We’re stepping up to help protect the climate and future generations by actively supporting the shift towards a decarbonised economy. Here are five reasons we’ll stop providing car loans for new fossil fuel cars from 2025…
Private passenger cars account for 62% of Australia’s transport emissions, and transport is the fastest-growing source of emissions in Australia. Electric vehicles are a ready-to-deploy technology so they can be one of the fastest contributors to Australia meeting its climate goals.
To have the best chance of keeping average temperature increase to below 1.5 degrees – to help future generations avoid the worst of catastrophic climate change – 2050 is too late. We need to act urgently. That’s why we have the most ambitious net zero target of any Australian bank. And to reach that 2035 target, we have to pull every lever available. Assisting the transition to electric vehicles is a strategic one to focus on right now.
We’ve been thinking about the carbon impact of car loans since 2004 when we launched our first carbon offset car loan, and we’ve offered discounted interest rates for low emission vehicles since 2018.
The responsible thing for us to do next is to ensure that our vehicle lending doesn’t lock our customers in to higher carbon emissions and increasingly expensive running costs in the years ahead.
And, of course, we have a responsibility to do all we can to protect the planet for generations to come.
We’ve chosen 2025 because the change to electric vehicles needs to happen quickly. And we believe it can happen, as soon as supporting policies and market forces help to bring a greater range of more affordable electric vehicles to Australia. This will include a range of new models at lower prices than are currently available in Australia, and second-hand EVs.
Taking a leadership position on this now will provide momentum to the rapid acceleration in EV transition.
Our customers tell us taking action on climate change is a top priority, and for many of them it’s a key reason why they choose to bank with Bank Australia. Being customer-owned means we can balance profit and purpose, and we don’t have to chase immediate financial profit at any cost – which in this case could represent a safe and healthy future for us all.
Genuine climate action is part of who we are. We’ve been carbon neutral since 2011, we run on 100% renewable electricity, and we’ve been offsetting our car loans for close to two decades. We know that moving forward, offsetting isn't enough to take serious action on climate.
This shift in lending is the beginning of a conversation with our customers and a signal to the wider market that if you’re considering buying a new car, you should think seriously about an electric vehicle – both for its impact on the climate and for its lifetime cost savings.
Offsetting has played a role in Bank Australia using money as a force for good, but we know an even better way to do good for our planet is helping customers make sustainable choices that don’t require offsetting. That’s why we’re encouraging customers to either purchase a new EV or a second-hand combustion engine or hybrid car that is already in the market, to reduce demand for new cars powered by fossil fuels.
Importantly Bank Australia will continue to support customers who can’t yet access an electric vehicle. We want to ensure customers who need cars can still buy them. That’s why this change will only affect new combustion engine or hybrid car purchases. We’ll continue to offer loans for second-hand fossil fuel vehicles until there is a viable and thriving market for electric vehicles.
We will be reviewing our car loan products for second-hand combustion engine and hybrid cars once there is a widespread availability of affordable and second-hand EVs in Australia.
Our 2035 net zero carbon emissions target is the most ambitious of any bank in Australia. Because to protect our communities and the environment – and give future generations a planet to live on – urgent action is required. Stepping up now to support the transition to electric vehicles is key to a future where we can all thrive.
Even with today’s electricity grid, driving with an EV generates 29-41% less emissions than other car fuels, and for customers who can charge their cars at home using 100% renewable energy from solar panels, those emissions can be brought down to zero. Rapidly transitioning passenger vehicles to EVs is important to give us our best chance of limiting global warming to 1.5 degrees, which climate experts say is crucial to minimise harmful impacts of climate change.
The shift away from fossil fuel powered cars to EVs needs to start soon if we’re going to reach net zero by 2035. Our customers are deeply concerned about climate change, and that’s why we’re taking this step from 2025, and announcing this change to our car loans now. This sends a signal to them and to the broader community that we’re committed to doing what we can to reduce emissions.
There are some sectors where it’s going to be difficult to decarbonise, but passenger transport is not one of them. The technology needed is ready now, we just need to make use of it, and make fossil fuel powered cars a thing of the past.
Renewable energy technologies are also rapidly improving, which means powering cars with electricity from our grid or from batteries in homes with solar panels will have a big impact on reducing emissions. Even with today’s grid, charging an EV emits between 29-41% fewer emissions than using fuel.
With a few government policy shifts and expanded charging infrastructure, we expect that by 2025 many customers buying a new car will be able to purchase an EV. We’ve seen in other countries that once EVs reach 5% of the total new car market, a rapid increase of anywhere between 10-25% can happen in 2-3 years. For example in California, EVs went from 5% of new car sales in 2019 to 16% in 2021.
EVs have far fewer moving parts, making them less prone to wear and tear. Combined with savings on fuel, this makes EVs roughly 70% cheaper per kilometre to run. So although new EVs in Australia have higher upfront purchase costs than some other models that rely on fossil fuels, when considering the lifetime costs of the vehicle, they are a competitive choice.
We also expect to see increasing demand for EVs, because of their cost savings and rising numbers of climate conscious consumers. Research from the Electric Vehicle Council shows 54% of people would consider an EV as their next car, and this rises to 80% if EVs and charging stations were more available in Australia.
Because of the rising demand for EVs, we expect EVs will have higher resale value in second-hand car markets than combustion engine or hybrid cars. This is another reason why EVs are a good choice for our customers in the long-term.