes.

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○ Increase local manufacturing: The opportunity exists for Australia to
establish local supply of light commercial EVs through the National
Reconstruction Fund, including component and chassis manufacturing,
general assembly and after-sales support. While a niche segment of the
market, there is a lack of suppliers globally, and we believe that local demand
across logistics and delivery fleets can support the establishment of this
capability. The market potential could be in the order of hundreds of
thousands of light commercial units, based on current sales.

GLOBAL ACTION

● We note that other major markets are further advanced in their transition to low and
zero emission vehicles. As a comparatively small market and with unique
characteristics to manage such as local climatic variations, long-distances and
concentrated populations and only nascent infrastructure support, Australia’s
challenges in attracting EV supply are considerable.

● Compounding Australia’s challenge is its fractured policy environment, which runs
contrary to the stated goals of a rapid decarbonisation of the road transport fleet.

● It is likely that EV suppliers will concentrate on more advanced and stable markets,
limiting the availability and selection of EVs to Australia. This is a challenge to
reducing the cost of EVs and accelerating the transition.

● As global vehicle supply transitions to EVs, slower moving markets are likely to
disproportionately attract older generation technologies, such as ICE vehicles.
Introducing fuel efficiency standards would help ensure that additions to the ICE fleet
are at least more efficient, in the interim.

● Australia has a real opportunity to be a part of the EV value chain and realise
economic opportunities, but the window for this is small in the context of global
markets. As supply chains and capabilities become established, that opportunity for
Australian industry to participate in the EV transition will diminish.

ONGOING PERIODIC REVIEW

● There are multiple measures that would be valuable to establish and track as
Australia decarbonises its road transport fleet. We encourage the adoption of time-
specific targets to give clarity and confidence to industry to invest.

● Suggestions for these measurements include:
○ EV vehicle availability per vehicle segment and cost range
○ EV sales as a proportion of total vehicle sales
○ Percentage of EV registrations

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○ EV km travelled, and as a proportion of total km travelled
○ Net emissions reduction per km travelled (incorporating that generated by
electricity generation).

ENCOURAGE RAPID INCREASE OF DEMAND FOR EVs

● Light commercial vehicles (LCVs) <4.5t: This segment of the commercial vehicle
fleet represents an opportunity to rapidly accelerate EV uptake. Across the retail
sector, the growth in online shopping has significantly increased the fleet of Last
Mile delivery trucks and vans in Australia, and we anticipate this will only grow.

● The extremely limited supply of electric LCV models heightens the upfront capital
cost. This also reduces the likelihood that the available models of electric LCVs are
“fit for purpose” for business’ Last Mile logistics operational use, preventing a wide-
scale rollout to replace ICE vehicles at this time.

● Reducing stamp duty and registration costs for LCVs would help bridge these upfront
capital costs for new EVs. Combined with operational incentives to reflect reduced
amenity impacts on communities, government has an opportunity to ensure the TCO
is more competitive against ICE vehicles.

● A funding mechanism is essential to ensure our road network is maintained and
further developed. Woolworths supports EVs contributing to road funding and agrees
that RUCs are an opportunity to better link road usage to road maintenance costs
and replace fuel excise. But the existing approach by several States has been to
adopt RUCs that disincentivise EVs before they are established in the wider fleet and
before the TCO for EVs reaches parity with ICE vehicles.

● A potential solution is to offer RUC exemptions for EVs to encourage uptake. Any
exemption should be temporary to balance the need for government revenue for
transport infrastructure, without unduly curtailing EV adoption.
● Thresholds to determine the application of RUCs to EVs may include:
○ when the proportion of EVs within the total national / state fleet, or as a
percentage of KMs travelled, reaches a certain percentage; and /or
○ when the total cost of ownership of EVs (purchase price and operating costs)
over an EV's useful life is comparable with ICE vehicles.

● Supply chains are national in scope and not limited to state boundaries. A single,
unified RUC mechanism is essential for commercial vehicles to give confidence to
both buyers and suppliers of EVs, particularly those that traverse state and territory
borders. Like fuel excise, we note that it would be preferable and logical for RUCs to
be managed by the Commonwealth

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● Woolworths and our partners currently provide 123 charging plugs at 79 charging
stations across 29 owned and leased sites across our network, with an additional 9
sites in development.

