Australia's automotive industry faces a potential $2.8 billion penalty by 2029 if car brands fail to meet the country's upcoming New Vehicle Efficiency Standard (NVES), according to a study by Blueflag, published by the Motor Trades Association of Australia (MTAA).
NVES Penalties Loom Large
The MTAA's pre-Budget submission to the Federal Government highlights the significant financial challenges carmakers may face under the NVES.
The $2.8 billion figure is based on current model lineups and announced plans, assuming carmakers don't further adapt their product offerings to meet the stricter emissions targets. The MTAA notes that these projections can improve as companies modernize their lineups.
How the NVES Works
The NVES, effective January 1, 2025, covers all new passenger and light commercial vehicles under 4.5 tonnes. Carmakers face penalties for exceeding average carbon emissions targets on their sold vehicles, calculated at $100 per g/km of CO2 over the target for each vehicle.
Penalties begin July 1, 2025.For 2025, the CO2 limits are 141g/km for passenger cars (Type 1) and 210g/km for light commercial vehicles/heavy-duty SUVs (Type 2). These limits will progressively decrease to 58g/km and 110g/km, respectively, by 2029. Brands can earn credits for exceeding targets, which can be used later or sold to other manufacturers.
Unexpected Findings
The Blueflag study contains some surprising findings. It suggests GWM is "unlikely" to meet the Type 2 target for 2025, despite offering hybrid utes and off-roaders, and soon, a plug-in hybrid ute. Conversely, Toyota is deemed "possible" to meet the target despite lacking hybrid, plug-in hybrid, or electric options in these segments. Hyundai is the only leading brand highly likely to meet the 2029 Type 2 target. No brands are currently projected to meet the 2029 Type 1 target.
Brands at Risk
The MTAA predicts Ford, Hyundai, GWM, Kia, Nissan, Mazda, and Mitsubishi are among the best-selling brands likely to miss the Type 1 (passenger vehicle) target. Ford, GWM, Isuzu Ute, Mazda, Mitsubishi, Nissan, and Toyota are projected to miss the Type 2 (light commercial vehicle) target.
Dealers Need Protection
The MTAA calls for greater protections for car dealers in its pre-Budget submission, citing increased costs for manufacturers to meet NVES requirements. The organization believes that manufacturers may struggle to pass the full cost onto consumers and could resort to strategies that negatively impact dealerships.
Possible Strategies for Carmakers
The MTAA suggests manufacturers may:
- Absorb costs
- Trade credits with EV-only brands
- Adjust product lineups
- Re-evaluate dealership structures
Reduced profit margins for manufacturers will inevitably impact dealerships, which operate on tight margins, potentially leading to consolidation or closures.
