AS AUSTRALIA’S New Vehicle Efficiency Standard (NVES) moves from policy debate to a measurable scoreboard, it has been revealed that Chinese car makers have already generated what could turn out to be a price advantage of between $13,000 and $17,000 for every car they import.
Even in the first and least stringent NVES period (the initial July 1 to December 31 2025 window before the steep tightening begins), the per unit credit values being generated by Chinese OEMs are enormous; highlighting just how far “behind target” some of the fleets from legacy OEMs already sit.
On the NVES regulator’s compliance table:
BYD shows credits per unit valued at about $16,205 at a $100 unit value (about $8,103 at $50 and $4,051 at $25)
Chongqing Changan (about $17,112 at $100),
XPeng (about $16,600 at $100)
Zeekr (about $17,261 at $100)
Geely (about $13,396 at $100).
The commercial takeaway is that Chinese OEMs are not just accumulating large volumes of units, they are doing it with exceptionally strong “credits per unit” economics. This underpins a meaningful head start in the emerging unit trading market as the headline targets tighten sharply from 2026 onward no matter the eventual value of such credits in dollar terms.
What is not generally appreciated is that from 2026, the NVES headline limits fall sharply versus the 2025 baseline, with Type 1 dropping 17.0% (141 to 117 g/km) and Type 2 dropping 14.3% (210 to 180 g/km), before tightening further again through 2027, 2028, and 2029.
This is the particularly nasty aspect of NVES because any shortfall is not confined to a few “noncompliant models”; it is multiplied across the OEM’s entire volume, as the scheme applies a fleet-average obligation across all vehicles entered onto the Register of Approved Vehicles (RAV), creating a powerful multiplier effect on total exposure.Conversely, the first and most lenient NVES period still shows a cohort of traditional and prestige OEMs already accruing liabilities, which is a clear warning sign ahead of the much steeper tightening from 2026.
The “penalty per unit” economics highlight how quickly the exposure scales.
Volume brands like Mazda (about $661 per unit at the $50 rate), Nissan (about $776 per unit at $50) and Subaru (about $529 per unit at $50) are already carrying meaningful penalties per unit. At the same time several low-volume prestige marques have posted extreme per-unit outcomes such as Ferrari (about $7,308 per unit at $50) and Aston Martin (about $6,608 per unit at $50), reflecting how far above target these fleets sit even before the targets tighten further.
So, while the first interim performance results confirm the mechanism is working, they also expose a widening structural gap between brands that are already long on compliance units and those heading into a tightening pathway with limited room to move.
The main points within the report are:
The first NVES interim results (July 1 to December 31 2025) show most regulated entities beat their targets and a large pool of tradable units has been created
Chinese OEMs have entered the scheme structurally long on units, giving them a commercial head start as targets tighten and unit trading becomes a real market mechanism
Consumers will feel the biggest impact. As compliance costs rise, buyers are likely to pay more for the vehicles they want, while discounts will be used to move the vehicles they do not want.
Dealers may see a partial upside through higher transaction prices in both new and used cars, lifting gross profit in dollar terms, but only if inventory risk is managed and slow-moving compliant stock is not forced into the channel.
The NVES regulator’s first performance period included 59 regulated entities and 620,947 covered vehicles entered on the RAV.
Around 68 per cent beat their target and over 17 million NVES units were generated. Reporting also highlights 12 per cent of covered vehicles were zero-emissions during the period.
The results, however, should not be read as a comfort blanket. This first period was the easiest part of the pathway. Headline limits tighten sharply from 2026 and the economics compound quickly for high-volume suppliers.
Steve Bragg
The good news: most brands were compliant in 2H 2025.
A large surplus pool validates the unit trading scheme and turns NVES into a commercial currency that can be banked and traded.
The bad news: major legacy brands are already noncompliant. The interim results show meaningful base-case exposures at $50 per unit for Mazda with 508,517 liability units (about $25.4m), Nissan with 215,261 (about $10.76m), and Subaru with 139,635 (about $6.98m). Hyundai is also in deficit with 84,563 units (about $4.23m).