● Supporting property owners to design and develop sites that facilitate EV charging,
as well as retrofit and convert existing sites, would hasten and increase recharging
infrastructure across Australia, particularly in regional and remote locations. This
could include dedicated vehicle parking zones for LCVs and considerations for
electrical infrastructure upgrades, further supporting EV uptake. A variety of
innovative models should be supported to enable industry collaboration to establish
large-scale recharging hubs, combining efforts by property owners, utility providers
and EV users.

INCREASE SUPPLY OF AFFORDABLE AND ACCESSIBLE EVs TO MEET DEMAND ACROSS
ALL SEGMENTS

Dimensions and weights

● A reconsideration of additional mass limits for LCVs would also incentivise EV
adoption. Currently, gross vehicle mass (GVM) for operation on standard car licences
is restricted to 4.5 tonnes.

● The cab chassis of EVs that suit Woolworths’ Last Mile operations weighs
approximately 400 kg more than a comparable ICE delivery vehicle due to the extra
weight of the EV’s batteries. In the UK, EVs are given an additional 750kg allowance,
reflecting the additional battery weight while meeting existing operating parameters.
Concessions for EV tare weight should be considered in relation to operation on a
standard car licence in Australia.

● Support for wider dimensions for heavy vehicles would enable access to additional
models supplied from the US and Europe. New Zealand, China, the UK and Europe
allow for up to 2.55m widths, while in the US they allow for 2.6m. New Zealand
expanded its width allowance to 2.55m in 2017 and has reported no increase in
safety issues.

● Manufacturers are unlikely to tailor their product to satisfy the Australian market in
the foreseeable future. For example, Tesla has confirmed that its Semi will only be
produced as a 2.55m wide variant, wider than the maximum allowance in Australia.
Under present regulation, Australia cannot access this expanded range of vehicles.

Efficiency and emissions standards

● We support efforts to mandate fuel efficiency and emissions standards, such as Euro
6 for light vehicles. For the majority of the Woolworths heavy vehicle fleet, we adhere
to the Euro 5 or 6 standard. This has the added benefit of prompting a newer fleet
with better safety performance and this would translate to passenger fleets as well.

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● Enhanced fuel efficiency standards across all classes would increase supply of
electric vehicles, as well as incentivising the shift away from ICEs. This must be
paired, however, with the variety of other regulatory reforms, including those
supporting increased vehicle supply (e.g. changes to vehicle class dimensions) and
the ability to access higher grade fuel than what Australia currently uses.

● Fuel efficiency standards for heavy vehicle classes would likely increase the supply
of low or zero emissions vehicles in that class. However, the technology available in
this class of vehicles is far less mature than that in lighter passenger vehicles, so it
may be some time before zero emission alternatives are viable and accessible.

● Based on current and foreseeable battery technologies, we see this as predominantly
being a hydrogen-based solution rather than battery electric, requiring concurrent
investment in supporting infrastructure across Australia, akin to the “Hydrogen
Highway” recently announced for the eastern seaboard.

Phase-outs and EV turnover

● Woolworths notes the growing number of State and Territory Government plans to
ban the sale of new ICE passenger vehicles from 2035. This sends a strong signal to
industry and consumers but should be paired with government support to encourage
the supply of suitable and affordable vehicles for the Australian market, the rollout of
recharging infrastructure and development of an extensive after-sales support and
maintenance network.

● This would increase the scale and variety of low and zero emissions vehicles
available to Australian business and consumers, reducing purchase costs, increasing
uptake and spurring the necessary support network.

● Additionally, early adopters of EVs, such as government, council and rental fleets,
could be encouraged to increase their turnover of vehicles to spur growth in, and
affordability of, the second-hand market. However, this should be considered against
the lifecycle impact of artificial, early vehicle retirements.

● As EV uptake grows internationally, there may be an opportunity to spur a second-
hand import market in Australia, reducing EV acquisition cost. This would likely
require trade policy reform and may result in earlier generation EVs entering the
market, which may be a favourable outcome when balanced against later adoption.

