New Vehicle Efficiency Standard Takes Effect: Rules Criticized As It Could Raise Car Prices

As Australia's new vehicle efficiency rules took effect on New Year's Day, the government faced criticism for potentially driving up car prices, with a senator labeling the measures as a new tax.

What is the New Vehicle Efficiency Standard (NVES)?

Under the Albanese government's New Vehicle Efficiency Standard (NVES), pollution benchmarks will be set for new vehicles, with manufacturers facing a tax of AU$100 for every gram of CO2 per kilometer their vehicles exceed the limit, Sky News reported.

The NVES is part of Labor's push to accelerate the adoption of electric vehicles to meet Australia's Paris Agreement targets, but the federal opposition warns that the new tax will increase car prices.

The new emissions standards will apply to the average emissions of all cars sold by a manufacturer, meaning the sale of high-emission vehicles can be offset by enough low-emission vehicles.

The Albanese government claims the NVES will help reduce Australia's carbon emissions by around 321 million tonnes by 2050, as the transport sector accounts for 21% of emissions, with over 12% coming from cars.

Labor also argues that the new standards will reduce pollution and improve air quality by encouraging the growth of more environmentally friendly vehicles.

Climate Change and Energy Minister Chris Bowen said the changes meant "more choices of better, cheaper to run cars for Australians."

"It will save around $95bn in running costs between now and 2050," Bowen said.

Opposition criticism of new rules

The Coalition, however, predicts that the penalties will lead to higher prices for everyday vehicles. The party has not specified whether it would repeal the NVES if elected, though it supports a national net-zero emissions target by 2050.

National Party leader David Littleproud slammed the rule, stating that Australians have been "sleepwalked into paying a new tax," News.com reported.

He said the cost of a Ford Everest will rise by AU$6,000 this year and could increase by up to AU$18,000 as the NVES phases in. He argues this will limit consumer options, particularly for regional Australians, who may struggle to access the vehicles they need.

The cost of a Toyota Rav4 is expected to increase by AU$3,000 in 2025 and by AU$11,000 over the phase-in period.

"That's a huge hit for any family looking to upgrade its SUV," Liberal senator Jono Duniam said. "That will just not be absorbed and copped on the chin by manufacturers. The cost of compliance will inevitably be passed on by manufacturers and dealers to the consumer."

While the standard doesn't dictate how automakers must meet their CO2 targets, it will require them to sell more vehicles with lower emissions ratings. This means that while fuel-thirsty vehicles can still be sold, they must be balanced by enough low-emissions models to keep a company under its CO2 cap.

Littleproud emphasizes that the focus should be on affordable, accessible cars rather than imposing taxes on vehicles.