Australia's New Vehicle Efficiency Standard—Frequently asked questions

What is the New Vehicle Efficiency Standard (the NVES)?

The NVES incentivises car companies to supply new cars that use less fuel per kilometre. Each vehicle manufacturer has a set average carbon dioxide (CO2) emissions target (emissions target) for the vehicles they produce, which they must meet or beat. Over time, the emissions target is lowered and in order to continue to meet or beat the target, companies must provide more choices of fuel-efficient, low or zero emissions vehicles.

The target is applied nationally on average. Suppliers can still sell any vehicle type they choose but they need to sell more fuel-efficient models to offset any less efficient models they sell. If suppliers meet or beat their target, they receive units. If they sell more polluting cars than their emissions target, they have 2 years to either trade units with a different supplier, or generate units themselves, before a penalty becomes payable. For example, if a supplier is above the target in 2025, it will be able work in 2026 and 2027 to generate credits to offset this.

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When did the NVES commence?

The NVES commenced from 1 January 2025 and applies to all new cars supplied to Australia from that date. The first NVES reporting period began on 1 July 2025. 

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Does the NVES impact my existing car?

No. The NVES only applies to new covered vehicles. You do not have to modify or change your existing car. Over time, vehicles with fuel-efficient and other more modern technology will also enter the second-hand market, improving the efficiency of Australian vehicles overall.

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Do I have to buy a new car?

No. The NVES only applies to new covered vehicles sold in Australia and drivers do not have to take any action. The NVES means greater choice of more modern and efficient vehicles when you do go to buy a new car.

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Does the NVES increase the price of cars?

No. There is no evidence to suggest that the NVES increases vehicle prices. In jurisdictions that have had a standard in place for some time (around 50 years in the case of the US and Canada), real-world evidence has not shown an increase in price for consumers in the cost of cars.

Instead, the NVES encourages suppliers to import more fuel-efficient vehicles, whether they are petrol, diesel, electric or other emerging fuel types. This saves drivers money on fuel, and ensures a greater number of more fuel-efficient, low and zero emission vehicles will become available in the second-hand vehicle market over time.

Bringing a wider range of new and more efficient petrol, diesel, hybrid and electric vehicles (EVs) to market does cost vehicle suppliers more, but people are not forced to buy a more expensive option that doesn't work for them. For those who want to spend more upfront to save over time, the NVES helps make those choices available, and ultimately increase options in the second-hand market as well.

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Can I still buy a ute or 4WD that can tow my trailer and boat?

Yes. The NVES allows suppliers to choose how they meet the emissions target. In other countries with comparable standards, 4WDs and utes are still widely available. Even though the EU market has a stringent standard in place, vehicles like the Toyota Hilux, Landcruiser’s and Ford Rangers continue to be sold. The situation is similar in the US, where Ford Rangers, Toyota 4Runners, Tacomas and Tundra utes are available today.

As technology improves, vehicles will continue to transition to more efficient, low or zero emission technology.

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Does the NVES ban vehicle models?

No. The NVES does not ban any vehicle models. It is about giving Australians more choice of fuel-efficient, low and zero emission vehicles.

The NVES allows car companies to choose how they meet the emissions target, by providing incentives to provide a fair share of their lowest emission vehicles to Australia. Large vehicles and utes remain top selling vehicles in markets with long-running standards, like the US.

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How do people in regional and remote areas benefit from the NVES?

The NVES helps deliver savings to those Australians who use more fuel. Typically, people living in regional Australia drive further than those in the metropolitan areas, and tend to buy more fuel as a result. Average new car buyers in regional and remote areas travel longer distances and can see fuel savings up to 20% higher than buyers in major cities.

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The move to more efficient vehicles is already happening. Why do we need more regulation?

The NVES is about improving the fuel efficiency of all new covered cars, whether they are petrol, diesel, electric or hybrids. Prior to the NVES, vehicle suppliers were sending their best, most efficient vehicles to other countries. On average, new passenger cars in Australia use 20% more fuel than in the US.

The NVES brings us in line with the majority of the world’s vehicle markets where 85% of all vehicles are sold, and global manufacturers will need to comply with Australia's laws. This means they need to send us cars that use the same advanced fuel-efficient technology that they send other countries.

For Australians who want to purchase an electric vehicle, but can't afford them right now, the NVES encourages car companies to introduce more affordable options. For example, while there are around 150 electric and plug-in hybrids available in the US, there are less than 100 on the market in Australia. In particular, we want to encourage manufacturers to bring more affordable electric vehicles to Australia. Right now, there are only a handful battery electric vehicles in Australia that regularly retail for under $40,000.

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Is the NVES just about electric vehicles?

