AUSTRALIA’S major changes to the automotive industry, including the new efficiency rules for new vehicles mandated from July 1, is placing significant pressure on retailers that will mean additional costs for consumers.

In a pre-budget submission to the federal government, the Motor Trades Association of Australia (MTAA), said small business franchisees were particularly vulnerable and many were at risk of losing their franchise because of changes such as the new vehicle efficiency standard (NVES), and the shift to agency models for dealerships.

It said that the power imbalance between offshore car manufacturers and local dealerships was worsening, leaving small businesses vulnerable. MTAA CEO Matt Hobbs said: “As global changes accelerate, small and medium-sized automotive businesses need stronger protections to navigate industry shifts.

“The MTAA is calling on the federal government to take immediate action to safeguard the future of Australia’s automotive sector before more small businesses are driven out of the market.”

It said that the government had to implement local solutions to support automotive businesses in what it describes as a “challenging market”.

It said that NVES was one of the most pressing challenges to automotive businesses.

It commissioned research from automotive intelligence firm Blueflag that projects that by 2029, without further adaptation of product offerings, the NVES will impose an industry-wide penalty of $2.8 billion. 

“This cost could be passed onto dealers and consumers,” the MTAA said.

Matt Hobbs

“Manufacturers have several options to meet these targets: introducing new low-emission vehicles and technologies, purchasing credits from EV-only manufacturers, increasing vehicle prices, reducing the volume of high-emission vehicles, or exiting the market altogether if unable to comply.

“These projections can, and should, continue to improve as car companies modernise their line-ups. 

“We have already seen brands like Toyota take decisive action by announcing they will switch their passenger line-up to hybrid engines across all their passenger cars and Ford is bringing to the Australian market a plug-in hybrid ute this year. Car companies have more work to do to keep prices competitive for consumers.”

Mr Hobbs said that the federal government cannot control global trends, such as tariffs in the US and EU. 

“However, if a car company is unable to transition to low-emission vehicles but continues to demand that dealers invest millions, only to later inform them that they can no longer deliver competitive vehicles to Australia, it leaves dealers caught in the middle,” he said.

“Dealers often don’t know what future products will look like until it’s too late to make informed investment decisions. 

“Therefore, we strongly urge the government to take proactive steps to protect local small businesses.”The MTAA is urging the federal government to take immediate steps, including:

• Strengthening the franchising code of conduct to ensure car dealers have greater power in negotiations with global manufacturers.
• Using NVES reviews, including the already scheduled review in 2026, to ensure that Australia adjusts as major countries like the US and the EU change their fuel efficiency standards.
• Implementing point of sale compliance to protect against product being forced onto dealers to meet a car company NVES targets especially at the end of the year.

The MTAA said it had long advocated for franchising reforms and is now disappointed that the recent update to the franchising code does not go far enough to protect dealers from growing market pressures and power imbalances. 

“Now is the time to address this issue once and for all,” it said.

Beyond strengthening the code and urgently reviewing the NVES, the MTAA is also calling for the federal government to:

• Introduce a mandatory body repair code of conduct to fix the asymmetric relationship between crash repairers and insurers.
• Review and amend outdated automotive taxes, including removing the luxury car tax (LCT), extending fringe benefits tax (FBT) concessions for plug-in hybrids, and implementing a nationally consistent road user charging approach.
• Establish an effective ‘end-of-life vehicle product stewardship’ scheme to better manage vehicle recycling.
• Commit funding to industry-led EV training and school pathway programs to address skills shortages.

Mr Hobbs said: “We look forward to collaborating with both sides of government to develop practical solutions that support small business, strengthen our industry, and ensure a fair and competitive automotive market.”