Commercial electric vehicles, or CEVs, represent nine per cent of the nation's carbon emissions, and this is rising, according to research released on Wednesday by independent think tank Beyond Zero Emissions (BZE).
Australia's bus and truck manufacturing industry employs the same number of workers as the coal industry but has "huge potential" as a new source of economic growth and jobs, the think tank said.
There are similar opportunities in freight and mine haulage, the Commercial Electric Vehicles Supply Chains report found.
Road vehicle emissions could be halved, 105,000 jobs generated and $110 billion added in revenue for businesses by the end of 2030 by replacing existing internal combustion engine buses, trucks and light commercial fleet vehicles.
Beyond Zero Emissions said retrofitting petrol and diesel-fuelled vehicles and expanding manufacturing are key to decarbonising commercial road transport.
But federal support to stimulate industry and government procurement targets are needed to encourage the new supply chain.
Local manufacturers could then keep pace with global trends, remain competitive and potentially export more sustainably produced CEVs to Asia, Europe and the United States.
BZE senior researcher Rowan Moorey said government action is urgently needed to create the conditions for CEV manufacturing to grow as a sector.
"This window for Australia to embed itself as a key player in the global supply chain for CEVs will not last forever," he said.
Unlike electric cars, global manufacturing capacity for CEVs is low and Australia has an opportunity to become a key player during the establishment phase, the report said.
BZE recommended starting with the assembly of trucks and buses, and scaling up to vans and utes over time.
Production tax credits (PTC) could be used to develop a sovereign manufacturing capability, supported by a workforce plan to train and recruit the future electric generation.
For vehicles with less than half local content, offer a 15 per cent PTC for new vehicles and 20 per cent for retrofitted ones, the think tank said.Â
For those with more than half local content, a 25 per cent PTC for new vehicles and 30 per cent if retrofitted was recommended.
All new commercial vehicle sales should be zero emissions by 2030, according to the researchers.
That would mean deploying or retrofitting 1.8 million zero-emission CEVs over the next seven years, including 300,000 buses and trucks.
A zero-emission government bus fleet declaration from state and territory governments would bolster the manufacturing base, the report said.
Industry design standards would support future battery upgrades, and the reuse and recycling of batteries and other components.
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