Hyundai backs tough national fuel-efficiency standard

Hyundai Australia has expressed fundamental support for the federal government’s tough new fuel-efficiency standard for new vehicles, but urged the addition of a ‘super credits’ trade-off allowing cheaper cars that emit more CO2 to be sold alongside cleaner and more expensive electric vehicles longer.

The federal government unveiled its proposed National Vehicle Efficiency Standard (NVES) earlier this month and wants it in place by January 1, 2025.

The objective of the NVES is to accelerate the move to low- and zero-emissions vehicles and away from traditional CO2-emitting vehicles.

With its growing line-up of electric vehicles and hybrids and two all-electric utes likely on the way, the Australian arm of the Korean auto giant sees itself in a strong position to benefit from the introduction of the NVES.

That’s in contrast to the auto industry’s peak body, the Federal Chamber of Automotive Industries (FCAI), which has expressed deep reservations about the federal government’s preferred ‘Option B’ NVES.

“We see the merit in Option B,” said Hyundai Australia chief John Kett at this week’s Hyundai i30 Hybrid sedan launch. “We can get to B, but we need some support.”

Primarily, the “support” Hyundai wants is the inclusion of ‘super credits’ for zero-emissions electric vehicles that would enable “cheaper” CO2 emitting vehicles to stay in its local showrooms.

“If the credit system were to work the way we hope, it would extend that entry-level ICE [internal combustion engine] portfolio and hybrid portfolio for longer,” said Kett.

“The consumer needs to be protected by clear and well-balanced credit systems that enable you [an auto brand] – if you have invested in EVs and have a critical mass of EVs – to retain a stream of ICE vehicle or marginal hybrid vehicles.”

Kett’s pitch is a blunt admission that EVs are unlikely to drop to price parity with traditional ICE vehicles any time soon.

Hyundai has doubled down on Kett’s statements by this morning issuing a press release endorsing the NVES. It is the first Australian division of a major car-maker to do so.

The federal government is now seeking submissions and feedback on the NVES. It wants that process completed within three weeks and legislation introduced to parliament soon after.

Hyundai Australia intends to submit its own response to the impact analysis, while there will also be responses from other major brands and the FCAI.

The NVES will work by providing car companies with targets for average emissions per kilometre from new vehicles sold. Makers who have a corporate average below the limit will gain credits, and those who exceed the limit will have to either buy credits from other brands or pay fines.

Vehicles that exceed the limit would be fined $100 per gram per example sold. That means their fines tally could add up quickly. It also potentially creates a significant income stream for makers with surplus credits to trade.

The super credits system proposed by Hyundai would mean electric vehicles would generate credits at a multiplier rate – potentially 1.25 or 1.5 – that would subsidise CO2-emitting vehicles in the line-up.

“So the reward for having a strong EV penetration and hitting a certain threshold enables you to keep the accessible-priced vehicles a lot longer,” said Kett. “So that gives you between now and 2030 to try and evolve and resolve that sort of technology.”

Kett is also pushing for a reduction of the $100 fine per gram of CO2 for exceeding the limit, but did not nominate what figure he judged to be fairer.

“Maybe we can rethink how heavy that needs to be in that first one to four years,” he said.

Super credits and a $40 fine per gram were proposed under the less onerous ‘Option A’ NVES endorsed by the FCAI and published in the impact analysis, but fundamentally rejected by the federal government.

Kett is an FCAI board member but was distancing himself and Hyundai from the lobby group’s claim that the NVES would cost up to $38 billion over its first five years.

The claim, based on the assumption that NVES would trigger no behavioural changes among consumers or car companies, has been widely panned.

Opposition leader Peter Dutton has also jumped in, describing the NVES as “Albo’s ute tax”.

“At the moment it’s a lot of politics, a lot of things that make it sound like this is a catastrophe,” cautioned Kett. “It allows people with special interests to get in there and we read incredible stories on a daily basis.

“We need to step our way through this,” he added. “As long as you are showing an intent to innovate and demonstrate that factually with an evolution of portfolio, we need to find a pathway to keep that choice in Australia and keep this industry of 1.1 million [sales per annum] alive.

“That’s the humanity side of it.”

Kett’s willingness to back Option B’s tougher emission drawdown is based on Hyundai’s zero- and low-emissions model range and expanding the roll-out of those models.

The second-generation Hyundai Kona Electric is already on sale, the IONIQ 5 N high-performance EV launches this month, the IONIQ 7 full-size electric SUV is due to arrive in the second half of 2024, and an entry-level circa-$35,000 Hyundai Casper electric SUV is expected to be unveiled this year and soon after confirmed for Australia.

The two aforementioned utes – especially the Ford Ranger-size IONIQ T10 – should generate substantial volume and credits if they are priced competitively and deliver ute-worthy payload and towing capability.

Low-emission hybrids are an increasingly significant part of Hyundai’s line-up too. Both the updated Tucson and the new Santa Fe will add hybrid powertrains this year and the facelifted i30 will come with 48V mild-hybrid tech.

“We are well placed and that’s a recognition of five to 10 years of ploughing our way through low volumes and low returns and lots of questions about ‘what are you guys doing?’,” said Kett.

“So I think there is an element of reward for that.”

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