Adam Johnston Discusses RUC Reforms on The Otago Opportunity Podcast

RUC on Rails founder and CEO Adam Johnston has joined The Otago Opportunity podcast to discuss New Zealand's upcoming Road User Charges (RUC) reforms, the role of private-sector providers, and the challenges of transitioning millions of everyday motorists to a distance-based road charging system.

Johnston joined host Pauline Moore and The Opportunity Party's Dunedin candidate, David Bainbridge-Zafar, who holds the party's Transport, Housing and Infrastructure portfolios.

The 35-minute discussion explored how New Zealand's RUC system could evolve over the coming years, covering digital licensing, consumer purchasing options, compliance and enforcement, market competition, and the challenges facing businesses developing solutions ahead of the transition.

New Zealand's transition to nationwide Road User Charges

New Zealand currently operates a mixed road funding system, with petrol vehicles contributing through fuel excise duties while diesel vehicles, electric vehicles and heavy vehicles generally purchase RUC licences based on distance travelled.

The Government's proposed transition towards a nationwide RUC system would bring approximately 3.5 million additional light vehicles into the existing framework, potentially beginning around 2028.

Johnston told the podcast that the underlying principle of a distance-based system is one RUC on Rails supports.

Under the existing fuel excise system, motorists driving less fuel-efficient vehicles can contribute significantly more towards road funding than motorists travelling comparable distances in newer, more efficient vehicles.

A distance-based model would instead charge vehicles according to kilometres travelled and their applicable vehicle classification.

However, Johnston emphasised that the benefits of the reform will depend heavily on how the system is implemented.

The discussion covered proposed changes to the existing RUC framework, including the removal of physical paper licences, greater flexibility around kilometre purchases, and the development of a more accessible private-sector provider market.

These changes are intended to modernise a system that has historically been designed around commercial transport, diesel vehicles and fleet operators.

Designing RUC for everyday New Zealand motorists

A significant part of the conversation focused on the origins of RUC on Rails and its approach to developing consumer RUC solutions.

Johnston explained how his previous experience managing driver compliance at New Zealand food delivery company Delivereasy exposed him to the administrative difficulties of managing RUC, vehicle licensing and compliance.

Following the Government's announcement of its intention to transition petrol vehicles to RUC, Johnston and co-founder Briyarne Pascoe began examining how existing solutions would translate to the much larger light-vehicle market.

The company identified a significant gap between the hardware-intensive solutions traditionally used by commercial fleets and what everyday drivers might actually want.

"I think simplicity in New Zealand beats technical prowess every single day," Johnston told the podcast.

Rather than requiring motorists to install dedicated tracking hardware, RUC on Rails has focused on developing a hardware-free purchasing experience through its RUC Pass mobile application, alongside plans to make RUC available through everyday retail locations.

The approach has also been informed by the company's independent research involving 1,098 New Zealand light-vehicle drivers, which examined preferences around automation, privacy, purchasing and payment flexibility.

Johnston argued that RUC should ultimately be treated as a relatively straightforward consumer transaction, rather than an unnecessarily complex technology product.

"RUC at a mathematical level is extremely simple. You just need to be able to purchase X number of kilometres for Y vehicle."

The discussion also explored how future RUC services could be integrated into other consumer products, including insurance, fuel and retail services, creating a wider range of purchasing options for motorists.

Compliance and enforcement remain significant challenges

The podcast also examined one of the less-discussed aspects of New Zealand's RUC transition: how compliance will be enforced when the majority of the vehicle fleet becomes liable for distance-based charges.

Bainbridge-Zafar raised the question of how a RUC system could ensure motorists contribute towards road funding when, unlike fuel excise duty, payments are not automatically collected whenever a vehicle is refuelled.

Johnston explained that while licence-plate recognition technology can identify a vehicle and retrieve its RUC licence details, it cannot independently determine whether the vehicle has travelled beyond its purchased distance.

That requires an accurate odometer reading.

Existing compliance mechanisms, including Warrant of Fitness inspections and roadside checks, provide opportunities to reconcile a vehicle's actual distance travelled against its purchased RUC.

However, the removal of physical RUC labels and the prospect of more flexible payment arrangements introduce additional questions about how enforcement will operate at a national scale.

Johnston also raised concerns about proposals that could require widespread installation of vehicle tracking hardware or continuous transmission of odometer data.

He argued that responsibility for compliance and enforcement should remain with the Government rather than being transferred to private RUC providers.

"I don't think the private sector should be having any involvement when it comes to the enforcement and compliance of RUC."

In Johnston's view, private providers should focus on delivering accessible, reliable purchasing and account-management services, while NZTA and New Zealand Police retain responsibility for enforcing the underlying legislation.

Maintaining a genuinely competitive RUC market

Another central theme was the importance of balancing regulatory oversight with achievable market entry requirements.

New Zealand's proposed RUC reforms include changes intended to enable a broader range of approved private-sector providers to participate in issuing and managing RUC licences.

Johnston welcomed the direction of these changes but cautioned that unnecessarily restrictive technical or commercial requirements could limit participation to a small number of established transport technology companies.

The discussion considered whether New Zealand could eventually develop a highly concentrated RUC provider market, particularly if larger operators consolidate smaller competitors.

Johnston said the initial level of commercial interest suggests there is considerable potential for competition, but stressed that the regulatory framework must continue supporting new entrants as the market develops.

He also highlighted RUC on Rails' advocacy for an agent-provider model that would allow smaller retailers and other businesses to sell RUC without independently meeting every technical requirement imposed on a fully approved provider.

This distinction would allow established RUC providers to manage the regulated licensing infrastructure while other businesses offer purchasing services directly to motorists.

The company believes such an approach could substantially improve accessibility while providing opportunities for New Zealand retailers to participate in the emerging market.

Johnston acknowledged that strong security, financial integrity and operational standards remain essential, but argued that these should be proportionate to the role of each participant.

Greater regulatory certainty for New Zealand startups

Towards the conclusion of the episode, the discussion turned to the challenges of building and financing a technology company ahead of major regulatory changes.

Johnston explained that RUC on Rails has deliberately entered the market early to undertake consumer research, develop technology and establish commercial relationships before the anticipated transition.

While this creates an opportunity to prepare ahead of the wider market, it also introduces uncertainty around investment, development costs and commercial launch timelines.

The proposed nationwide transition remains dependent on the progression of legislation and subsequent regulatory and operational decisions.

For companies preparing to operate within the new framework, uncertainty around these dates can make longer-term business planning and capital raising more difficult.

Johnston encouraged prospective policymakers to provide clearer public timelines, even where individual implementation dates remain subject to change.

He also emphasised the importance of ensuring that smaller technology companies have a meaningful opportunity to participate in the future RUC market.

Listen to the full discussion

The episode provides a broader look at New Zealand's proposed RUC reforms, including both the opportunities for private-sector innovation and the practical challenges still to be resolved.

RUC on Rails thanks Pauline Moore, David Bainbridge-Zafar and The Opportunity Party for the opportunity to contribute to the discussion.

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RUC on Rails is not affiliated with, sponsored by, or endorsing The Opportunity Party. Participation in the podcast was solely to discuss Road User Charges reform and its implications for New Zealand motorists and businesses.