Australia’s sales of big cars are out of control

A recent government report shows transport emissions continue to rise, as reported by the Australian Financial Review:

[this is] driven in part by the immense popularity of large diesel-powered utes and SUVs, which contributed to a 7.8 per cent annual increase in road transport diesel emissions.

This is not surprising. Australia has a big “big car” problem; we have too many SUVs and utes, and we keep getting lots more of them. In the mid-1990s, about three in four new vehicle sales were ordinary cars, such as sedans and hatchbacks.

Since then, the sales of bigger vehicles have exploded. Sports utility vehicles (SUVs) have grown from one in 14 sales to more than half (56%) of all sales. Similarly, ‘other vehicles’, a category that mostly represents utes, have grown from one in six sales to more than one in four.

But don’t people need SUVs and utes for work and the weekend?

A common argument is that these ever-larger vehicles are needed by tradies and farmers for work or by families to pull caravans and boats. Any attempts to reduce the growth in the ‘big car’ fleet meet spurious cries about being ‘unfair to tradies’ or ‘destroying the weekend’.

But such claims don’t hold up.

In the statistics, utes are categorised as light commercial vehicles (LCVs). There are non-utes in this category (for instance vans), but it is overwhelmingly (at least three-quarters) utes. Back in 1988, there was less than one (about 0.7) LCV for each tradie and farmer. From 1988 to 2024 the number of tradies and farmers grew by a third (32%) while the number of LCVs more than tripled (244% growth). This means today there are nearly two (1.9) LCVs for each tradie or farmer.

When it comes to the weekend, we already have around five times as many SUVs as boat trailers or caravans.

So why is this a problem?

It’s not just that these vehicles are unnecessary; they’re actively harmful. The proliferation of big cars is a concern because they cause big problems, most of them stemming from basic physics.

Firstly, big cars are much more dangerous because of their size and shape. Being hit by an SUV or ute increases the chances of pedestrian or cyclist fatality by 44% or 82% for children. Because these vehicles are both more dangerous and more expensive, they also probably push up car insurance prices. Even for people not driving these cars, riskier roads mean higher insurance premiums.

The size of these vehicles means they are difficult to navigate on narrow streets and might not fit into standard parking spots. This has led to governments and other bodies considering requiring bigger parking spots in shops and garages.

This might seem like a minor change, but it incurs real costs. Larger parking spots mean car parks will either have fewer parking spots or be more sprawling and expensive, at the expense of other amenities such as parks or shops.

Petrol- or diesel-fuelled big cars are generally less fuel-efficient than smaller cars. This means burning more fossil fuels and emitting more carbon dioxide, which contributes to climate change.

The turn towards electric vehicles does not negate this impact: barely any existing stock is electric, and only about 5% of new ute and SUV sales over the last 12 months were EVs. Additionally, manufacturing big cars tends to emit more carbon simply because there are more materials to process.

Lastly, big cars emit larger amounts of particulates that lower air quality and worsen rates of respiratory illness. Big cars more quickly wear down roads and their tyres and brakes, polluting the air with tiny particles that impact human health. One study showed that the brakes in large SUVs have to work twice as hard than small compact cars.

Why is this happening?

Government policies have allowed and encouraged people buying big harmful cars.

Some of Australia’s tax settings effectively give away public money to subsidise people buying big cars. The luxury car tax includes a loophole that essentially exempts all utes, incentivising people to buy expensive utes (such as the gigantic American RAM1500) rather than smaller vehicles. This loophole cost $250 million in 2023.

Meanwhile, poor enforcement appears to have allowed significant tax dodging of fringe benefits tax on utes.

Other tax incentives include the (currently expired but regularly reintroduced) instant asset write-offs. The Morrison Government temporarily supercharged these tax giveaways during COVID-19 by raising the Instant Asset Write Off to $150,000 and creating the Loss Carry Back tax offset.

This saw a surge in ute sales. What’s more, by not taxing or regulating harms caused by big cars (“externalities” in economist-speak), governments enable these harms.

Economics 101 says we should tax things we want less of and subsidise what we want more of. Instead of providing tax breaks for big cars, Australia should close loopholes and institute new taxes and regulations to stop the growth in these dangerous and harmful vehicles.