charging tesla cars

Why is Tesla so expensive in Australia?

Tesla arrived in the market not long after the i-MiEV was consigned to history. Initially, Tesla dipped a toe in the water with its high-performance Roadster. Very few of the sporty electric vehicles sold here, but the manufacturer was encouraged by the local consumer interest in electric vehicles.

Subsequently, Tesla launched the Model S – a range of electric vehicles looking more like prestige limousines than the polarising city cars from Nissan and Mitsubishi.

Although the American EV brand has been very secretive about its sales numbers in different global markets, including Australia, it has met with apparent sales success in the years since entering the local market, despite even the cheapest Model S from 2015 selling at a price more than double that of the i-MiEV.

With the arrival of the model S, there was suddenly an electric car offering appealing looks, a roomy, desirable interior and better than adequate performance. You could comfortably seat five adults in the model S, and drive a reasonable distance before the vehicle needed recharging.

And when comparing the model S and i-MiEV, the Tesla was a clear step ahead of the Mitsubishi for battery capacity, in dollar terms. If you divide the final selling price of the i-MiEV by its battery storage capacity (16kW/h) the cost works out at over $3000 per kilowatt-hour.

Try that same calculation with the 2015 Model S 60, and the cost comes down to $1677 per kilowatt-hour.

Now, you can find all the reasons under the sun for that, including aggressive pricing to establish the brand and more margin in the prestige-level pricing to compete directly with competitors.

But according to Tim Washington, Director of local EV recharging service JET Charge, the difference is one of battery technology.

“Battery prices are the main reason, lack of scale is another,” Washington said to car sales, explaining the higher pricing for EVs.

“However, both are changing incredibly fast. Battery prices, for example, have fallen 85 per cent since 2010, and are forecast to hit $USD $100/kWh at the pack level within the next five years.

“At those levels, an EV will be cheaper than an Internal Combustion Engine vehicle at the dealership. Couple that with the cost advantages of running an EV, and it becomes a no-brainer for almost everyone.”

Tesla’s new Model 3 electric car rolls into driveways across Australia this month and is set to spark fresh debate about the value for money of these innovative vehicles.

At around half the price of other Tesla cars, the Model 3 is the US brand’s cheaper option — but still pricey at about $70,000 on the road.

New Teslas are ordered online rather than advertised through car dealers, and while the company does not share sales data for Australia, many local fans have signed up.

Among them is Simon Claringbold, who bought his first Telsa two years ago and is awaiting delivery of his second.

“It’s really nice not having to go to petrol stations, it’s nice not getting gouged at Christmas and Easter, and it’s nice to be able to have solar panels on your roof and generate your energy for transport,” he said.

Mr Claringbold said it was difficult to compare cost benefits because Tesla cars were so different to what motorists were used to.

“A Tesla car has only got 18 moving parts in the transmission and engine, and they’re engineered to last one million miles,” he said.

“For me, the running cost is virtually zero. Ninety-five per cent of the charging I do is at home — I leave the car plugged in, and every morning it is full and ready to go 400km.”

SolarQuotes CEO Finn Peacock estimated people would pay between $12 and $29 to charge a Tesla, depending on electricity prices and battery type.

“Of course, if you have solar at home you can charge it for a lot less,” he said.

A solar energy-charged Tesla could cost just 0.4c per kilometre to run, compared with up to 5c for grid-powered cars and 6.3c for a Toyota Corolla, Mr Peacock said.

“Tesla vehicles are still fairly expensive, but the new Nissan Leaf is $55,000,” he said.

“I think it really comes down to how much you would expect to spend on a car — and how much extra you will pay for an electric vehicle.”

Mr Peacock said cost savings mostly came from fuel and maintenance.

“An electric vehicle will hardly wear the brakes, as they are regenerative — no friction — and there is no engine,” he said.

“Some insurers can charge a fortune for insurance. I’ve seen Tesla Model 3 insurance quotes range from $1,500 to $4,500.”

A spokeswoman for comparison website Finder.com.au said buying the most powerful Teslas could “push your vehicle a lot closer to supercar territory, driving insurance premiums right up”.

“Have a qualified electrician install upgraded power points in your garage before you get the car,” she said.

“Typical wall outlets can charge the car but maybe frustratingly slow.”

