As Australians, we’ve always had a love affair with our cars. They’re not just a means of transportation; they’re a symbol of freedom, a way to explore the vast landscapes of our beautiful country. But for those of you in the market for a new vehicle, there’s a significant change on the horizon that could hit your wallet hard. The New Vehicle Efficiency Standard (NVES) has rolled into effect, and it’s set to shake up the auto industry, potentially driving up prices for some of the nation’s most beloved vehicles.
The NVES, which came into force on January 1, is the government’s latest effort to reduce carbon emissions by incentivising car manufacturers to produce vehicles that consume less fuel per kilometre. The goal is noble, but the execution may have unintended consequences for consumers. Under this new regulation, car companies are now bound by a set CO2 target for the passenger and light commercial vehicles they produce, which must be met or exceeded annually.
Experts are sounding the alarm, warning that the cost of compliance could be passed down to car buyers. Paul Maric from CarExpert.com.au has voiced concerns that consumers will be the ones shouldering the burden of these new standards. He points out that the push towards electric vehicles (EVs) by the government may not be a seamless transition for everyone, especially when EVs can’t always match the performance and utility of their petrol and diesel counterparts.
Toyota, a brand synonymous with rugged reliability and the go-to choice for many Australians, is expected to feel the impact of the NVES acutely. The company’s high-volume sellers, such as the HiLux, Prado, and Land Cruiser, are now facing price hikes as they incorporate new technologies like AdBlue, an additive designed to reduce CO2 emissions. The result? A new Prado could cost buyers an additional $15,000 to $20,000 compared to the previous generation.
But Toyota isn’t alone in this. Other manufacturers like Ford, whose Ranger topped the sales charts in 2023, and Isuzu, known for the D-MAX, are also navigating these regulatory waters. Both companies have hinted that price increases are on the table as they grapple with the financial and engineering challenges posed by the NVES.
The car brands themselves have had mixed reactions to the NVES. Toyota Australia’s President and CEO, Matthew Callachor, acknowledged the policy as a positive step but also as a significant shift for the industry. Ford’s Mustang product and marketing manager, George Thomas, expressed confidence in adapting to the new standards, while Isuzu warned of the potential negative impact on Australian consumers.
So, how does the NVES work? Although the standards started on January 1, the government won’t begin tracking emissions until July 1. The law applies to all new passenger and light commercial cars supplied to Australia from the start of the year. Manufacturers will need to balance their fleets by selling more fuel-efficient models to offset any less efficient ones. If they exceed their CO2 targets, they’ll have two years to trade credits with other suppliers or generate their own before facing penalties.
Interestingly, the government is optimistic that the NVES won’t lead to higher car prices, citing the absence of such trends in other jurisdictions with similar standards. However, the real-world impact remains to be seen.
There’s a silver lining, though. The credit system within the NVES could potentially lower prices for other vehicles. Companies like Tesla, which produce electric vehicles and are likely to be below their CO2 targets, could benefit by selling credits to manufacturers that exceed their limits. This could lead to price reductions for Tesla vehicles, offering a potential bargain for those looking to go electric.
What are your thoughts on the NVES and its potential impact on car prices? Are you considering an electric vehicle, or will you stick with traditional petrol or diesel? Share your views and experiences in the comments below, and let’s navigate these changes together.
Also read: Australians’ cars are typically larger, heavier and less efficient than in Europe – here’s why
