New Vehicle Efficiency Standard (NVES)

Policy Engagement Overview

Policy Engagement Trends – Consultation on exempting vehicles from the NVES (October 2024)

A government consultation ran from August to October 2024 on establishing exemptions under the NVES Act. The government proposed that NB1 vehicles – medium goods vehicles over 3.5 tonnes but below 4.5 tonnes (mainly utes, vans and some larger 4WD vehicles) that were previously not required to have Australian CO2 tests – would have a transitional exemption from the NVES until 2026.

• Many automakers advocated for weaker exemption rules for NB1 vehicles, including FCAI, Toyota, Ineos Automotive, Ford and the American Automotive Policy Council. Pushing to weaken the proposed one-year exemption for NB1 vehicles, the FCAI advocated for a four year exemption rule, while both Ford and Toyota advocated exempting new NB1 vehicle models for two years and existing models for four years. The American Automotive Policy Council appeared to advocate to exclude NB1 vehicles from the light-duty NVES entirely by reclassifying weight categories. Ineos requested the general exemption of NB1 vehicles from the NVES, while JAMA requested an “appropriate lead time” for testing NB1 vehicles.

• The Electric Vehicle Council and Tesla led positive advocacy, pushing for NB1 light-duty vehicles to be included in the NVES from 2026. The Electric Vehicle Council advocated against weakening rules for NB1 vehicles, while Tesla pushed back against the general exemption of NB1 light-duty vehicles from the policy.

• Other automakers advocated for an exemption for small-volume manufacturers from the NVES, including the Society of Motor Manufacturers and Traders (SMMT), FCAI and Ferrari. All three groups proposed to exempt manufacturers with less than 500 yearly vehicle registrations in Australia from the NVES, whereas Toyota advocated against exempting km small volume manufacturers from the NVES.

Policy Engagement Trends –From Government Policy Announcement to Adoption (February 2024 to March 2024)

In February 2024, the Australian government announced its proposed New Vehicle Efficiency Scheme (NVES) that would bring Australia’s CO2 standards in line with U.S. by 2028, and a new consultation on the policy ran until March 2024.

• Following the announcement, FCAI's CEO, Tony Weber, emphasized costs and vehicle availability concerns regarding the standard in a press release. Many other FCAI members responded to the announcement, with the media reporting positive statements supporting the proposed standard from Hyundai, Polestar, and Volkswagen. In contrast, Mazda urged the government to delay the standard, while Toyota criticized the proposal as "too ambitious" and pushed for weaker rules. In February 2024, ABC News reported that Hyundai, its subsidiary Kia, and Volkswagen supported the proposed new vehicle efficiency scheme.

• In the March 2024 consultation, positive advocacy was led by the Electric Vehicle Council, Smart Energy Council, Tesla and Polestar. All four groups strongly supported the government’s proposed standard and advocated against flexibilities that would weaken the stringency of the rule, such as multiplier credits. The proposed standard was also supported by Australian Energy Council, Origin, Uber and Porsche (Volkswagen). Hyundai supported the proposed efficiency standards with the exception that a multiplier credit for electric vehicles and incentives for EV purchases were also introduced.

• In the same consultation, multiple automakers and their industry groups advocated to severely weaken the proposed NVES. The FCAI, Japanese Automobile Manufacturers Associations (JAMA), Mazda, Mitsubishi and Toyota advocated to weaken the standard’s proposed CO2 targets and include multiple flexibilities like super credits that would weaken the rule’s stringency, alongside delaying the introduction of the standard. Isuzu, Ford and Great Wall Motor also advocated to weaken proposed CO2 targets in the NVES, with Ford also pushing for penalties to apply only by 2026 and Great Wall pushing to delay the standard’s introduction until 2028. Nissan also advocated to delay penalties in the NVES by two years.