Meanwhile, Tesla is looking at the Chinese market and calculating what the Model 3 will be worth there. It’s even asking Asian customers to hazard a guess as to what its base MSRP will be, claiming it has a big announcement scheduled for May 31st. 

Bloomberg, which has already taken a stab at Tesla’s guessing game, cites inside sources who claim Tesla is currently considering pricing the vehicle between 300,000 yuan ($43,400) and 350,00 yuan ($50,600) before incentives. However, at least one source claims the official Chinese MSRP has yet to be finalised and was unable to confirm if the end-of-month announcement is even related to the matter.

Considering that Chinese production of the Model 3 is still months away, Friday’s announcement has a decent chance of being about something else. Still, Tesla’s effort to encourage future customers to estimate the vehicle’s price means the company is actively thinking about it.

Certification documents from nearby Australia suggest Tesla will bring the pricier Performance and Long Range variants of the Model 3 for its initial launch, and the same could be true for China — meaning the global rollout would mimic what we’ve seen in the United States. Lower-margin variants probably won’t be a priority until worldwide demand for the well-equipped Model 3 peters out.

Tesla’s Just Got More Expensive In Australia

Tesla’s range is already expensive in Australia thanks to import fees, a hefty luxury car tax and a range of other additional costs depending on the state or territory you live in. Looking to deepen the hole in your wallet that little bit more, Tesla’s now increased the price in the country.

The increase in price is seen across Tesla’s three models sold in Australia, the Model X, Model S and Model 3, as spotted by WhichCar.

This means the Model X, Tesla’s most expensive local offering, will now start from $144,900, excluding the order and delivery fees and on-road costs for the long-range model. In December 2019, CarsGuide reported it had a minor increase to $133,900, so this means the latest hike is a huge $11,000 increase. Of course, you’ll also need to add the luxury car tax, around $21,000 for the bare-bones Model X, on top plus any other on-road costs associated with where you live.

The performance model of the Model X will get a price increase too, now costing $159,900 before all the usual fees are added on top to bump it up. Back in December, it was $151,900, according to CarsGuide.

An overview of Tesla’s price increases in Australia

For the Model S, it now starts from $130,900‬ before adding on ordering and delivery fees as well as on-road costs. That’s up to $6,000 from its last increase in December 2019 when it was increased to $124,900, per CarsGuide. The performance model will also cost you a neat $145,900, up $2,000 from $143,900.

The Model 3 was also not spared from the price hike and will now cost you $73,900 excluding the ordering and delivery fees and any on-road costs. That’s a $6,000 increase in price, according to prices available on CarsGuide in December 2019. The Luxury Car Tax doesn’t apply to this model as it sits just under the threshold.

Both the performance and long-range options have also increased in price by $2,000 each.

Gizmodo Australia contacted Tesla Australia to confirm its reasoning for the price increase and if it was related at all to the ongoing coronavirus pandemic wreaking havoc on global markets. We’ll update the article once it responds.

Tesla announced it dropped the standard ranges for both the Model X and Model S back in July 2019, effectively lifting its minimum prices by thousands of dollars. It said it was doing this to make its lineup simpler.

“In order to make purchasing our vehicles even simpler, we are standardising our global vehicle lineup and streamlining the number of trim packages offered for Model S, Model X and Model 3,” a Tesla Australia spokesperson confirmed to Gizmodo Australia.

“We are also adjusting our pricing in order to continue to improve affordability for customers. Like other car companies, we periodically adjust pricing and available options.”

The Model 3, considered Tesla’s ‘budget’ model, still has the standard range model available but as we’ve already noted earlier this year, it’s hardly a cost-effective alternative for many Australians hoping to get their hands on an electric vehicle. One even Elon Musk agrees seems a bit high.

The Cheapest Tesla In Australia

The baseline Model 3 is the cheapest you can buy anywhere. But while this can be a sub-$50K vehicle in the US, it starts a lot higher here in Australia.

The lowest price tag you’ll see on a Tesla Model 3 in Australia is $69,425, but that’s before on-road costs are taken into account. $70,000 isn’t exactly what you would call an affordable option, and as we already reported, Elon Musk agrees.

But a lot goes into the inflated price tag.

