AUSTRALIA’S new-vehicle vehicle emissions average is falling but the latest interim performance results released by the federal government regulator shows huge penalties – for one brand alone it is $25.4 million – could apply.

The penalties applying to the new vehicle efficiency standard (NVES) are calculated as the emissions value (basically the CO2 average multiplied by the number of vehicles) and then multiplied by $50. 

For example, in the interim performance results, Alfa Romeo had an interim emissions value in 2025 of 2580. This would result in a penalty for 2025 of $129,000 for the year.Mazda shows up in the latest interim performance results with the biggest liability of 508,517 interim emission values, equating to a $25.4 million penalty; followed by Nissan with 215,261 units that would have a penalty of $10.76 million – if the NVES penalty system was currently enacted. It will apply from December 31, 2027.

The good news is that OEMs have two years to clear any emission values accrued, doing this by managing its fleet (higher EV product range and less ICE models, for example) or buying emission credits from other OEMs who don’t record any emission values, such as those wholly importing BEVs.

The 2025 NVES performance period included 59 regulated entities who entered a total of 620,947 NVES covered vehicles on the RAV (register of approved vehicles) between July 1 and December 31, 2025. 

Of the 59 regulated entities, 68 per cent beat their target and over 17 million NVES units were generated.

In 2025, NVES data showed that 12 per cent of all covered vehicles were zero-emissions (the remaining 88 per cent were ICE and hybrids), with 40 entities supplying vehicles in this category. 

These results indicate the NVES is set to support more low-emissions vehicles on Australian roads, contributing to a reduction of CO2 emissions in future years.

Coalition’s energy and emissions reduction spokesman, Dan Tehan

The Coalition’s energy and emissions reduction spokesman, Dan Tehan told the Australian Financial Review: “As the industry warned, all we’re seeing is a greater reliance on one country benefiting from this scheme.

“How can it be in Australia’s interests to ultimately see what has been a very diverse car industry concentrated more and more on exports out of China?”

The chief executive of the Federal Chamber of Automotive Industries (FCAI), Tony Weber, said the interim results showed that car makers responded quickly to the task of meeting the first year of emissions reduction targets but a substantial reduction in targets each year to 2029 will present significant future challenges.

“An increase in the range of zero and low-emission vehicles available in the Australian market have supported the achievement of the first-year targets,” Mr Weber said. 

The chief executive of the Federal Chamber of Automotive Industries, Tony Weber

“To support the emissions reduction objectives, car makers have increased the range of EVs with more than 100 EV models available to consumers. 

“However, despite this increase in supply, EVs represented just 8.3 per cent of new vehicle sales in 2025, which was only a 1.1 percentage point increase on 2023.  

“Sustaining compliance as targets tighten will require materially stronger uptake of EVs than current market trends indicate.

“This is a major concern because an increase in EVs on Australian roads is critical to the achievement of the stringent Government targets which reduce each year to 2029.”

Mr Weber said that the NVES target for passenger vehicles in 2026 is 17 per cent lower than 2025 and 14 per cent lower for light commercial vehicles. 

“By 2029, the target for passenger vehicles is 59 per cent lower than 2025 and 48 per cent lower for light commercial vehicles,” he said. 

But the peak dealer body, the Australian Automotive Dealer Association (AADA) said some caution is urged in processing the data

AADA CEO James Voortman: “Something we don’t know from today’s results is how many of these vehicles have actually been registered or sold to customers.

Australian Automotive Dealer Association CEO, James Voortman

“Under the current system to demonstrate compliance, a number of these vehicles could be unsold, sitting in paddocks or even on boats on their way to Australia.”

He said that the AADA will continue to press the Government that the point of compliance must be moved from point of import to point of sale.

Cox Automotive Australia and New Zealand corporate affairs manager and analyst Mike Costello told News Corp the design of the NVES makes early “banking” of credits important.

Cox Automotive Australia and New Zealand corporate affairs manager and analyst, Mike Costello

“While a majority of brands are ahead of target today, the NVES design gets much more challenging throughout the decade in its current form. This is one reason why ‘banking’ emission credits now, when targets are quite attainable, is important,” he said.

Mr Costello added that brands with a heavier skew to EVs and hybrids are in particularly strong position, such as BYD.

“The likes of BYD from China are in a strong position, with many of these new entrants able to out-compete competitors on price already, and potentially to an even greater degree under the evolving NVES,” he said.

