New Vehicle Efficiency Standards Passed Into Law

The Australian Parliament on 16 May 2024 passed into law the New Vehicle Efficiency Standards (NVES), which provides enforceable vehicle efficiency standards for new vehicles sold in Australia. The New Vehicle Efficiency Standard Act 2024 (Cth) was enacted after the Federal Government considered submissions to its Consultation Impact Analysis in February 2024.

The Government has stated that the primary problem that it is trying to solve is how to save Australians money on fuel, stimulate the provision of more efficient vehicles into the Australian market and reduce CO2 emissions from new cars.

Prior to the law being passed by Parliament, the Government’s impact analysis for fuel efficiency standards came off the back of record vehicle sales in January 2024 being driven by SUVs and Utes. The Ford Ranger was Australia’s top-selling vehicle with sales of 4,747 units, followed by the Toyota Hilux (4,092), Toyota Landcruiser (2,541), Isuzu Ute D-Max (2,541) and Toyota RAV4 (2,211).

The Standards

The NVES would imposes a headline target for vehicle importers (suppliers) in grams of CO2 emissions per kilometre travelled by passenger and light commercial vehicles.

The headline CO2 emissions target is based on a supplier’s fleet of new passenger and light commercial vehicles sold from 1 January 2025 – as opposed to each individual vehicle. Heavy vehicles and vehicles subject to heavy vehicle emissions tests are exempt from the NVES.

The headline target means that suppliers are able to supply vehicles that exceed target, but the average emissions across the fleet must be at or below the headline target. The law also provides that the headline target will reduce every year until at least 2029, in the following manner:

From the headline targets in 2025 to those set in 2029, the NVES will require carbon intensity reductions of approximately 60% for Passenger Vehicles and an approximate 48% for Light Commercial Vehicles. This means that each supplier, each year, will need to supply increasingly more efficient vehicles.

In 2019, the average light vehicle had an emissions intensity of 181 g/km, which means that the NVES will require an approximately 68% reduction in emissions intensity by 2029 from this base.

The NVES will be enforced through a penalty on suppliers of $100 per g/km exceeding over the target. The penalty mechanism commences from 1 July 2025 to assist manufacturers in the transition to the NVES.

Vehicle Weights

The NVES incorporates a ‘breakpoint’ mechanism which adjusts the headline figure based on the weight of the vehicle, to determine the effective target for suppliers. Under this mechanism, heavier vehicles will have higher emissions targets, up to the ‘upper breakpoint’ limit. The ‘upper breakpoint’ will be 2,000kg for Passenger Vehicles and 2,200kg for Light Commercial Vehicles. All Passenger Vehicles heavier than 2,000kg and Light Commercial Vehicles over 2,200kg will have the same emissions target.

Exclusions

The NVES will only apply to new car sales and will only apply to cars that are defined as

Evan Stents

Mr Stents acts for a broad range of clients in the automotive industry including motor vehicle dealers, component producers, automotive service providers, aftermarket providers and automotive industry group associations including AADA, MTAA and VACC.

He regularly provides thought leadership in the automotive sector, publishes articles and speaks at industry conferences in Australia and overseas.

Mr Stents holds a degree in Arts, an Honours degree in Law and a Masters degree in Commercial Law.

Passenger Vehicles and Light Commercial Vehicles. Heavy Vehicles and used cars will not be regulated by the NVES.

Off-road passenger vehicles that have a:

• rated towing capacity of three tonnes or more; and

• body on frame chassis, are considered to be Light Commercial Vehicles and will have higher emissions targets.

The New Vehicle Efficiency Standard Act 2024 (Cth) is available to view, visit https://www.legislation.gov.au/ C2024A00034/asmade/text

1 https://www.greenvehicleguide.gov.au/pages/ UnderstandingEmissions/VehicleEmissions