Fuel fight: What vehicle efficiency standards mean for you
Are you looking to buy a new car? The rising cost of fuel will undoubtedly be factored into the choice you make - a more efficient car means less money at the bowser, after all.Yet Australia has long been, as one automotive CEO put it, a dumping ground for inefficient cars because we are one of the few countries without fuel efficiency standards.
The Federal Government is about to change that, introducing laws that will require car manufacturers to supply more fuel-efficient vehicles, with targets set on the average emissions per kilometre. The government argues this will not only save you money when you fill up the car but will help meet emissions targets.
So what does the proposed law mean for you? Will the changes push up the price of the average new car by unaffordable amounts, as Opposition Leader Peter Dutton claims? Or will the laws mean a much bigger saving at the bowser in the long run?
Understanding fuel efficiency standards
Ever wonder why some cars seem to guzzle gas while others sip it? That difference boils down to fuel efficiency, and governments worldwide are setting standards to ensure that new vehicles are built to be both cleaner and more economical.
A fuel efficiency standard sets a target for the average amount of emissions (usually carbon dioxide) that a car manufacturer's new vehicles can produce per kilometre driven. This pushes companies to develop a mix of fuel-efficient cars and hybrids while still allowing them to sell some gas-powered models as long as the overall average meets the target. These targets get stricter over time, so the entire fleet of new cars on the road becomes cleaner year after year.
The United States has a well-established program, while the European Union is taking a particularly aggressive stance, aiming to phase out traditional petrol and diesel vehicles entirely by 2035.
Australia, on the other hand, has been slow on the uptake. While we have a voluntary scheme for fuel efficiency, it doesn’t make the grade because companies are not penalised for non-compliance. Consequently, we have some of the least fuel-efficient cars on the road compared to other developed nations, which means higher emissions and more money spent on fuel. A mandatory standard would not only benefit the environment but also put Aussies behind the wheel of more economical and innovative vehicles.
Australia is finally getting ready to shift gears, with the Federal Government planning to introduce a mandatory New Vehicle Efficiency Standard (NVES) in 2025. The specifics are still being ironed out, but it's a step towards cleaner air and more sustainable transportation.
Impact on car manufacturers
Fuel efficiency standards have been on the table for more than a decade. Multiple government inquiries and reports have recommended their adoption, highlighting the potential economic and environmental benefits.
In 2014, the Australian Climate Change Authority proposed a specific target: a significant reduction in emissions intensity for new vehicles by 2025. This proposal even came with economic modelling showing a net benefit for the country.
Despite these recommendations and the potential economic upside, mandatory fuel efficiency standards didn’t progress further until 2023, when extensive consultations took place. The Albanese Government has committed to introducing the NVES legislation in the first half of 2024, with a target launch date of January 1, 2025.
While most car manufacturers seem supportive of the new standards, Toyota has called for a less stringent version. It believes the current plan, aiming to reach US levels by 2028, is too strict, especially for trucks (such as HiLux, LandCruiser) that are popular with rural drivers.
While it supports the idea of cleaner cars, Toyota argues the fast pace of emissions reduction (12 percent annually) is unrealistic and might limit its ability to offer certain models.
Nonetheless, the NVES will undoubtedly challenge car manufacturers to up their game. To meet the stricter fuel efficiency standards, brands will have to stop seeing Australia as a junkyard for gas guzzlers and instead include us in the priority market for their most fuel-efficient models.
Impact on Australian consumers
The NVES won't affect the car you already own. You can continue to drive your existing vehicle without any changes. The standard focuses on new cars entering the market, aiming to make them cleaner and more efficient overall.
If you’re looking to buy or lease a new car, the NVES should ultimately result in a broader selection of fuel-efficient options. Expect more electric vehicles, hybrids and cars with improved fuel economy on dealer lots.
While some fuel-efficient technologies might add a bit to the initial purchase price of a new car, the long-term savings are significant. According to the government's analysis, we can expect a slight increase (0.3 percent) in the price of new internal combustion engine (ICE) vehicles compared to a scenario without the NVES. However, the projected fuel savings over the life of the car could reach $8500 if buying the car in 2027.
In contrast, electric vehicles (EVs) are expected to become significantly cheaper over time. The modelling predicts a price decrease of more than 2.8 percent annually for EVs. If you buy an EV in 2027, you could see savings of more than $10,000 compared to a traditional fuel-driven car. And since EVs require less maintenance than conventional ICE vehicles, this also means you’ll save on maintenance costs.
Impact on Australian environment
By pushing car manufacturers to develop cleaner technologies and encouraging fuel efficiency, the NVES is estimated to reduce greenhouse gas emissions by an impressive $14.37 billion by 2050.
Since transportation is a major contributor to emissions, NVES also offers an achievable strategy to decarbonise the transportation sector and contribute to a net-zero future by 2050.
The Australian Electric Vehicle Council - perhaps unsurprisingly - expressed approval for the move, stating it will stop the country from being a destination for inefficient cars.
Where can I find out more about the legislation?
While the public consultation period for the NVES closed on 4 March 2024, you can access the government's report for a comprehensive overview of the legislation. If you prefer a quicker and easier read, there is also a simplified Frequently Asked Questions (FAQ) section.
With the cost of fuel increasingly driving our choice of car and growing concern about the environment, the proposed legislation will be welcomed by many. We’d love to hear your thoughts on this issue and what else you think the government should be doing to support Australian motorists. Please complete our survey so we can help you drive your dollar further.
