Government waters down fuel efficiency standard

UPDATED 17/05/2024: The New Vehicle Efficiency Standard (NVES) passed through federal parliament this week and, as planned, will come into effect on January 1, 2025.

ORIGINAL ARTICLE PUBLISHED 26/03/2024: Bowing to pressure from Australia’s biggest car-makers and industry lobby groups, the federal government has made crucial concessions with its proposed New Vehicle Efficiency Standard (NVES).

The key concession will see large SUVs held to the same emissions targets as light commercial vehicles (LCVs).

Transport minister Catherine King and climate change minister Chris Bowen jointly announced today that legislation will enter parliament tomorrow, March 26, ahead of the January 1, 2025, start date for the long-awaited new vehicle emissions-reduction scheme.

NVES has attracted widespread criticism from large sections of the car industry, including threats of higher prices and the prospect of some leading brands even closing their operations in Australia.

The flak was in large part based on the government’s preferred option that was tough on LCVs and held large tow-friendly 4x4 SUVs to the lower emissions levels of passenger cars.

In what is seen as a victory for auto lobbyists, the government has made four key modifications to its favoured NVES proposal after “constructive collaboration” with industry. These are:

Despite the concessions, NVES remains a tough new standard for which all car-makers must now prepare, with the government claiming it “will reduce emissions from new passenger vehicles by more than 60 per cent by 2030, and roughly halve the emissions of new light commercial vehicles over the same period”.

Even with the concessions it should still have the desired aim of forcing car companies to introduce “a wider range of more efficient, modern vehicles”.

“The New Vehicle Efficiency Standard targets for passenger vehicles catch up to comparable economies by the end of the decade,” the ministers said.

“The Albanese government has closely consulted with a broad range of stakeholders over the past year and engaged with the more than 9000 submissions made throughout the latest consultation period.

“The standard will give car-makers an incentive to send us their most efficient vehicles, while ensuring Australians have access to the range of vehicles they need for work and leisure.

“This constructive collaboration is delivering what’s right for Australia, by making improvements to the consultation option to deliver more choice of cheaper-to-run cars for motorists, while ensuring a sustainable and effective standard,” the ministers’ press statement said.

The NVES revisions have been broadly welcomed by the car industry, with market leader Toyota issuing a conciliatory statement today after roundly criticising the proposals during the consultation phase.

“Toyota has long supported the introduction of an ambitious fuel efficiency standard that is calibrated to the unique requirements of the Australian market and leaves no-one behind,” said Toyota Australia president and CEO Matthew Callachor in a statement today.

“Even so, Toyota and the industry face huge challenges that must be addressed before these significant reductions can be realised.”

Hyundai Australia, which in contrast to Toyota was supportive of the government’s preferred NVES scheme, also welcomed the revisions, which is no surprise given it plans to offer a diesel-powered one-tonne ute of its own in the next few years, alongside the related Kia Tasman.

“The [revised] NVES framework seems to strike the right balance between ambition and practicality,” said Hyundai Australia chief operating officer, John Kett.

The Federal Chamber of Automotive Industries (FCAI) similarly described the revisions as “a step in the right direction”.

“However, we continue to have concerns about the impending challenges facing industry and motorists,” the FCAI said in a statement.

The Australian Climate Council welcomed today’s NVES announcement, despite running a hostile campaign during the consultation phase in which Toyota, Hyundai, Ford, Mazda and Renault-Nissan-Mitsubishi were branded as the “filthy five … whose fleets are responsible for more climate pollution than some of Australia’s biggest coal mines”.

In a statement, Climate Council CEO Amanda McKenzie was less emotive in her language, saying the council “welcomes the simple and transparent final settings that will lock in these benefits for Australians”.

Meanwhile, Electric Vehicle Council chief executive Behyad Jafari endorsed the revised NVES and described the scheme “as a big step forward for Australia”.

“The government’s NVES model represents strong, ambitious standards that will send a clear signal to the global automotive industry: Australia now demands the same options in electric cars, vans and utes that you offer to the US and Europe,” Jafari stated.

Representing more than 15,000 automotive retailers, the Motor Trades Association of Australia (MTAA) also welcomed the revised NVES strategy, having held more than 40 meetings with federal government representatives over the past six weeks.

“MTAA commends the Australian government for their approach and appreciates the seat at the table throughout these critical discussions,” said MTAA CEO, Matt Hobbs said.

“Working side-by-side with the government has provided MTAA members with a leading voice into this policy – the result being a program that better reflects the country’s love of utes and SUVs while preparing for an EV future.

“The next few years, however, are critical for the automotive industry, and we all intend to do our part in decarbonising the country’s transport sector. But consumers must come first, and we believe the adjustments to the policy strikes this delicate balance.”

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