• Other groups had varied advocacy positions in the March consultation. BMW appeared to generally support the NVES with the exception that its introduction should be delayed until 2026. Ai Group supported the NVES with numerous exceptions, including not introducing enforcement penalties for 2025. In contrast, the Australian Chamber of Commerce & Industry opposed the NVES and advocated for utes and large SUVS used by certain industries to be excluded from the NVES.

• Following the consultation, on March 7th 2024, it was reported Tesla had left the FCAI over its continued advocacy campaign against the NVES, criticizing the FCAI’s "demonstrably false" claims that it would drive up car prices. Following this, on March 8th, Polestar was reported have also also quit the FCAI over its campaigning against the standard.

• On March 8th 2024, Volkswagen reportedly had publicly backed the government’s proposed CO2 standards, in contrast to the FCAI and Toyota's reported negative positioning. Following this, on March 11th 2024, Volkswagen was reported to have quit the FCAI's policymaking committee to distance itself from the FCAI’s campaign against the NVES.

• On March 21st, MG Motor (SAIC Motor) also publicly supported the government's proposed standards.

• On March 25th, the government announced a finalized fuel efficiency standard, in a press conference attended by the Electric Vehicle Council, Hyundai, Toyota and Tesla.

Policy Engagement Trends – Fuel Efficiency Standards Consultation (April-May 2023)

Overall engagement with the second Fuel Efficiency Standards consultation again appeared to be positive, with 21 entities in InfluenceMap’s database submitting a response. Of these responses, 8 supported ambitious rules, 2 took mixed or unclear positions, and 11 advocated for weaker standards.

• Support for an ambitious fuel efficiency (CO2) standard was led by Tesla, Polestar (Volvo Cars), Electric Vehicle Council and Carbon Market Institute. All groups advocated for stringent Australian CO2 emissions standards for light-duty vehicles in line with either New Zealand, the EU, or the US. All these groups, except Carbon Market Institute, also directly advocated against the inclusion of flexibilities such as off-cycle and AC credits that may weaken the stringency of the standard. Tesla also advocated against the use of multiplier credits in the standard, while the Electric Vehicle Council and Polestar advocated there should be “minimal” concessions and bonus credits. The Carbon Market Institute did note that if credit banking is permitted, it should be approached with caution.

• Automotive-sector opposition to a stringent fuel efficiency standard continued to be led by the Federal Chamber of Automotive Industries (FCAI), which advocated for numerous exceptions that would weaken the policy’s stringency, including the need for a “cautious start” and the use of multiplier, off-cycle, and air conditioning credits. While the FCAI did not appear to state support for specific fuel efficiency target figures, unlike its October 2022 NEVs response, it continued to emphasize numerous concerns around stringent standards. The Japan Automobile Manufacturers Association (JAMA) and its members Mazda, Toyota, and Toyota-subsidiary Lexus similarly advocated for the inclusion of multiplier, off-cycle and air conditioning credits in the standard. Toyota and Lexus stated that “the FCAI current industry code provides a logical baseline” to the standard. Mazda advocated that the FCAI’s low-stringency voluntary standards “could form a strong basis for a mandatory fuel efficiency standard”. JAMA similarly “requests that an Australian FES not significantly divergent from the FCAI’s voluntary regulation”.

• Other automakers supported some elements but not others or adopted unclear positions on the policy. While Nissan supported “annual rates of reduction of other major markets, like the EU or US” year-on-year, it pushed back against an overall CO2 target equal to the US or EU and advocated to include multiplier, off-cycle and air conditioning credits in the standard. Volkswagen appeared to positively advocate against the use of air conditioning and off-cycle credits in the standard, while more negatively supporting multiplier credits for BEVs and PHEVs (although not HEVs). Ford Motor appeared to take an unclear position on the standards in their response.

• Other groups stated general support for adopting a fuel efficiency standard, while supporting an unclear level of ambition, such as the Ai Group. BP also supported the adoption of a fuel efficiency standard, however it also advocated for flexibilities that may weaken the stringency of the policy.