We will suffer CO2 penalties says Mazda

Succumbing to NVES (New Vehicle Efficiency Standard) emissions regulations, Ford and Isuzu have axed some diesel-powered Everest and MU-X family SUV models. But Mazda Australia’s long-standing managing director, Vinesh Bhindi, says the brand will stand firm in the face of strict new CO2 laws.

In doing so Mazda will almost certainly incur penalties that may lead to higher prices but this scenario will play out not only in Mazda showrooms, but across those of many other marques and new car brands.

The Mazda Australia boss told carsales the NVES is all punishment and no reward for the buyer and that some of the biggest new car brands in the market will have to cop it sweet.

“What [penalties] we incur and the mechanics of it are played out across two years, but you can accumulate credits in that period to offset them etcetera. So [how] that [is dealt with] is a decision that each individual business will make,” said Bhindi.

A recent study commissioned by the Motor Trades Association of Australia (MTAA) warns that leading car manufacturers could face up to $2.8 billion in fines by 2029 if they fail to meet the tough new emissions targets.

“Penalties is the only mechanism that the government has used, right?” said Bhindi. “So again, I say the NVES is more about reducing carbon, that’s the ultimate objective of it. The NVES part of it is our government’s choice on influencing this transition and it’s full of sticks but no carrots for the consumer.”

Australia’s NVES came into effect on January 1, 2025, with the aim of significantly reducing CO2 emissions from new passenger cars and light commercial vehicles and while making low-emission vehicles cheaper and polluting vehicles more expensive.

The NVES sets progressively stricter targets as time goes on, with penalties for manufacturers that fail to comply.

Mazda Australia, which has a diverse line-up of vehicles – including petrol, diesel, plug-in hybrid and EV types – faces potential financial implications under these new regulations.

But the local Mazda chief reckons there won’t be sufficient credits to balance out the fines, which is almost certain to have a negative effect on new car retail pricing.

“The penalty part of it, in the early days, if you ask me to look at it from an industry point of view, I don't believe there's enough credits to offset the fines – so there will be a level of fines incurred by the industry,” said Bhindi.

“And then when you introduce that level of penalties or fines in an industry, the choices are you either incur it, you absorb it, or you pass it on. Or a combination of all of that."

“And I think that’s what’s going to happen – a combination.

“So some brands will be able to offset it, some brands will have lots of credits that they will not be able to trade or may choose not to trade. And then there’ll be others who will have no option but to pay it.

“That’s just a behind-the-scenes issue but a transition like this is never free – that is what I think.”

The NVES imposes a penalty of $100 for each gram of CO2 per kilometre that a manufacturer’s fleet exceeds the set target, multiplied by the number of vehicles sold. So if a manufacturer’s fleet average exceeds the target by 50g CO2/km, and they sell 10,000 vehicles, the penalty would amount to $50 million.

Asked if Mazda will pass on the extra costs incurred through the NVES to customers, Bhindi remained cautious. “Potentially; it all depends,” he said.

He said the brand’s incoming new vehicles, which will include a Mazda CX-5 PHEV, will help the brand reach the CO2 emissions targets set by the Australian government.

“I can’t discuss our business plans into the next couple of years but potentially we’ll be able to bank some credits. So it’s not as clear cut as ‘incur now, pay now’ and therefore you make a decision now on what you do with pricing.”

“But my view is, unless there’s a reasonable acceleration of battery EV take up – and it’s stagnated at the moment – fast forward three years and the system will not have sufficient credits, because that’s saying to us consumers still prefer what they’re comfortable with.

“From our point of view, we have a broad portfolio so we will have customers who will not see beyond what [combustion engine vehicles] they have right now, that’s fit for their purpose, and we will provide that to the market.”

Mazda showrooms will be plumped up by “…multiple battery EV vehicles” by the end of the decade, confirmed Bhindi.

“We’ll have hybrid technology, we’ll have plug-in hybrid, we’ll have mild hybrid but we’ll also have pure ICE [internal combustion engine]. And when that portfolio balances up I think we’ll be okay.”

But there’s a curve ball about to wobble its way towards not only established car brands but also the Australian consumers, as an election looms.

If the incumbent progressive government is booted and replaced by conservatives, the NVES law could be repealed. However, Mazda Australia’s managing director doesn’t believe a new government would scrap the CO2 regulations.

“That’s for them to answer but I don’t think so,” he said.

“I think as a country we need, and we must have, an efficiency plan like this. I think as long as it’s in line and in sync with where consumers are and understanding when it makes sense to them [it has to stay].”

“And I think the hurdles that your readers’ and viewers’ commentary show, you would clearly know what’s stopping them taking the step [to electrified vehicles] and I suspect there could be numerous issues, including charging costs, choice and many unknowns.

“But similarly, you’ll have people who would be saying, ‘Bring it on. I want it tomorrow.’.

“I think my simple view is that it’s a transition, and all in the industry have to play their part to ensure we give comfort to consumers and convince them that this technology is here to stay and is the right one, and it makes sense.”