Currency Conversion

Starting with a simple one. Like with any product, the face value price in the US is not going to be the same as in Australia. Our dollars are worth different prices. In general, a car that costs $50K in the US is going to have a higher number attached to it in Australia before you even take things like import tax into account.

Tesla Extras

Like with any car, the baseline price of any Tesla is just a jumping-off point. If you want to add some of the fun and fancy extras, it’s going to cost you.

Using the Model X as an example, any colour other than white will is a minimum of $2,200, with non-standard wheels costing between $2,900 and $8,000. If you want Tesla’s current full suite of self-driving capabilities (AutoPilot is included for free), it will be an additional $8,500.

There’s also a tonne of other upgrades and accessories you can throw on top.

Tesla On-Road Costs

Similar to extras, Teslas are no different from any vehicle in that they incur on-road costs. The overall on-road-cost will vary from model-to-model, especially when it comes to calculating the Luxury Car Tax (LCT). The state you live in will also affect this.

As an example, here is what it can look like for a $134,695 2019 Tesla Model S being purchased in New South Wales. As an FYI a $1,375 delivery fee and $150 order fee in the base price.

Tesla Luxury Car Tax

A piece of particularly bad piece news for prospective Tesla buyers is Australia’s LCT, which was covered briefly above. It’s worth explaining in a little more because it is arguably the key reason why Teslas are so expensive in Australia.

LCT adds 33 cents of every dollar the car costs to the overall price. To look at it another way, it adds 33 per cent tax onto the cost of a vehicle that qualifies.

This pricing bracket can change, but the 2019-2020 tax year an LCT is added to fuel-efficient vehicles that cost $75,526 pr over. For non-fuel efficient vehicles, it applies to anything over $67,525.

As we explained here, EVs fall into the fuel-efficient vehicle category because of their lack of petrol usage. Some might argue that the LCT being defined by fuel usage should mean that EVs should be exempt. Not only that, axing the LCT for EVs would be one way to encourage uptake in support of the environment.

However, this is not currently the case. Because every Tesla available in Australia, including the entry-level Model 3, costs a minimum of $75,526, it’s going to get have the 33 per cent LCT added to the overall price.

Supply and Demand

There is clearly a demand for Tesla cars. Every month the company seems to set new sales records, and there is a bottleneck, creating a waitlist for back-ordered vehicles that is growing steadily. Unlike established car companies, Tesla Motors does not have the manufacturing capacity to meet the current demand all at once. Because demand exceeds the current supply, basic economics suggests that the price would be bid up. Tesla seems to be constrained by production, not demand. (For more, see: What Drives Consumer Demand for Tesla.)

The demand is fueled in part by the green energy movement. Because Tesla cars are all-electric, they do not consume greenhouse gas-emitting gasoline and do not directly create carbon dioxide. It remains true, however, that CO2 is still a by-product of the electrical generation needed to charge the car’s batteries. Demand is also driven by Tesla’s sleek, modern design and its high-tech driver interface and dashboard that features an impressive all-digital touch-sensitive display.

Supply and Demand

There is clearly a demand for Tesla cars. Every month the company seems to set new sales records, and there is a bottleneck, creating a waitlist for back ordered vehicles that is growing steadily. Unlike established car companies, Tesla Motors does not have the manufacturing capacity to meet the current demand all at once. Because demand exceeds the current supply, basic economics suggests that the price would be bid up. Tesla seems to be constrained by production, not demand. (For more, see: What Drives Consumer Demand for Tesla.)

The demand is fueled in part by the green energy movement. Because Tesla cars are all-electric, they do not consume greenhouse gas-emitting gasoline and do not directly create carbon dioxide. It remains true, however, that CO2 is still a by-product of the electrical generation needed to charge the car’s batteries. Demand is also driven by Tesla’s sleek, modern design and its high-tech driver interface and dashboard that features an impressive all-digital touch-sensitive display.

In addition, Tesla cars are high performance. They can cruise for over 200 miles on a full charge, and recharging is a user-friendly task. The Tesla S sedan can accelerate from 0-60 miles per hour in an impressive 5.54 seconds, and the Tesla Roadster can do the same in under four seconds. Combined with all of this is the fact that electric cars are virtually silent when they drive, a truly desirable feature for many.

