Mostly positive reaction to NVES changes

THE federal government will relax its proposed New Vehicle Efficiency Standard (NVES) to make allowances for vehicles including four-wheel drive SUVs and light commercial vans and utilities.

 

Enforcement of the Standard will also be delayed by six months from its original date on January 1, 2025.

 

Key changes to the structure of the NVES will see some passenger car models moved to become light commercial vehicles in a bid to sidestep stricter fuel efficiency rules and maintain industry sales averages.

 

Further, light commercial vehicles will now face a more lenient emissions ceiling than initially proposed.

 

Climate change minister Chris Bowen said the compromise meant the concerns of the automotive industry were considered in addressing the need for stricter efficiency standards, which will still result in an estimated 50 per cent reduction in vehicular emissions by 2029.

 

“This legislation will mean Australian motorists are no longer at the back of the queue – no longer treated as second-class citizens,” he stated.

 

“No longer will Australia be in the ‘G2’ of Australia and Russia as the only two major economies without vehicle efficiency standards.”

 

It is reported that without intervention Australia’s transport emissions would have been its biggest source of pollution by the end of the decade.

 

The Albanese government consulted closely with a broad range of stakeholders in preparing the NVES and engaged with the more than 9000 submissions made throughout the most recent consultative period to arrive at a compromise Standard.

 

In a statement, the federal government said the Standard will give importers an incentive to introduce their most efficient vehicles to the Australian market, while ensuring Australian new-car buyers have a range of vehicles suited to both business and leisure pursuits.

 

Modifications to the NVES include:

 

Recategorising a limited number of four-wheel drives from passenger car to light commercial vehicle status. This acknowledges that some off-road SUVs use similar ladder-frame chassis (as utility models) and need comparable towing capacity above 3000kg, to dual-cab utes. This includes models such as the Nissan Patrol and Toyota LandCruiser.

 

Smoothing the emissions trajectory for light commercial vehicles. This reflects adjustments announced by the United States Environmental Protection Agency to its Standard and smooths the transition for utes, vans, and four-wheel drives.

 

Adjusting the weight-based relative emissions limits, known as the break point, recognising that heavier vehicles emit more.

 

Staging implementation to enable preparation and testing of essential data reporting capabilities. To ensure we get the implementation right in partnership with industry, the scheme will commence on January 1, 2025, but manufacturers will not begin earning credits or penalties until July 1, 2025.

 

Responding to the announcement this week, Toyota Australia president and CEO Matthew Callachor said the importer appreciates the federal government’s willingness to consult on this important public policy and that it will continue to offer a range of vehicles best suited to Australian buyers.

 

“Toyota has long supported the introduction of an ambitious fuel-efficiency standard that is calibrated to the unique requirements of the Australian market and leave no-one behind,” he said.

 

“We welcome the willingness of the federal government to consult on this important public policy and to make changes that represent a positive step forward.

 

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

 

“Our task now is to get on with the job of delivering diverse technologies that will enable our customers to choose vehicles with lower or zero carbon emissions that best suit their circumstances.”

 

Hyundai Motor Company Australia (HMCA) seconded Toyota in welcoming the Australian government’s revised New Vehicle Efficiency Standard, saying the proposal strikes the right balance between ambition and practicality.

 

“The NVES framework seems to strike the right balance between ambition and practicality,” said HMCA chief operating officer John Kett.

 

“With this Standard in place, Hyundai dealers will have great vehicles to sell, customers will have great vehicles to drive, and the automotive industry will be playing its part to reduce emissions in line with Australia’s commitment to decarbonise.”

 

Mr Kett said the ambition of the NVES aligns with Hyundai’s global vision for the rapid development of sustainable transport technologies.

 

“Hyundai has been selling EVs in Australia for six years and investing in the technology globally for decades. It is our intention to bring many more EVs to the Australian market, while substantially reducing the emissions profile of our entire range.

 

“The NVES will help us to do that – and now we can look forward to getting on and selling some cars.”

 

The Climate Council has also come out in support of the adjusted Standard, saying the changes will result in cheaper fuel bills and fewer emissions for all Australians by offering access to “cleaner cars that are cheaper to run”.

 

Climate Council chief executive officer Amanda McKenzie said the organisation welcomes the simple and transparent final settings that will lock in these benefits for Australian motorists.

 

“Manufacturers have been dumping their dirtiest cars here for years, and that has got to stop,” she said.

 

“When Australians go to buy a new car, they should be able to choose a low- or zero pollution option that suits their needs.

 

“Our cars produce more than 10 per cent of Australia’s total climate pollution, and the average family pays over $5000 a year for fuel. The NVES will mean we can wave goodbye to those eye-watering fuel bills and unhealthy air, and get on the road to cleaner, more affordable transport.”

 

The Electric Vehicle Council (EVC) was similarly supportive of the updated announcement, saying the Standard is a big step forward for Australia.