While NVES has helped improve supply of EVs, Mr Costello said supply and demand are not yet aligned.

“Full EV sales are growing, but relatively slowly, and we may see an increasing disconnect between the number of BEVs each brand must sell each passing year to meet its CO2 targets, and the number of BEVs that its customers opt to buy,” he said.

“This is why demand-side policies like tax-exempt leases that drive about half of all EV sales right now, are really important.”

Polestar Australia managing director, Scott Maynard

Polestar Australia managing director Scott Maynard said that the NVES was already driving change for Australians, helping deliver more zero and low-emissions options to new car buyers. 

“The fact two-thirds of manufacturers beat their emissions targets prove these regulations are achievable, despite claims to the contrary from some corners of the Australian car industry,” he said.

“As consultation regarding the next phase of NVES begins, it remains crucial that Australians don’t give in to scaremongering from legacy brands determined to maintain our nation’s status as a convenient dumping ground for old technology.  

“The next emissions reduction targets laid out by NVES, combined with incentives such as the FBT exemption for electric vehicles, remain crucial as we progress towards Australia’s long-term emissions reduction targets.” 

The National Automotive Leasing and Salary Packaging Association (NALSPA) CEO Rohan Martin said the interim report reinforced the importance of maintaining stable demand-side policy settings as the market adjusts.

National Automotive Leasing and Salary Packaging Association (NALSPA) CEO, Rohan Martin

He said that it shows that without ongoing support, including maintaining the FBT exemption, Australia will fall short on EV uptake and its climate targets.

Mr Martin said new-vehicle buyers had pre-empted much of the message of the NVES by choosing low-emission vehicles based on the cost of transport. 

He said buyers had become more attuned to calculating vehicle costs, which was beginning to show an increase in battery-electric vehicle ownership.

“The BEV take-up has become increasingly strong in the outer suburbs of capital cities – those 30-40km out of the CBD – by homeowners who are savvy about costs and have, for example, solar panels on their roofs,” he said.

“We are seeing that the average mileage of these BEV owners are much higher than ICE owners, which shows that range anxiety is no longer an issue.”

EV Council CEO Julie Delvecchio: “For too long, Australians were offered fewer low-emissions models than drivers in Europe, the UK or the United States.

“The NVES is working exactly as intended – rewarding manufacturers who bring cleaner vehicles to Australia and giving consumers more choice.

EV Council CEO, Julie Delvecchi

“This is proof that smart, coordinated policy can accelerate cleaner transport, lower running costs for families and strengthen Australia’s position in the global automotive market.”

Ms Delvecchio said the results demonstrated the success of the federal government’s reform “and exposed the scaremongering that surrounded its introduction”.

“When the NVES was legislated, critics warned of supply shortages, soaring prices and market disruption,” Ms Delvecchio said.

“Instead, the first performance report shows strong industry performance, healthy competition and a clear acceleration in cleaner vehicles coming to Australia.

“The data confirms what we said all along – clear, predictable standards drive innovation and investment. They don’t break markets, they modernise them.”

Ms Delvecchio said that with emissions coming down, cleaner and more affordable cars were arriving in Australia, choice is expanding and EV sales are growing.

“That’s exactly the momentum we need to reach five million EVs on our roads by 2035.”

The EVC also said Tesla and Polestar were to be congratulated for their public advocacy of the NVES model and their strong performance under the scheme.

“Tesla and Polestar put a stake in the ground early, arguing that Australia needed a modern efficiency standard to unlock supply and investment,” Ms Delvecchio said.

“Their leadership helped shift the national conversation from fear to facts.” 

Published by the NVES Regulator, the 2025 NVES performance results show strong engagement from vehicle suppliers in bringing cleaner and cheaper-to-run vehicles to Australia.  

Since the NVES started in July 2025, a wide range of passenger and light-commercial vehicles have entered the Australian market, from electric vehicles and hybrids through to utes and SUVs.  

The regulator said that competition in the vehicle market remained strong, with vehicles becoming cheaper in real terms last year, after adjusting for inflation.  

The 2025 NVES performance results show: 

• Around two-thirds of regulated vehicle suppliers beat their emissions target
• A net surplus of 15.9 million NVES units, marking the start of a tradable unit market  
• The average emissions for new light passenger vehicles beat the NVES target by 21 per cent 
• Around 12 per cent of vehicles covered by the NVES during the reporting period were electric and 88 per cent were internal combustion or hybrid.