First NVES report divides opinions

The Federal Government's release of the first New Vehicle Efficiency Standard (NVES) results shows that the combined automotive industry has met targets for 2025, but highlighted divergent views among lobby groups on the long-term impacts of the policy.

Electric Vehicle Council highlights strong early performance

The Electric Vehicle Council, the peak national body representing the electric vehicle industry in Australia, highlighted the fact two-thirds of vehicle suppliers outperformed their emissions targets in the first reporting period, with the average outperformance for new light passenger vehicles being 21%.

The Federal Chamber of Automotive Industries (FCAI), the peak industry organisation representing manufacturers and importers of new vehicles, acknowledged that the combined industry had met the targets for 2025, but noted “significant challenges lie ahead as the targets become more stringent through to 2029”.

EVC Chief Executive Officer Julie Delvecchio said the results demonstrated the success of the Federal Government initiative, which came into effect on 1 January 2025 and sets mandatory emission targets for new passenger and light commercial vehicles.

“The NVES is working exactly as intended – rewarding manufacturers who bring cleaner vehicles to Australia and giving consumers more choice,” Ms Delvecchio said.
“This is proof that smart, coordinated policy can accelerate cleaner transport, lower running costs for families and strengthen Australia’s position in the global automotive market.”

Government policy driving cleaner vehicle supply

RACQ Head of Public Policy Dr Michael Kane said the NVES forced car manufacturers to supply more fuel-efficient or zero-emission vehicles to avoid penalties, aiming to lower transport emissions, increase consumer choice of efficient vehicles, save money on fuel and reduce local air pollution.

The results, released by the NVES Regulator, outline the interim emissions value (IEV) for each of the car makers, along with details on the number of units (i.e. credits) issued under the scheme for 2025.

“When the NVES was legislated, critics warned of supply shortages, soaring prices and market disruption,” Ms Delvecchio said.

“Instead, the first performance report shows strong industry performance, healthy competition and a clear acceleration in cleaner vehicles coming to Australia.

“The data confirms what we said all along – clear, predictable standards drive innovation and investment. They don’t break markets, they modernise them.”

FCAI warns of tightening targets and future challenges

FCAI chief executive Tony Weber struck a different tone, noting the results showed car makers responded quickly to the task of meeting the first year of emissions reduction targets but a substantial reduction in targets each year to 2029 presents significant future challenges.

“To support the emissions reduction objectives, car makers have increased the range of EVs with more than 100 EV models available to consumers,” Mr Weber said.

“However, despite this increase in supply, EVs represented just 8.3% of new vehicle sales in 2025, which was only a 1.1 percentage point increase on 2023.

“Sustaining compliance as targets tighten will require materially stronger uptake of EVs than current market trends indicate.”

He noted the NVES target for passenger vehicles in 2026 is 17% lower than 2025 and 14% lower for light commercial vehicles, and that by 2029 the targets were 59 per cent and 48 per cent lower respectively.

A statement from the FCAI said the rate of improvement required to avoid NVES penalties presents a substantial challenge, and any additional costs generated by the NVES would likely be passed on to new car buyers.

“FCAI is keen to see the Government consider policy settings that support consumer demand for EVs and low-emission vehicles which will assist the achievement of the NVES,” Mr Weber said.

NVES credit system and early market impacts

Ms Delvecchio said the fact that many petrol and diesel car manufacturers outperformed their year one NVES targets showed the benchmarks were more than achievable.

The report shows that around 12% of vehicles covered by the NVES were electric, with the remaining 88% internal combustion or hybrid, and that the two-thirds of suppliers who beat their emissions targets accumulated a net surplus of 15.9 million NVES units.

“Emissions are coming down, cleaner and more affordable cars are arriving in Australia, choice is expanding and EV sales are growing,” Ms Delvecchio said.

“That’s exactly the momentum we need to reach five million EVs on our roads by 2035.

“It would be counterproductive to now allow large volumes of banked credits to slow the pace of clean vehicle supply in coming years.

“The initial success of the NVES should give policymakers confidence to steadily strengthen its trajectory and keep Australia aligned with global markets”

Concerns over penalties, costs and consumer demand

Dr Kane said car makers could seek to avoid fines by buying credits from other car makers who deliver more low emission vehicles.

“In overseas markets there have been more credits available in the earlier years of NVES type schemes, so the credits get discounted,” he said.

“This has seen OEMs (Original Equipment Manufacturers) avoiding higher cost fines by buying credits. It also means that OEMS that don’t perform are paying the OEMS that are.”

Calls for supportive demand-side policies

The National Automotive Leasing and Salary Packaging Association (NALSPA) cautioned that without ongoing support, including maintaining the FBT exemption, Australia will fall short on EV uptake and its climate targets.

NALSPA CEO Rohan Martin said the data reinforces the importance of maintaining stable demand-side policy settings as the market adjusts.

“The NVES is influencing manufacturer behaviour and improving vehicle efficiency,” Mr Martin said.

“It’s increasing consumer choice in cleaner cars and lowering emissions on Australian roads.

“As NVES targets tighten, car manufacturers will need to bring materially more zero-emission vehicles to the Australian market. That is where supply and demand policy must work in lockstep to proactively support and encourage consumer behaviour towards this technology.”

Role of the Electric Car Discount in boosting EV uptake

Mr Martin said the Electric Car Discount, delivered primarily through novated leasing, remained Australia’s main demand-side mechanism supporting EV uptake among working Australians.

“The Electric Car Discount is the policy doing the most to put EVs within reach of everyday Australians,” he said.

“Australia has more than 105,000 extra EVs on our roads thanks to the discount, with at least half of all EVs sold today supported by it.

“Many of the workers taking up the discount say they simply wouldn't have considered making the switch without it.”