‘Larger, thirstier cars’ will benefit under road user charge shake-up - economist

Friday, 8 August 2025

‘Larger, thirstier cars’ will be better off under changes to road user charges, says an economist.

Drivers of gas guzzlers will benefit more than those with more fuel efficient vehicles under the Government’s proposal to scrap excise tax (FED) in favour of road user charges, according to one economist.

Announced on Wednesday, the coalition intends to roll out the scheme in 2027, affecting about 3.5 million drivers of light vehicles. It will see petrol prices drop, but drivers will be required to pay road users charges - or RUCs - based on the amount they drive.

Transport Minister Chris Bishop envisioned it would see vehicle owners get a bill at the end of the week or the month for the distance they had travelled, like “your monthly Netflix bill” - marking an end to the outdated paper-based system currently used for road user charges.

The Government plans to phase out petrol tax and introduce a digital road user charging system for all 3.5 million vehicles, with law changes starting in 2026.

However, while Bishop said on Thursday that it was “too early” to comment on the specific rates that might apply under a new system, Infometrics principal economist Brad Olsen crunched the numbers for The Post based on the existing system.

Using a scenario of driving from a New World supermarket in central Wellington (Chaffers, at Oriental Bay) to the Wairarapa Events Centre in Carterton - a journey of 85.7km - Olsen determined that the RUC rate for a light vehicle would be $6.51.

But under the current fuel excise duty, the cost for the same trip would range from $2.69 for a Toyota Aqua driver through to $7.25 for a Honda Odyssey.

The calculations were based on the light RUC rate of $76 per 1000km (including GST) and the fuel excise duty of 70.024 cents per litre on petrol.

An Aqua used about 3.9 litres of fuel per 100km, compared with an Odyssey that would use 10.5 litres.

“Essentially, larger, thirstier cars will pay less under RUC compared to FED, and more fuel efficient cars will pay more under RUC compared to FED,” said Olsen.

“Infometrics has calculated that a vehicle with a fuel efficiency of above 9.4L/100km will be better off under the RUC shift – vehicles with lower efficiency will be worse off.”

Importantly, he added, different petrol vehicles currently pay quite a different cost depending on the vehicle - whereas current RUC-paying light diesel vehicles pay the same for the same distance.

“Using RUC is a much more equitable approach,” says Infometrics principal economist Brad Olsen.

“Petrol vehicles have probably been subsidised by RUC-paying vehicles.”

Asked whether this went against Bishop’s claim that the updated system would be more equitable, Olsen said it did not.

“Bishop is bang on in fact,” he told The Post.

“Using RUC is a much more equitable approach - the more you use the road, the more you pay.”

At the moment, those able to afford a “newer, more fuel-efficient car” paid less - “even though you’re doing the same amount of driving and road damage”.

He added: “The RUC system means you’ll pay for how far you drive – even stevens across all similar light car types.”

In a statement, Bishop said it was too early to say what the specific rates would be for the future universal RUC system.

Transport Minister Chris Bishop believes the change to RUC will be a fairer system.

However, “Under the current system, differences in the fuel efficiency of vehicles means some petrol vehicle users pay several times what others do for the same amount of road use. For example, the user of a 2000 Toyota Estima people mover with fuel economy of 12 litres per 100 kilometres could pay four times the excise duty of the user of a 2020 Toyota Yaris with fuel economy of 3 litres per 100 kilometres, despite both having the same impact on the road network.”

The rates would be set via regulations, and the public will be able to provide feedback during consultation in the coming years.

The AA’s principal advisor Terry Collins told The Post there would be winners and losers under the new scheme.

“One of the biggest winners is going to be the owners of pleasure boats; all those guys who have outboard motors that have been paying petrol tax for the road user charges won't be paying it any more,” he said.

That would also mean good news for users of quad bikes, lawnmowers and farm equipment - if they used petrol, of course.

The changes, expected to be legislated for next year, will be in place in 2027.

An NZTA spokesperson told The Post the agency would be updating its code of practice for electronic RUC services, as well as preparing for changes to our systems and processes for RUC collection and monitoring to support new technology and new retailers.

“We will also work closely with police to prepare for monitoring and enforcement once RUC labels are removed,” they said.