Community operations

● For freight and delivery, we support the creation of designated EV loading zones,
particularly in inner-city areas. Given the challenges of Last Mile freight delivery,
particularly in inner urban areas, these measures would provide a strong incentive for
the adoption of EVs in commercial trucking fleets.

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● State governments should retain - or reintroduce - flexibility for retail delivery hours
as an incentive to adopt quieter and more efficient technologies in the freight sector,
including EVs and loading dock process improvements.

● Most Australian jurisdictions adopted emergency regulations during the COVID-19
pandemic in mid-2020 to permit flexibility in delivery times, overriding the usual
timeframes set by Councils. While this was introduced in response to elevated
demand experienced throughout the pandemic, NSW adopted these permanently,
reflecting the significant improvement to neighbourhood amenity from newer, quieter
vehicles. A similar regulatory approach in other jurisdictions would further encourage
uptake of EVs in the delivery vehicle segment.

STRENGTHEN AUSTRALIA'S COMPETITIVENESS IN THE EV VALUE CHAIN

Vehicle Supply

● An opportunity exists for the government to support the development of local
component manufacturing and assembly, enabling the supply of EVs more attuned
to Australia’s operating environment. This includes training and upskilling for new
and existing automotive professionals, alongside incentives for offshore OEMs to
establish more substantive local facilities or partnerships.

● Support for these suppliers to scale and engage the Australian market would be
welcomed and would likely require leadership by the Commonwealth in conjunction
with local industry in attracting investments. The National Reconstruction Fund is
one potential avenue to fund this type of industry development initiative.

Maintenance and Repair Services

● Crucial to the success of EV expansion is the development of widespread support
and maintenance services for these vehicles. This includes supporting training for
repair technicians and asset write-down provisions for existing service providers to
retool and transition to EV support.

EV Batteries

● We note the government is also developing a National Battery Strategy, which should
complement this strategy, and represents another avenue for considerable industry
development in Australia. This could potentially service global markets, given the
extraction of critical raw materials for batteries occurs domestically.

● Design, manufacture, refurbishment and recovery/recycling of batteries is a
considerable and high-value economic opportunity.

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ESTABLISH THE SYSTEMS AND INFRASTRUCTURE TO ENABLE RAPID EV UPTAKE

Charging and refuelling infrastructure

● Charging infrastructure to support a growing EV fleet is crucial. ‘Range anxiety’ is a
barrier to EV uptake across Australia and investment in charging infrastructure is
required to drive confidence that conversion will be supported without compromise
to current community experience. This includes promoting at-home charging and
reconfiguring existing petrol stations to incorporate charging.

● The EV charging process is considerably different to refuelling a vehicle at a fuel
station. For example, when a fleet is managed by a logistics partner, consideration
needs to be given to the fleet operating model, particularly where and when EVs are
charged, and which parties are responsible for providing and managing EV
charging/refuelling assets.

● The timeframes for recharging are considerably longer than refuelling ICE vehicles,
impacting the throughput at charging points and the planning of vehicle use and
driver welfare. Of particular importance to fleet operators is charging availability as
and when needed, unencumbered by other users, and the operational reliability of
these charging units.

● Additionally, the power requirements at a local level will place significant and, as yet
unknown, pressure on the electricity grid and is likely to need substantial investment.

● Feasibility studies to determine preferred locations and structures for charging
infrastructure would be beneficial to maximise investment returns and align
prioritised fleet conversions. For example, deploying higher capacity charging
infrastructure in industrial areas, to target commercial and delivery vehicles, while
providing lower capacity ‘top up’ charging equipment for commuters at local
shopping centres or community facilities, who will primarily charge at home.

● For fleet operators, higher capacity charging equipment is necessary but significantly
more costly to purchase and the required supporting electrical infrastructure works
much more expensive to install than lower capacity charging.

● Using existing refuelling networks to support recharging infrastructure is a sensible
starting point. There are also locations not traditionally associated with refuelling but
which present opportunities to introduce recharging, such as car parks, offices,
shops, cafes and restaurants. Owners and operators of these facilities need support
to introduce recharging where appropriate.