 

“For many years now, we’ve campaigned for Australia to join the US and Europe by introducing vehicle efficiency standard, so car makers are incentivised to offer their best and most affordable electric options to Australians,” said EVC chief executive Behyad Jafari.

 

“The federal 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.

 

“We know most Australian drivers are now interested in considering electric options, so more choice on the market will naturally drive greater take-up of EVs. Ultimately, these standards will mean all Australian consumers are paying lower fuel bills, breathe cleaner air, and enjoying a greater choice of the latest and greatest in new cars.”

 

To help accelerate the transition to electric vehicles, the federal government will allocate $60 million to boost EV charging infrastructure at Australian dealerships under its Driving the Nation fund.

 

And while the Federal Chamber of Automotive Industries (FCAI) has also come out in support of the NVES, it says it is keen to read the fine print before fully embracing the compromised Standard.

 

“The FCAI welcomes today’s changes by the Albanese government on the New Vehicle Efficiency Standard and recognises it as a step in the right direction,” it said in a statement.

 

“However, we continue to have concerns about the impending challenges facing the industry and motorists.

 

“The FCAI will review the draft legislation in detail to understand the impact to the industry and consumers. We call on the government to release full legislation and modelling that forms the basis for their policy.”

 

The FCAI was not alone in encouraging the federal government to provide the detail and clarity it says is needed to delivery broad community and political support for its proposed fuel efficiency standard.

 

The Australian Automobile Association (AAA) said that while it has long-supported an efficiency standard as a means of ensuring Australians have access to a first-world vehicle fleet, it is seeking transparency on the detail of the Standard to ensure that there are no “bad outcomes” for consumers and the environment.

 

“The AAA is pleased the government has settled upon its preferred proposal, and we encourage both sides of politics to pass legislation containing targets that are ambitious and achieveable,” said AAA managing director Michael Bradley.

 

“The introduction of a fuel efficiency standard would represent a significant economic reform after years of unhelpful politicking about EVs and climate policy in general.

 

“Investors need political parties to work together in the national interest, and policy settings that can live beyond changes of government.”

 

Mr Bradley said the AAA also encourages the government to clearly explain whether its revised proposal now aligns Australian regulation with the United States’ approach, including the significant changes announced by the Biden administration last week.

 

The AAA wants to emphasise that a bipartisan approach to vehicle emissions policy is crucial in removing uncertainty and associated sovereign risk, and to deliver what it says is desperately needed private sector investment in Australia’s EV charging network.

 

Additionally, the AAA said it believes a bipartisan approach is also required in the adoption of vehicle technologies that will facilitate a timelier response to pressing associated issues, such as industry skill development and tax reform.

 

“Settling on a preferred model is an important first part of the job, but now the government should seek robust bipartisan political support and, more importantly, support among motorists,” added Mr Bradley.

 

“Transparency and openness on impacts will be critical if the government is to succeed in delivering durable change that can provide long-term certainty.”

 

The Motor Trades Association of Australia (MTAA) said the adjusted NVES better suits the predominantly small and medium business members it represents and that the concessions made by the Albanese government show its awareness of the challenges being experienced both here and abroad.

 

“(The) MTAA commends the Australian government for its approach and appreciates the seat at the table (it offered the MTAA) throughout these critical discussions,” said MTAA CEO Matt Hobbs.

 

“Working side-by-side with the government has provided the MTAA 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.

 

“The proposed standard is still very stringent in 2029, amongst the hardest in the world. It will still be very challenging for the majority of car brands in the market to meet these targets.”

 

Mr Hobbs said the MTAA will continue to work alongside the Australian government on the implementation of the NVES and its operation for the five-year term of the program concluding in 2029.

 

He said this includes “achieving alignment” between automotive manufacturers and dealers, and ensuring vehicles are counted towards the NVES at the point of registration, rather than point of import.

 

Further, he said the review of the NVES in 2026 will be critical and said the MTAA will continue to monitor consumer impacts and international trends and advocate for further adjustments to the NVES over time.

 

“This whole-of-industry approach is critical. Consumers need more than just the cars, they need access to charging, properly trained repairers (and vehicle) recyclers need to be ready as well,” added Mr Hobbs.

 

“We look forward to further detail in relationship to these policies.”

 

Mr Hobb’s sentiment was largely echoed by Australian Automotive Dealer Association (AADA) CEO James Voortman.

 

In a statement issued to Australian motoring media, Mr Voortman said while the AADA acknowledges the progress the NVES represents, it is aware that there are still many challenges facing its members.

 

“This is not the New Vehicle Emissions Standard the industry has asked for, but we recognise that the government has listened to industry and made significant changes to its original policy and is seeking to strike a balance between the needs of competing interests,” said Mr Voortman.

 

“We welcome the revision of the LCV headline targets, the re-categorisation of body on frame SUVs into the LCV category, and the commitment to provide $60 million to boost EV charging at Australian dealerships.

