A LEADING Australian Senator has uncovered a potential loophole apparently locked into the New Vehicle Efficiency Scheme (NVES) legislation which would allow a car importer to make hundreds of millions of dollars in NVES credits without selling any of the cars in Australia. 

That such potential schemes are coming to the surface so soon is not surprising because the NVES has effectively turned vehicle emissions into a tradable commodity currency with literally hundreds of millions of dollars flowing through the system.

Leader of the National Party Senator Canavan

In a recent Senate committee hearing, the leader of the National Party Senator Canavan asked Department of Transport bureaucrats: “What is stopping me from importing a bunch of battery electric vehicles, registering them, getting the credits, meeting my obligations and then just exporting them to another country the next year.

“Sure, there is absolutely a transaction cost, it would depend on how much the units are whether it is worth their while or not.

They could just import some cars, register them, get the credits for them. Bang. Done. Then move them onto another market that intended to sell them in the first place.” Senator Canavan

On his website, Senator Canavan said: “We are being scammed!

“Did you know? Foreign electric car companies get a carbon credit when they import the car into Australia, not when it is sold.We pay extra for our cars to fund these carbon credits.

Maybe this is why we see stories of EVs being mass parked at our ports?

The key here is that in forming the NVES rules, the government, against the persistent advice of dealers, made the point-of-entry the compliance point for generating credits, not the point-of-sale. 

The Australian Automotive Dealer Association has also argued that the compliance point should be point-of-sale because it fears importers will bring in too much stock of EVs to generate credits and then flood the excess stock on automatic release into dealerships.

The motor industry services team at Pitcher Partners told GoAutoNews Premium that the NVES “has rapidly transformed vehicle emissions into a tradeable compliance currency. 

In a special report on the issue, Pitcher Partners said: “Under the framework, manufacturers earn credits, some of which are staggering when the average emissions of vehicles they enter onto the Register of Approved Vehicles (RAV) fall below annual targets.”

“For example just last year, credits generated ($50 gov’t penalty potential value) were:

BYD – $314,141,200

Toyota – $144,531,250

Tesla – $110,604,650

Kia – $36,484,900

Geely – $31,011,650

“Crucially, credits are generated based on vehicles imported and entered onto the RAV, not vehicles ultimately sold to Australian consumers,” it said.

“This design feature opens up an emerging strategic question for global automotive brands: could Australia be used not just as a sales market, but as a temporary compliance market?

“Under current rules, every eligible vehicle imported and entered onto the RAV contributes to a brand’s NVES emissions calculation for that compliance year. 

“Some of the values per unit are staggeringly high; some as much as anything up to $10,000 per vehicle and when multiplied out by tens of thousands of units over a year creates eye-watering sums of money.

“For manufacturers with strong electric or low emissions portfolios, importing additional qualifying vehicles can generate surplus NVES units, which can be banked for future years or sold to higher emitting competitors. With NVES units effectively functioning as a carbon-linked financial asset, the incentive to maximise credit generation is clear.“One potential strategy is the overimportation of low or zero emissions vehicles into Australia, even where short-term local demand may not fully absorb that volume. 

“This behaviour has already been observed in public reporting, where some manufacturers have imported materially more vehicles than they sold, accumulating NVES credits in the process. While this stock may eventually be sold domestically, the compliance benefit is realised at the point of import and RAV entry, not at the point of retail sale.

“Looking ahead, one can speculate about a more sophisticated extension of this logic: importing vehicles into Australia to generate NVES credits, then redirecting unsold units to other right-hand drive markets once compliance objectives are met. 

“In theory, such an approach could allow manufacturers to arbitrage regulatory regimes across regions, using Australia’s NVES as a credit generation hub while still aligning global production with demand elsewhere.

“Whether this becomes viable at scale depends on several economic and market constraints. Vehicles entered onto the RAV must meet Australian Design Rules, and any subsequent export would need to comply with destination market regulations, logistics costs, and commercial transfer pricing rules. 

“There are also regulatory integrity risks. The NVES Regulator has signalled a strong focus on transparency and market behaviour, and future reviews may adjust the point at which emissions are counted, particularly if stockpiling or crossborder reallocation undermines policy intent.

“Nonetheless, the incentives are real. NVES credits can offset future tightening targets through to 2029, when emissions thresholds become materially more stringent. 

“For global OEMs managing portfolios across AsiaPacific, Europe and the UK, Australia’s NVES introduces a new variable into regional supply chain optimisation.

“Ultimately, the NVES was designed to accelerate cleaner vehicle supply to Australia, not to encourage regulatory arbitrage. But as with any tradable credit system, commercial ingenuity will test its boundaries. 

“How regulators respond, and whether compliance shifts from import to point-of-sale in future reviews, will determine whether Australia becomes simply a destination market for cleaner cars, or a strategic node in a far more complex global emissions game.”

Federal Chamber of Automotive Industries chief executive Tony Weber told GoAutoNews Premium: “Unfounded claims that manufacturers would import vehicles solely to generate NVES credits and then re-export them are highly theoretical and commercially unlikely, given the significant costs of logistics and limited opportunities for sale in other right-hand drive markets.

“Even under the unlikely assumption that it would be commercially viable to re-export vehicles in significant volumes, changing the point of compliance to point of sale would not prevent this course of action.

“Further, if there was any evidence of mass exporting of vehicles, a simple administrative mechanism such as adjusting NVES credits for such vehicles would address the issue without adding much complexity.”

Tony Weber, CEO of the FCAI

Meanwhile a spokesperson from the Department of Transport told GoAutoNews Premium: 

“The cost to OEMs is unlikely to make this financially viable. While hypothetically this is possible under the NVES Act, this activity would be subject to other legal obligations and a number of other costs to the OEM. These include:

• To be eligible for NVES units vehicles must be entered on the Register of Approved Vehicles (RAV) and must meet Australian design rules.
• The cost of transport of vehicles to and from Australia may be prohibitive.
• Customs processes and on shore inventory management.”

By John Mellor