These are interim positions, and the regime gives suppliers time (two years) to manage their exposure through unit extinguishment and future-year performance.
There is also a time limit on NVES units; they expire. This will ultimately lead to the brands with a surplus in units to discount them when trading with non-compliant brands.
We believe that this will eventually show the credits value settling around the $25 mark, half of the $50 fine value.
The structural head start: Chinese OEMs are already long on units, and so are Toyota and Tesla.
Several Chinese OEMs entered NVES with material unit surpluses, including BYD’s two entities, BYD Auto Co. Ltd with 4,234,294 units and BYD Auto Industry Company Limited with 2,048,530 units.
Other Chinese manufacturers also show significant surplus positions, including Zhejiang Geely Automobile Co., Ltd. with 620,233 units, Chery Automobile Co., Ltd with 438,633 units, and Great Wall Motor Company Limited with 405,198 units.
The unit leaders are not only Chinese brands. Toyota accrued 2,890,625 units and Tesla accrued 2,212,093 units in the same period.
Being structurally long gives OEMs options. Units can be banked for future years, traded to offset deficits, or used as a strategic lever as competitors absorb higher compliance costs.2026 is the inflection point: headline limits tighten hard and many 2025 positions flip.
The regulator’s published commentary notes that the 2026 target for passenger vehicles is 17 per cent lower than 2025, and 14 per cent lower for light commercial vehicles. Headline limits tighten from 141 to 117 g/km for Type 1 passenger vehicles and from 210 to 180 g/km for Type 2 LCVs.
A simple scenario illustrates the risk.
If brands sell broadly the same mix and volumes as they did in the second half of 2025, many will flip from being unit generators to being deficit buyers under 2026 headline limits.
For example, Ford generated 426,261 units in the first period (2025), yet if Ford holds the same emissions intensity model mix, this will translate into significant notional 2026 penalty values.
Mitsubishi has a similar situation. It generated 82,072 units in 2025, yet the same intensity mix translates into significant notional 2026 penalty values. This theme plays out for most non-EV brands from 2026 onwards and the situation only gets worse.
The pathway to compliance therefore becomes less about incremental improvements and more about portfolio decisions, allocation battles, and unit market participation. That is where Chinese brands, and other structural unit leaders, have a head start.
Dealers: the compliance stock trap, with consumers stuck in the middle
Dealers need to be vigilant about how this plays out at retail. Compliance is recognised at the point of entry onto the RAV, not at the point of sale, which increases the risk that OEMs push compliant stock into the channel regardless of demand.
Dealer-focused NVES analysis warns this can force retailers into higher floorplan costs and margin erosion from discounting to clear stock.
This risk is amplified by demand-side reality. Industry commentary on the interim results notes that EVs represented just 8.3 per cent of new vehicle sales in 2025, and sustaining compliance as targets tighten will require materially stronger uptake than current market trends indicate.
If supply is pushed ahead of demand, compliant EV inventory can build up and age on dealer lots, followed by discounting to clear stock, dragging used values and profitability with it.
There is a potential upside for dealers, if inventory discipline holds that is often overlooked.
NVES is likely to push up the price of higher-emissions vehicles that customers still want to buy because compliance costs must be absorbed somewhere. Higher transaction prices in new vehicles also tend to lift the pricing umbrella for used cars.
That can translate into higher gross profit in dollar terms on both new and used vehicles, even if margin percentages compress. The key is inventory discipline, and avoiding being forced into slow-moving compliant stock.
Bottom line: The 2025 interim results show the scheme is functioning, with most entities compliant and a large pool of units created.
They also show a structural advantage for Chinese brands, and other unit leaders such as Toyota and Tesla.