No. The NVES is technology neutral. It encourages suppliers to sell more fuel-efficient vehicles, be they petrol or diesel, as well as hybrid or electric vehicles.

The cars Australians drive are a very personal choice based on where they live, what they do for work and how they like to spend their time. We acknowledge that the electric vehicle models available today, may not suit the needs of all drivers, including drivers in regional Australia. That is why the NVES encourages the supply of more fuel-efficient cars rather than simply encouraging electric vehicles.

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Who benefits more from the NVES? People in cities or in the regions?

We know that people in regional Australia drive further than those in the metropolitan areas, and use more fuel as a result. The NVES helps deliver savings to Australians who travel long distances.

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Is this a carbon tax on cars?

No. The NVES is not a ‘tax’. It is a regulatory measure to incentivise the supply of a greater number of fuel-efficient, low or zero emission vehicles to Australia.

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Does the NVES increase the price of fuel?

Improving the fuel efficiency of new cars sold in Australia does not have any impact on fuel prices. At the same time, it helps to improve Australia’s fuel security by reducing our dependence on imported fuel.

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Aren’t electric vehicles worse for the environment?

Electric and hybrid vehicles provide significant emissions reduction benefits than conventional vehicles. Electric vehicles produce zero tailpipe emissions. Plug in hybrid vehicles can also produce no tailpipe emissions when operating in all-electric mode.

The Bureau of Infrastructure and Transport Research Economics estimates that when comparing a new electric vehicle with a new petrol or diesel vehicle, the additional carbon emissions impact of manufacturing a new electric vehicle is offset by the reduced in-service emissions compared to an internal combustion engine vehicle after one year, if the vehicle is charged entirely from renewably-sourced electricity (e.g. home solar) and two years if charged from the grid (using the current mix of electricity generation resources).

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How does the NVES impact on farmers and food production?

The NVES only applies to new covered vehicles in Australia. Agricultural equipment is not in scope of the NVES.

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What about towing and range concerns?

The NVES supports the ongoing supply of a wide range of vehicles, including utes and 4-wheel drives, by applying an average emissions ceiling on a vehicle manufacturer (or domestic supplier), which takes account of the mix of vehicles they sell.

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Is there enough charging infrastructure to support more electric vehicles?

The deployment of fast and ultrafast charging sites around the country is keeping pace with electric vehicle sales, with both roughly doubling between 2022 and 2023. As at March 2024, there were over 900 fast charging sites across the country.

The Commonwealth, along with State and Territory governments, have collectively committed to co-fund around 1,600 fast charging sites. Over 600 have now been delivered, with the remaining 1,000 to be delivered over the next 1-3 years.

As part of its Driving the Nation Fund, the government has partnered with the NRMA to deliver a nationwide network of 117 fast charging sites along Australia’s highways, roughly every 150kms, to make sure Australia’s massive distances are no barrier to countrywide electric vehicle journeys.

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Are electric vehicle batteries safe?

Overseas evidence indicates that electric vehicles and electric vehicle batteries are less likely to catch fire than petrol or diesel vehicles. But that does not mean the government is ignoring battery safety or the need for supporting Australia’s emergency services in responding to any electric vehicle related incidents.

In May 2024, the government released its National Battery Strategy which outlines the path forward for a better safety framework for lithium-ion batteries.

The government is funding an initiative to support emergency service workers and first responders through the development of world-leading guidance, electric vehicle road rescue demonstrations, and electric vehicle incident training. Learn more about the initiative.

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Is the NVES about fuel quality or other noxious emissions?

The Australian government is introducing new fuel quality and noxious emission standards to save $6.1 billion in health and fuel costs by 2040. These initiatives will also impact light vehicles, but are separate to the NVES.

From December 2025, this will:

  • reduce the amount of sulphur in all grades of petrol.
  • reduce the amount of aromatic hydrocarbons in 95 RON (research octane number) petrol. All petrol vehicles will be able to use the new 95 RON petrol.
  • lower the harmful effects of noxious vehicle emissions on public health and protect Australians from strokes, cancers and respiratory illnesses.

Find out more about regulating Australian fuel quality.

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What about impacts on the grid/blackouts?

The Australian Energy Market Operator’s Integrated System Plan ensures that the electricity grid is ready for expected increases in demand, including increases in electric vehicle charging demand.

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How much abatement is the Government seeking to achieve through the NVES?

The Australian Government has listened to stakeholder feedback and has implemented a standard that will achieve significant abatement and benefit Australians. This includes more than $95 billion in fuel savings, $13.85 billion in maintenance savings, and around $5 billion in health benefits to 2050 from cleaner air and close to 321 million tonnes of CO2 abatement by 2050.

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