Australia is set to undergo one of the most significant automotive reforms in a century, as the federal government’s New Vehicle Efficiency Standard (NVES) officially comes into force on July 1.

The new regime introduces a credit and debit system for vehicle emissions, targeting a progressive reduction in carbon output across the nation’s light vehicle fleet.

Under the NVES, manufacturers will now be directly accountable for the emissions performance of their vehicles sold in Australia. Those supplying low-emission models, including electric vehicles (EVs) and plug-in hybrids (PHEVs), will earn credits. Conversely, companies exceeding strict carbon dioxide (CO₂) thresholds will accumulate debits, potentially incurring financial penalties or needing to trade for compliance.

Tony Weber, CEO of the Federal Chamber of Automotive Industries (FCAI), highlighted the industry’s substantial preparatory work, noting significant investments in vehicle supply chains, regulatory systems, and market readiness. “There are now more than 100 EV models and over 50 plug-in hybrids available to Australian consumers,” Weber stated.

Despite this progress, uptake remains sluggish. EVs account for just 7 per cent of new vehicle sales – a figure far below what’s needed to meet NVES benchmarks, which tighten annually through to 2029. “This target trajectory is ambitious, and we are already lagging,” Weber warned.

A key concern remains consumer demand. The FCAI cites barriers such as high upfront costs, limited charging infrastructure, and fluctuating electricity prices as deterrents for wider adoption. “The NVES can’t succeed without coordinated government support to improve affordability and accessibility for everyday Australians,” Weber stressed.

The NVES is modeled on similar standards in the US and Europe, aiming to encourage cleaner technologies while giving manufacturers flexibility in how they meet targets – through internal fleet planning or trading credits. The ultimate goal is to cut CO₂ emissions, reduce fuel costs for consumers, and stimulate the zero-emissions vehicle market.

As the policy kicks off, attention now turns to how federal and state governments will support the transition – and whether consumers will follow.