With headline limits tightening sharply from 2026, the risk is that many suppliers will become structurally short if they do not react, and consumers will ultimately feel the biggest impact through price signals, paying more for the vehicles they want and receiving discounts on those they do not.
Steven Bragg is lead partner in the motor industry service team at Pitcher Partners
By Steve Bragg on 24th February 2026 Comment, Management Workshop, News NVES, Regulations
COMMENTARY
AS AUSTRALIA’S New Vehicle Efficiency Standard (NVES) moves from policy debate to a measurable scoreboard, it has been revealed that Chinese car makers have already generated what could turn out to be a price advantage of between $13,000 and $17,000 for every car they import.
Even in the first and least stringent NVES period (the initial July 1 to December 31 2025 window before the steep tightening begins), the per unit credit values being generated by Chinese OEMs are enormous; highlighting just how far “behind target” some of the fleets from legacy OEMs already sit.
On the NVES regulator’s compliance table:
The commercial takeaway is that Chinese OEMs are not just accumulating large volumes of units, they are doing it with exceptionally strong “credits per unit” economics. This underpins a meaningful head start in the emerging unit trading market as the headline targets tighten sharply from 2026 onward no matter the eventual value of such credits in dollar terms.
What is not generally appreciated is that from 2026, the NVES headline limits fall sharply versus the 2025 baseline, with Type 1 dropping 17.0% (141 to 117 g/km) and Type 2 dropping 14.3% (210 to 180 g/km), before tightening further again through 2027, 2028, and 2029.
This is the particularly nasty aspect of NVES because any shortfall is not confined to a few “noncompliant models”; it is multiplied across the OEM’s entire volume, as the scheme applies a fleet-average obligation across all vehicles entered onto the Register of Approved Vehicles (RAV), creating a powerful multiplier effect on total exposure.
Conversely, the first and most lenient NVES period still shows a cohort of traditional and prestige OEMs already accruing liabilities, which is a clear warning sign ahead of the much steeper tightening from 2026.
The “penalty per unit” economics highlight how quickly the exposure scales.
Volume brands like Mazda (about $661 per unit at the $50 rate), Nissan (about $776 per unit at $50) and Subaru (about $529 per unit at $50) are already carrying meaningful penalties per unit. At the same time several low-volume prestige marques have posted extreme per-unit outcomes such as Ferrari (about $7,308 per unit at $50) and Aston Martin (about $6,608 per unit at $50), reflecting how far above target these fleets sit even before the targets tighten further.
So, while the first interim performance results confirm the mechanism is working, they also expose a widening structural gap between brands that are already long on compliance units and those heading into a tightening pathway with limited room to move.
The main points within the report are:
The NVES regulator’s first performance period included 59 regulated entities and 620,947 covered vehicles entered on the RAV.
Around 68 per cent beat their target and over 17 million NVES units were generated. Reporting also highlights 12 per cent of covered vehicles were zero-emissions during the period.
The results, however, should not be read as a comfort blanket. This first period was the easiest part of the pathway. Headline limits tighten sharply from 2026 and the economics compound quickly for high-volume suppliers.
Steve Bragg
The good news: most brands were compliant in 2H 2025.
A large surplus pool validates the unit trading scheme and turns NVES into a commercial currency that can be banked and traded.
The bad news: major legacy brands are already noncompliant. The interim results show meaningful base-case exposures at $50 per unit for Mazda with 508,517 liability units (about $25.4m), Nissan with 215,261 (about $10.76m), and Subaru with 139,635 (about $6.98m). Hyundai is also in deficit with 84,563 units (about $4.23m).
These are interim positions, and the regime gives suppliers time (two years) to manage their exposure through unit extinguishment and future-year performance.
There is also a time limit on NVES units; they expire. This will ultimately lead to the brands with a surplus in units to discount them when trading with non-compliant brands.
We believe that this will eventually show the credits value settling around the $25 mark, half of the $50 fine value.
The structural head start: Chinese OEMs are already long on units, and so are Toyota and Tesla.
