In the inaugural year of Australia’s New Vehicle Efficiency Standard (NVES), a significant majority of car companies have successfully met the new emissions targets, largely driven by the increasing adoption of electric and hybrid vehicles. However, a notable portion of manufacturers, including some of the nation’s best-selling brands, fell short and are now facing the prospect of substantial financial penalties.
NVES Performance Report Reveals Industry Trends
The first performance report from the New Vehicle Efficiency Standard Regulator, covering new-vehicle emissions from July to December 2025, indicates that two out of every three car companies operating in Australia have complied with the recently introduced pollution standards. The NVES, implemented in January 2025, aims to curb transport pollution by setting specific emissions targets for passenger cars and light goods vehicles entering the Australian market.
Across the industry, both vehicle categories demonstrated performance exceeding the set requirements. Passenger cars recorded an average emission of 114 grams of carbon per kilometre, comfortably below the target of 144 grams. Similarly, light goods vehicles averaged 199 grams of carbon per kilometre, against a goal of 214 grams. This overall positive trend highlights the industry’s capacity to adapt to stricter environmental regulations.
BYD Leads in Credit Generation, While Others Accumulate Liabilities
Forty out of 59 car companies participating in the scheme either met or surpassed their emissions targets, subsequently earning credits. Chinese electric vehicle manufacturer BYD emerged as a significant performer, accumulating over six million credits. Other notable companies that amassed more than two million credits each include Toyota and Tesla, underscoring their strong positions in the market for lower-emission vehicles.
Conversely, 19 firms did not meet the pollution standards and could be liable for significant fines. Among the brands that failed to meet the emission targets are popular manufacturers such as Mazda, Hyundai, Honda, General Motors, Nissan, and Subaru. Luxury marques including Porsche, Ferrari, Maserati, and Rolls-Royce also found themselves on the list of non-compliant companies.
The report detailed the liabilities incurred by some of these firms. Mazda faces the largest potential penalty, equivalent to $25.4 million, followed by Nissan with a liability of $10.7 million, and Subaru with $6.9 million. These penalties are mandated to be paid within three years, although manufacturers have options to mitigate these sums.
Pathways for Compliance and Future Targets
Companies can reduce their financial obligations by purchasing credits from other manufacturers that have exceeded their targets or by actively lowering their fleet’s overall emissions during the three-year compliance period. This mechanism is designed to encourage a market-based approach to emissions reduction, incentivising companies to invest in cleaner technologies.
Julie Delvecchio, chief executive of the Electric Vehicle Council, commented on the results, stating that they demonstrate automakers’ capability to reduce pollution. She expressed that the outcomes should provide policymakers with the confidence to further strengthen future emissions targets. “Emissions are coming down, cleaner and more affordable cars are arriving in Australia, choice is expanding and EV sales are growing,” Delvecchio said. “That’s exactly the momentum we need to reach five million EVs on our roads by 2035.”
The NVES is structured with escalating emission reduction targets that will increase annually. For passenger vehicles, the target will rise to 117 grams of carbon per kilometre in 2026, while light goods vehicles will face a target of 180 grams.
Demand for Electric Vehicles Crucial for Scheme’s Success
Tony Weber, chief executive of the Federal Chamber of Automotive Industries, acknowledged that more vehicle brands are introducing low-emission options to the Australian market. However, he stressed that a concurrent rise in electric vehicle (EV) sales is essential to match this increased supply and ensure the long-term viability of the scheme.
“The key to long-term success of the (scheme) relies on increased demand for EVs,” Weber stated. “At the moment, demand for EVs remains subdued and this is a major concern and disappointment for car makers.”
Data from 2025 shows a modest increase in electric vehicle sales, which accounted for 8.3 per cent of new car sales, up from 7.4 per cent in the previous year. Hybrid and plug-in hybrid vehicles also saw growing popularity, collectively making up 21 per cent of the market. Despite these increases, the uptake of fully electric vehicles remains a critical factor for the continued success of Australia’s emissions reduction efforts in the automotive sector.