 

“We are now committed to working with the government on a range of key issues affecting dealers including - ensuring that the compliance for this policy is at the point of sale, not the point of importation; implementing meaningful automotive franchising reform; and addressing the enormous investment task facing dealers in this transition.

 

“These are critically important issues for automotive retailers and if left unaddressed, the NVES could have dire consequences for dealers. We welcome the government’s commitment to work with us on these matters.”

 

Mr Voortman said the AADA would urge the government to continue working with the automotive industry in identifying and addressing any unintended consequences the policy may cause.

 

“Make no mistake, this is a major regulatory intervention into the automotive industry and while we understand and accept the government’s objectives, we would also urge them to work with industry to identify any unintended consequences arising from this policy,” he said.

 

“As this policy is implemented over the next five years, we will need the government to keep an open mind on these standards and to constantly review developments within the market and make sensible changes if required.

 

“The first review will commence in 2026 and this will be an opportunity to assess the first two years of the NVES, but also determine whether the settings are appropriate for the incredibly challenging outer years of the policy.

 

“This is a contentious issue in our industry and there is a great deal of anxiety among dealers.

 

“We urge the Government to consider the needs of these businesses which employ more than 60,000 people, invest in cities and towns across the nation and which provide so much support and sponsorship to their communities.”

 

What is a New Vehicle Efficiency Standard?

 

A NVES is a regulatory obligation placed on a vehicle importer to supply vehicles that on average meet a certain CO2 per kilometre emissions target. The target is made more stringent over time to ensure importers provide more efficient vehicles.

 

For each vehicle an importer supplies that beats the target, a credit is earned. For each vehicle that misses the target, the importer will have to offset that figure by importing a more efficient vehicle within two years on by buying credits. If this does not happen, the importer will be issued with a penalty.

 

At this point in time, the NVES applies only to cars, SUVs, 4WDs, utilities and vans. No vehicles are banned.

 

The NVES sets two targets – one for passenger cars and smaller SUVs, another for larger SUVs, 4WDs and light commercial vehicles, such as utilites and vans. Targets are also adjusted for vehicle weight to reduce the disadvantage heavier vehicles have.

 

When will the New Vehicle Efficiency Standard be introduced?

 

The NVES will be applied from January 1, 2025. However, penalties and credits will not be implemented until July 1, 2025.

 

The decision to delay the start of the penalty and credit portion of the NVES was made as part of a broader change to the original proposal which now sees the cap for some utility, van, and 4WD models recalibrated to better match revised limits in comparable markets.

 

What does the New Vehicle Efficiency Standard hope to achieve?

 

In addition to cleaner air and more efficient vehicles, it is estimated that the NVES will save Australian motorists some $95 billion in fuel costs by the middle of the century.

 

Further, it is calculated that a cumulative abatement of carbon dioxide and other greenhouse gas emissions will tally 20 million tonnes by 2030, 80 million tonnes by 2035, and 321 million tonnes by 2050.

 

So, what changed since the New Vehicle Efficiency Standard was proposed?

 

In addition to changing the implementation date, consultation with industry groups has seen the federal government change the headline limit for light commercial utilities and vans, as well as some 4WDs.

 

These now appear as follows:

 

	Previous limit	Revised limit
2025	199g/km	210g/km
2026	164g/km	180g/km
2027	129g/km	150g/km
2028	94g/km	122g/km
2029	81g/km	110g/km

 

The upper breakpoints for heavier vehicles have also been increased by 200kg for light commercial vehicles (to 2400kg) and by 200kg for passenger vehicles (to 2200kg) for what it describes as a better statistical fit.

 

Finally, the categorisation of some heavier four-wheel drives (4WDs) built on a ladder-frame chassis, and which have a braked towing capacity of more than 3000kg will be moved into the light commercial vehicle class.

 

The majority of SUVs will remain in the passenger vehicle class.

 

Vehicles which will be placed into the light commercial category include the Ford Everest, Isuzu MU-X, Lexus LX, Mercedes-AMG G63, Mitsubishi Pajero Sport, Nissan Patrol, Toyota Fortuner, Toyota LandCruiser, and Toyota LandCruiser Prado.

 

How does New Vehicle Efficiency Standard legislation work?

 

Over the course of a year, importers will enter vehicles onto the Register of Approved Vehicles (RAV), an existing database of cars imported into the country. Based on the emissions and weight of a vehicle, the Interim Emissions Value (IEV) for a supplier will go up and down.

 

At the end of each year, if an importer’s IEV is less than zero, that importer is awarded with credits (units, in the legislation). If the importer’s IEV is more than zero, that importer will have two years to surrender enough units to reach zero.

 

If an importer does not surrender ample credits, they will be found in breach of a civil penalty provision. The penalty for a breach will be $100 per gram of CO2 per kilometre.