The newly announced Tesla Model X is a more family-friendly SUV that can comfortably fit seven passengers. By expanding its product line, Tesla is sure to increase demand for its cars. The question remains as to whether it can build out enough capacity to produce those vehicles in a short amount of time. Tesla is rumoured to be building a so-called ‘gigafactory’ in the Nevada desert, which would allow it to scale up production of both its cars and the battery packs required to power them.

Battery Technology is Expensive

Batteries to store and use electrical power are the most expensive single component of these cars, with the current cost of around $500 per kilowatt-hour. A Model S has around 60 kilowatt-hours of capacity, meaning that approximately $30,000, or 42.25%, of the sticker price, is due to the battery packs. Since 2008, the cost of Tesla’s battery packs has risen by 50%, and their storage capacity has increased by more than 60%. 

The company has indicated that it is already in the process of increasing the energy efficiency of the batteries further causing the price to fall to about $200 per kWh, but this improvement has not yet been released into production. In addition to the fixed costs of the battery packs themselves, it costs the owner of the car approximately 10-12 cents per kWh to buy the electricity when recharging those batteries. 

A lot of research and development is going into battery technology, and the hope is that in a short time the cost of battery power storage will be able to compete with the cost of gasoline or other fossil fuels. (See also: Ways To Indirectly Invest In Tesla’s Momentum.)

Future battery development

To store the necessary power for performance and range, the battery of an electric car has to be ‘energy-dense’ and compact. The best technology to date for electric vehicles is the lithium-ion battery. This is basically the same sort of technology that powers your laptop or mobile phone, but the battery has to be scaled for a car.

As companies gear up to develop and produce these batteries (and other companies dig up more lithium), the price for electric vehicles will reduce. Indeed, electric vehicles and plug-in hybrids, using the same type of energy reservoir, are increasingly affordable already.

While the upfront cost still seems high, electric vehicles promise lower running and maintenance costs – and total expenditure for electric vehicles is within range of vehicles powered by internal combustion engines well before the purchase prices are directly comparable.

“Based on the average driving distance of less than 50km a day, the average person would spend around $2.10 on peak price electricity to refuel their daily drive and half that on off-peak electricity (free on excess solar generation). That’s $14.70 a week,” says Washington.

“If we convert it to $/L terms, it’s equivalent to around $0.32c per litre based on peak price electricity.”

And that’s just the spend for day-to-day running. Add in reduced servicing costs and lower taxes, and the disparity between the purchase price for electric vehicles and conventional cars is reduced to irrelevance.

EVs are subject to a higher threshold for the Luxury Car Tax, avoid stamp duty in the ACT and (for example) receive a $100 registration discount in Victoria. The newly formed EV Council is working with the Federal Government for further tax concessions to support EV purchases.

What will bring down the cost of buying an EV is either steady progress refining current battery technology or some major breakthrough. The holy grail of battery development is a unit that is lighter, more compact – for its energy storage capacity – and cheaper to produce. No one knows when this will be, but teams all over the world are working towards the goal, and futurists are predicting the big breakthrough will occur within a decade.

Tesla And EV Incentives In Australia

Unfortunately, there aren’t a lot of government incentives to encourage EV adoption in Australia. But there are a few state-led ones.

Stamp Duty and Registration

In the ACT new EVs pay $0 stamp duty for the car purchase as well as a 20 per cent discount on registration. In Victoria, EVs are exempt from regular ‘luxury vehicle stamp duty. EV owners pay $8.40 per $200 of the market value of the vehicle, as opposed to up to $18. $100 off annual rego is also offered.

In Queensland, both EVs and hybrids pay reduced stamp duty – $2 per $100 up to $100K and $4 per $100 for anything over $100K. Regular ‘polluting vehicles’ pay up to $6 per $100 in stamp duty.

These, along with renewable energy and solar power incentives, are detailed further on Tesla’s Australian website.

Tesla cars are expensive, but that hasn’t stopped people from lining up to buy them. One reason the price is so high is that, at the moment, demand is outstripping supply. Expanding production capacity and building new factories is sure to help moderate prices.

The other main reason for Tesla cars’ high sticker price is the very high cost of the electric battery packs that supply these vehicles with power. While the cost of battery technology and its energy efficiency has improved over the past few years, more research and development is needed to create a truly affordable electric car. 

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