What the first federal emissions standard means for Australian car buyers

The ink officially dried under the Australian government’s New Vehicle Efficiency Standard (NVES) early this year, bringing with it a series of tough new laws aimed at reducing the local car market’s carbon footprint.

In essence, the NVES is an environmental policy aimed at car manufacturers, but the regulations are likely to have tangible consequences for new car buyers as well.

Depending on the type of vehicle you buy, NVES can give you everything from savings at the gas pump to massive vehicle price inflation at the dealership.

With so much noise coming from all sides of this politically charged issue, it can be challenging to separate fact from fiction. So let’s get to the heart of what Australia’s first new vehicle emissions legislation means for everyday consumers.

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What exactly is the NVES?

The Australian New Vehicle Efficiency Standard is a set of laws imposed to incentivize manufacturers to reduce CO2 emissions across their vehicle range.

All new passenger and light commercial vehicles sold with a mass of less than 4.5 tonnes are covered by the scheme.

If car manufacturers exceed the average CO2 emissions target of the vehicles they sell each year, they will be fined $100 per g/km of CO2 for each vehicle that exceeds the target.

For 2025, the mandate for passenger cars (Type 1) is 141 g/km CO2, while light commercial vehicles and heavy-duty SUVs (Type 2) are 210 g/km or less.

These CO2 ceilings will be lowered every year until 2029, after which they will be much lower, 58 and 110 g/km respectively, forcing manufacturers to sell increasingly efficient vehicles.

Brands can also earn emissions credits by beating their fleet-wide targets, which can then be used in a subsequent year to help meet stricter CO2 targets, or sold on to other brands to help them meet their emissions targets. reaches.

Although the NVES legislation came into effect on January 1, 2025, the fines will not be imposed until July 1. However, the first round of fines will not be paid until 2029, as carmakers have three years to receive an annual ‘interim fine’. emission value’ to reduce emissions.

Will the NVES kill our favorite vehicles?

No. Instead, automakers will be faced with some tough decisions regarding inefficient models.

The first option is to do nothing. Brands can continue to sell as many high-emission vehicles as before, but that choice will result in high fines.

For example, the 2025 headline emissions target for smaller Type 1 vehicles is 141 g/km. In the hypothetical scenario where a manufacturer sells 20,000 Type 1 vehicles with average emissions of 150 g/km, it will be subject to a fine of $18 million. Far from ideal.

To avoid a financial hit, brands can choose to pass on penalties to consumers in the form of price increases. For example, in the example above, each vehicle sold would be fined $900. Rather than taking a hit to their bottom line, the automaker could instead charge buyers an extra $900 per car. Problem solved, albeit at the probably expensive retail price.

The third option available to manufacturers is to offset sales of inefficient vehicles by selling more low-emission models.

So even some of the ‘dirtiest’ vehicles on our roads, including the diesel cars that made up three of the five most popular models last year, are likely to survive, even as they become less profitable for their makers.

Is the NVES a ‘ute tax’?

Federal Opposition Leader Peter Dutton has labeled the NVES a ‘ute and family car tax’, while Nationals party leader David Littleproud warns the cost of popular SUVs will rise by as much as $18,000 in the coming years. Neither statement is true.

The NVES is not a tax at all, as a tax is a mandatory levy created to collect revenue for the government. Financial penalties associated with the scheme are a cost of non-compliance, but the requirement for manufacturers to meet vehicle efficiency standards is not a tax and no revenue is generated.

There’s also no guarantee that new car buyers will be forced to pay more for their dream machines. It is entirely up to manufacturers whether they pass on NVES fines to consumers or absorb them.

Finally, non-cars and family cars are not taken into account. The NVES applies to all vehicles and emissions targets will be adjusted up or down depending on the weight of the vehicle.

For example, Type 1 vehicles, including traditional passenger cars (hatchbacks, sedans, wagons, coupes, convertibles and people movers) and SUVs, such as everything from a Toyota Yaris to a Kia Sorento, will be subject to lower emissions limits than the heavier Type 2 vehicles . vehicles.

This includes light commercial vehicles such as utes, vans and heavy off-road SUVs with a braked towing capacity of 3000 kg or more And a ladder frame chassis. Think RAM 1500, Toyota LandCruiser, Toyota Prado, Nissan Patrol and Ford Everest, but not car-based monocoque vehicles like the Land Rover Defender or Volkswagen Touareg, or light tow vehicles like the GWM Tank 300 and Suzuki Jimny.

Will the NVES make new cars more expensive?

While the legislation itself will not have a direct impact on new car prices, some manufacturers have already admitted that government fines are likely to be passed on to consumers.

Isuzu Ute Australia was among the vocal manufacturers calling on the federal government to relax the NVES in March.

“Vehicle brands that cannot increase vehicle prices to cover the fines may have no choice but to exit the Australian market, threatening to once again weaken competition to the detriment of Australian consumers,” the company said in a statement.

Since then, revisions to the legislation have been made, including major concessions to appease automakers.

Commenting on the updated plan, Toyota Australia vice-president of sales, marketing and franchise operations Sean Hanley said large price increases in such a crowded market would be “fraught with danger” after initially suggesting NVES fines would be passed on to the consumers. .

He said that earlier this week AutoExpert: “Australia is already one of the most saturated markets in the world, so with that in mind it’s not as simple as saying ‘let’s raise prices to offset the fines’.

“The market is so competitive that that may not be possible. You never rule out that prices will have to rise at some point, but that would be a last resort.”

Toyota Australia’s chief sales officer also called for a delayed rollout of the NVES timeline, saying that regardless of the outcome, the brand’s most popular models would have to electrify, which could increase costs for consumers.

“As we progress through the NVES, it will be incredibly challenging – especially for heavier vehicles: Prado, HiLux, LandCruiser,” Mr Hanley said.

“Our job is to think about what technologies we bring to market, especially between now and 2028.

“Let me be very clear. We won’t drop LandCruiser, we won’t drop Prado, we won’t drop HiLux. What we will try to do is offset any fines that we get with electric vehicles, hybrids and all the technologies that we have coming up. The mix will be very important.”

Does the NVES apply to used cars? And am I forced to buy a new car?

The NVES does not directly affect used cars, although the second-hand market could be exposed to flow-on effects from the legislation.

If manufacturers choose to build NVES penalties into new vehicle prices, those prices will eventually flow into the used market, potentially pushing more consumers toward used vehicles, increasing demand and therefore prices.

But while the new emissions program aims to accelerate the shift to increasingly efficient vehicles, it doesn’t put any pressure on individuals to buy a new low-emissions car.

Will the NVES make fuel more expensive?

No. Despite the nature of the NVES legislation, it will not have any impact on the price of petrol and diesel in Australia.

Conversely, the Australian government claims that by encouraging the transition to cleaner, greener vehicles, the NVES will reduce the burden of fuel expenditure on new car buyers.

Is the NVES here to stay? Or could a new government scrap the legislation?

A federal election is looming, and recent reports suggest Prime Minister Anthony Albanese could go to the polls as soon as April. What happens if the anti-NVES liberal party is brought to power?

The coalition cannot scrap the legislation nor make the emissions targets for the period 2025-2029 less strict.

But it could make changes to the fines carmakers pay for exceeding the limits, or adjustments to the weight ratings that define Type 1 and 2 vehicles, and it would have to decide on CO2 targets for 2030 and beyond.

“The coalition will not be Labour-lite. We will not get a softer version of what Labor is proposing,” opposition leader Peter Dutton reportedly told his party room in March.

MORE: All our coverage of the New Vehicle Efficiency Standard