Victoria to tax electric vehicles? What this could mean for ASX lithium shares

As the Victorian government gets set to introduce a world-first tax on electric vehicles, we look at what it may mean for ASX lithium shares.

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ASX lithium shares are in the spotlight as the Victorian government is set to introduce a world-first tax on electric vehicles.

The charge, which could cost the average owner $330 per year, is set to become law from 1 July. That is conditional on the government’s bill passing the state parliament.

The proposal stands in stark contrast to most other jurisdictions globally. Many nations, states, and localities provide tax incentives and rebates to encourage drivers to buy low or zero-emission vehicles.

ASX lithium miners, such as Lake Resources NL (ASX: LKE), Hawkstone Mining Ltd (ASX: HWK), and Piedmont Lithium Ltd (ASX: PLL) all have boomed recently on the back of ever-growing demand for lithium dependent electric vehicles.

Similarly, cobalt is an essential metal in the manufacturing of lithium-ion batteries. Miners like Cobalt Blue Holdings Ltd (ASX: COB) would be affected by any policy that impacted demand for electric vehicles.

So, the question is, will other governments follow suit? If so, what does that mean for ASX lithium shares and related industries? Let’s take a closer examination.

Why is the Victorian government taxing electric vehicles?

The charge, which will see owners pay 2.5 cents per kilometre travelled in zero-emission vehicles and 2 cents on hybrid cars, is being justified as a way for all drivers to pay for roads.

“Everybody who uses a road should pay their fair share to maintain them,” said Victorian Treasurer Tim Pallas.

As electric vehicles use no fuel and hybrid vehicles use a minimal amount, owners avoid paying fuel excise taxes that fund road infrastructure.

Zero-emission automobiles make up less than 1% of all Australian cars – well below nations in Europe, where the figure is approximately 4.7%. Federal government modelling expects the figure to increase from 5% – 25%.

Mr Pallas agrees. “We’ll get to a point where essentially there’ll be no revenue capacity for the state to manage the use and maintenance of our roads,” he said.

Will others follow Victoria’s lead?

In Australia, maybe. The South Australian government beat Victoria in introducing legislation to tax electric vehicles but shelved the plans to see what impact it would have in its neighbouring state.

According to The New Daily, the ACT, Tasmania, and Western Australia do not intend to introduce such a tax. However, New South Wales and Queensland have left the possibility open.

A discussion paper on electric vehicles released by the Federal Government in February examines the proposed Victorian tax and does not discredit it or rule it out on a federal level.

The paper, entitled Future Fuels Strategy, discusses strategies to increase uptake, including:

  • investing in charging for infrastructure;
  • trialling electric vehicles within the Commonwealth fleet, and;
  • managing increased demand on the electricity grid.

The government, however, is not considering any form of increased fuel standards or financial benefits.

What is the general stance at a global level?

Australia is just a small player in total global car sales. Nations worldwide and the private sector are using their resources to encourage more electric vehicle sales, not fewer.

In the United States, for example, the government provides a tax credit of up to US$7,500 for each purchase of an electric vehicle. The European Union is targeting 30 million electric vehicles on its roads by 2030.

China requires 12% of all vehicles manufactured in or imported to the country to be electric.

Even General Motors Company (NYSE: GM) plans to stop selling cars with combustible engines by 2035.

While it’s impossible to predict, all indicators (even in Australia) point to electric car sales continuing to increase. Of course, more electric vehicles equal more demand for lithium, cobalt, and other metals required in battery manufacture.

ASX lithium and cobalt stock price snapshots

At the time of writing, the Lake Resources share price is trading 2.82% lower at 35 cents per share. In contrast, the Hawkstone share has lifted 2.78% to 3.7 cents, and Piedmont shares are selling at $1.04, up 1.96%. 

Over the course of 1 year, the share prices of each of these companies have increased between 173% and 338%.

The Cobalt Blue share price is currently up 1.23%, trading at 41 cents. Its share price has increased by 310% since this time last year.

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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