● Many of Woolworths’ LCVs are parked overnight at a range of off-premise locations
after completing their deliveries. In many instances, the drivers of these LCVs are not
responsible for the vehicles overnight. The range of overnight garaging locations
requires a range of charging solutions - charging unit locations, cost arrangements
and responsibilities. Multiple stakeholders - landlords, businesses, fleet operating

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partners, drivers and councils - need to be engaged in designing a charging solution
that is fit for purpose for LCV and passenger fleets.

● Additional electrical infrastructure and upgrades may be required at sites where EV
charging is occurring at scale or concurrently. A complete transition to electric LCVs
would have considerable impacts on Woolworths’ electricity use, with an estimated
increase of up to 60 per cent in electricity usage. This can create challenges for grid
infrastructure. While this can be partially mitigated by scheduling recharges to lower
demand periods, there would still likely be an impact on the capacity of grid
infrastructure in and around our stores.

● Additionally, the ability for battery EVs to supply back to the grid (V2G) could help
support the grid during times of high usage or low renewable generation, thereby
reducing grid investment costs and allowing for innovation in charging models.

● Beyond EVs, there is also the prospect of considerable use of hydrogen, particularly
in long haul freighter fleets. The “Hydrogen Highway” from Queensland to Victoria is
a commendable and essential initiative by governments, spurring considerable
interest in the technology across industry. Given Australia’s scale, this crucial
initiative will need to be replicated across the rest of Australia to support a
decarbonised road transport fleet.

CONCLUSION

Woolworths strongly supports the development of a National Electric Vehicle Strategy, to be complemented by the upcoming National Battery Strategy. Battery electric vehicles and hydrogen fuels are a significant opportunity for Australia to take tangible steps to achieving its net zero ambition. Harmonised regulation that rapidly and significantly increases EV supply, combined with a cohesive, Australia-wide approach to recharging infrastructure across all communities, will maximise the benefits from the road fleet transition. Reduced emissions, lower transport costs and high-skilled jobs are all achievable with the right policy and regulatory settings.

We welcome ongoing engagement on the development and implementation of the Strategy and hope that it will give confidence to Australian communities and industry that, while our vehicles may look and sound different, they will be a key part of our journey to net zero.

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APPENDIX A: WOOLWORTHS ROAD TRANSPORT FLEET

Last Mile Operations

● COVID-19 changed the needs and behaviour of Australian consumers, rapidly
accelerating the uptake of online retailing and the infrastructure to support it.

● Woolworth’s eCommerce business (“eComX”) provides convenient ways for
customers to shop for groceries online. Online grocery orders are picked and packed
by personal shoppers in-store or at a Customer Fulfilment Centre (CFC), and made
available for pick up or delivered to homes and businesses.

● The eComX business delivers groceries to homes using a fleet of over 1,000
temperature-controlled, <4.5T GVM Light Commercial Vehicles (LCVs), in which a
refrigerated body is attached to 2-door cab chassis. eComX’s Last Mile fleet
operates across every state and territory in Australia.

Supply Chain

● Primary Connect is Woolworths’ logistics business offering end-to-end solutions for
Woolworths Group and external partners. It is the largest food and grocery network in
Australia and New Zealand, with 18 distribution centres nationwide with a further six
in development, enabling the rapid, reliable and efficient storage and distribution of
fresh produce and consumer products.

● Connecting global and local supply chains, Primary Connect uses a multi-modal
approach of road, rail, sea and air transport. In Australia, this year to date, Primary
Connect averaged over 28,000 outbound and 7,000 inbound truck movements per
week to over 1,300 Woolworths Group retail sites. Additionally, Primary Connect
services over 1,300 supply partners, handling 1.46 billion cartons this year.

● Primary Connect’s fleet includes over 1,100 road trailers and over 60 contracted
carriers operating to Woolworths’ safety and equipment specifications.

Tools of Trade

● Woolworths operates over 800 passenger vehicles for use by our team to undertake
their duties across the country. This includes vehicles for:
○ Store Managers in their local community;
○ Area Managers overseeing a geographic spread of stores;
○ State and territory support teams with vast geographic coverage; and
○ Support team for fleet vehicles, mostly in urban and suburban areas.

● We own and operate, or contract out, over 700 trolley collection vehicles to collect
displaced trolleys, and will soon trial electric vehicles in this segment.

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