Several Chinese OEMs entered NVES with material unit surpluses, including BYD’s two entities, BYD Auto Co. Ltd with 4,234,294 units and BYD Auto Industry Company Limited with 2,048,530 units.
Other Chinese manufacturers also show significant surplus positions, including Zhejiang Geely Automobile Co., Ltd. with 620,233 units, Chery Automobile Co., Ltd with 438,633 units, and Great Wall Motor Company Limited with 405,198 units.
The unit leaders are not only Chinese brands. Toyota accrued 2,890,625 units and Tesla accrued 2,212,093 units in the same period.
Being structurally long gives OEMs options. Units can be banked for future years, traded to offset deficits, or used as a strategic lever as competitors absorb higher compliance costs.
2026 is the inflection point: headline limits tighten hard and many 2025 positions flip.
The regulator’s published commentary notes that the 2026 target for passenger vehicles is 17 per cent lower than 2025, and 14 per cent lower for light commercial vehicles. Headline limits tighten from 141 to 117 g/km for Type 1 passenger vehicles and from 210 to 180 g/km for Type 2 LCVs.
A simple scenario illustrates the risk.
If brands sell broadly the same mix and volumes as they did in the second half of 2025, many will flip from being unit generators to being deficit buyers under 2026 headline limits.
For example, Ford generated 426,261 units in the first period (2025), yet if Ford holds the same emissions intensity model mix, this will translate into significant notional 2026 penalty values.
Mitsubishi has a similar situation. It generated 82,072 units in 2025, yet the same intensity mix translates into significant notional 2026 penalty values. This theme plays out for most non-EV brands from 2026 onwards and the situation only gets worse.
The pathway to compliance therefore becomes less about incremental improvements and more about portfolio decisions, allocation battles, and unit market participation. That is where Chinese brands, and other structural unit leaders, have a head start.
Dealers: the compliance stock trap, with consumers stuck in the middle
Dealers need to be vigilant about how this plays out at retail. Compliance is recognised at the point of entry onto the RAV, not at the point of sale, which increases the risk that OEMs push compliant stock into the channel regardless of demand.
Dealer-focused NVES analysis warns this can force retailers into higher floorplan costs and margin erosion from discounting to clear stock.
This risk is amplified by demand-side reality. Industry commentary on the interim results notes that EVs represented just 8.3 per cent of new vehicle sales in 2025, and sustaining compliance as targets tighten will require materially stronger uptake than current market trends indicate.
If supply is pushed ahead of demand, compliant EV inventory can build up and age on dealer lots, followed by discounting to clear stock, dragging used values and profitability with it.
There is a potential upside for dealers, if inventory discipline holds that is often overlooked.
NVES is likely to push up the price of higher-emissions vehicles that customers still want to buy because compliance costs must be absorbed somewhere. Higher transaction prices in new vehicles also tend to lift the pricing umbrella for used cars.
That can translate into higher gross profit in dollar terms on both new and used vehicles, even if margin percentages compress. The key is inventory discipline, and avoiding being forced into slow-moving compliant stock.
Bottom line: The 2025 interim results show the scheme is functioning, with most entities compliant and a large pool of units created.
They also show a structural advantage for Chinese brands, and other unit leaders such as Toyota and Tesla.
With headline limits tightening sharply from 2026, the risk is that many suppliers will become structurally short if they do not react, and consumers will ultimately feel the biggest impact through price signals, paying more for the vehicles they want and receiving discounts on those they do not.
Steven Bragg is lead partner in the motor industry service team at Pitcher Partners
*at a $100 unit value
By Neil Dowling
Road to Recovery Podcast Series
US support to unblock oil tankers
Oil price relief as $28b US reinsurance plan covers ships through Iranian waters
26 days of fuel left
Middle East conflict trigger fears Australia may run dry as stocks are below required levels
Work-from-home to sting auto sector
VACC hits out at “slap in face” from two-day home workplace plan by Vic govt