What Australia’s New Vehicle Efficiency Standard means for consumers

The Australian government’s proposed New Vehicle Efficiency Standard (NVES) is going to throw the cat among the pigeons at an industry level, but what will it mean for consumers?

There are a number of key factors still at play, but the short answer is it’s likely to lead to a wider and cheaper range of the latest battery-electric and plug-in hybrid vehicles – and more expensive internal combustion models, especially utes and large SUVs.

To summarise the key elements of the government’s preferred NVES option, car-makers would be issued with an increasingly stringent – year-by-year – blanket emissions target to meet across their product portfolio, and heavily fined if they exceed those targets.

In contrast, those who meet and or comfortably beat their targets will receive credits that can be used to offset potential fines or traded with another manufacturers for capital.

The first of these targets are earmarked to be implemented on January 1, 2025 and will be pegged at 141 grams of CO2 per kilometre (g/km) for passenger cars and SUVs, and 199g/km for light commercials, before dropping by 12.2 and 12.4 per cent respectively per annum down to 58g/km and 81g/km.

Specifically intended to drive the local take-up of more efficient vehicles, the strategy should see an influx of new low- and zero-emissions vehicles from a wide range of auto brands, including those without any or many such models now – think Isuzu Ute, Ford and General Motors.

It should also spur the accelerated electrification of key model lines like the Toyota LandCruiser, Prado, Fortuner, Ford Everest, Mitsubishi Pajero Sport and Isuzu MU-X, given the bulk of these models are derived from light commercial vehicles yet will be subject to the stricter passenger vehicle standards.

Deployment of such electrification technologies will undoubtedly cost OEMs millions and so price premiums are likely to be passed onto consumers in order to maintain profit margins. And if a car-maker fails to meet the standard, it gets slugged a massive fine – specifically $100 for every gram of CO2 over the limit for every every sold.

By 2029 that could equate to a $17,000 fine per vehicle for the LandCruiser and $10,000 per Ford Ranger based on the their current fuel consumption and emissions.

Despite the pressure coming for its light commercial and off-road SUV line-up – and the fact it’s yet to release an EV locally, market leader Toyota Australia has welcomed the NVES announcement and said in a statement that Aussies have always purchased “vehicles that meet their work and lifestyle needs”.

“Toyota Australia supports the introduction of a mandatory fuel-efficiency standard that is ambitious, doesn’t leave Australians behind, is calibrated to the Australian market and allows carmakers to determine the appropriate mix of technologies to achieve it.

“This will have a direct effect on the vehicles that consumers choose to purchase and drive, encouraging access to vehicles with lower and zero CO2 tailpipe emissions technologies.

“Toyota’s long-term strategy, therefore, involves a multi-pathway approach: delivering a range of technologies that support decarbonisation while leaving no-one behind.”

The reverse is true of low-emission brands and especially so for EV brands like Tesla, BYD and Polestar, which will be able to trade (sell) their inevitable abundance of credits to other brands, potentially making them more profitable.

If they pass on those profits to consumers that will result in lower retail prices for their vehicles, which would be a big win for Aussies given purchase price is the biggest barrier to electrification uptake.

This in turn should accelerate the expansion and improvement of Australia’s EV charging network, reducing range anxiety – the other big worry for consumers considering an EV.

Neither of Australia’s two major EV brands (Tesla and BYD) contacted by carsales responded to our enquiries regarding the NVES, but Kia and Hyundai – both of which are working on increasingly affordable electric models at the moment – did.

“Kia Australia supports a formalised emissions standard and the details of the federal government’s recently announced proposal are currently under study internally,” said Kia in a statement.

“Kia Corporation is a global company with advanced R&D, and has previously implemented long term strategies to meet emission requirements in the Korean domestic, North American and European markets.

“Kia Australia is confident it will provide a diverse product range, consisting of various fuel-efficient technologies, for Australian new car buyers to choose from.”

Hyundai likewise welcomed the announcement and said it was confident “a standard that is right for all Australian new-car buyers” can be developed through government and industry collaboration.

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