Australian Vehicle Efficiency Standards Trigger Potential Fines for Major Carmakers
Several prominent automotive brands, including Mazda, Nissan, and Subaru, are confronting the possibility of substantial financial penalties after failing to comply with Australia's newly implemented climate targets for new vehicles. The initial six-month data since the Albanese government introduced the vehicle efficiency standard reveals that 40 companies, representing 68% of the total, successfully exceeded their initial targets for average emissions efficiency in new car sales.
Winners and Losers in Emissions Compliance
Companies such as BYD, Toyota, Tesla, Kia, Ford, Volkswagen, BMW, and Polestar were found to have sold vehicles that, on average across their fleets, emitted less carbon dioxide per kilometer than required by the regulations. However, 19 companies missed their targets and now face the prospect of purchasing credits or paying penalties if they do not significantly improve their performance over the next two and a half years.
Mazda has accumulated a potential liability of approximately $25 million, Nissan faces more than $10 million, and Subaru about $7 million. These liabilities can either increase or decrease and are scheduled to become due in 2029. Other notable manufacturers that failed to meet their initial targets include Hyundai, General Motors, Honda, Porsche, Ferrari, and Jaguar.
Government and Industry Responses
Federal Transport Minister Catherine King highlighted that the average pollution for new light passenger vehicles across the industry outperformed the target by 21%. "These results make it clear the vehicle efficiency standard supports both lower emissions and consumer affordability," she stated. Despite this progress, electric vehicles constituted only 12% of new sales in the latter half of last year, marking an increase but falling significantly short of the levels required for the scheme to fulfill its projected role in meeting national climate objectives. The remaining 88% of sales comprised petrol and hybrid vehicles.
Globally, about 25% of new cars sold last year were electric, yet Australia has consistently lagged behind other developed and many developing nations in EV adoption. China remains the world's largest EV market, accounting for over 60% of global EV sales according to Our World in Data.
Mechanics of the Efficiency Standard
The Australian vehicle efficiency standard mandates that car manufacturers supply new vehicles meeting an average per-kilometer emissions target, which will be progressively reduced to encourage cleaner vehicles. Importantly, no cars are banned; more polluting models can still be sold if offset by electric or low-emissions vehicles. Companies that surpass their targets earn credits that can be sold to those missing their targets to offset additional pollution.
In the first six months, companies earned 17.2 million credits for exceeding targets, while those missing targets faced a combined potential liability of 1.3 million tonnes, resulting in a net surplus of 15.9 million credits available for future years.
Industry Perspectives and Future Outlook
The Electric Vehicle Council hailed the results as a success, with Chief Executive Julie Delvecchio noting that critics had previously warned of "supply shortages, soaring prices, and market disruption" when the standard was legislated. "The reality was emissions were coming down, the choice of new cars was expanding, and EV sales were growing," she said. "The data confirms what we said all along: clear, predictable standards drive innovation and investment. They don't break markets, they modernise them."
Delvecchio argued that the results should prompt a strengthening of targets in an upcoming review, warning that failure to do so could slow momentum in clean car adoption as companies accumulate excess credits for beating insufficiently rigorous targets. Meanwhile, the National Automotive Leasing and Salary Packaging Association expressed encouragement but cautioned that Australia might fall short on EV uptake and climate goals if a contentious fringe benefits tax exemption on clean cars is removed.
