What does the New Vehicle Efficiency Standard Act mean for fleet supply?

The New Vehicle Efficiency Standard Act (NVES 2024) comes into effect in just two months’ time. Lincoln DeKalb, Group Product Development Manager, Future Mobility for SG Fleet, discusses what this means for those managing vehicle fleets. 

According to a 2024 Lowy Institute poll, seven in ten Australians (72%) support committing to a more ambitious national emissions reduction target. Although that figure has fallen five points since the Institute’s 2022 poll on the same subject, there remains overwhelming support for Australia to reduce its carbon emissions. 

The Federal Government is a signatory to the Paris Agreement and has set itself the goal of achieving net zero emissions by 2050. As transport is one of the largest sources of emissions, the New Vehicle Efficiency Standard Act 2024 is an obvious measure in the pursuit of this objective, and it has received a positive public response. 

The Act, which comes into effect on 1 January 2025, applies caps on CO₂ emissions on new vehicles sold in Australia, and is part of a wider new vehicle sales strategy to support the Government’s emissions reduction targets. Although it has passed through both houses of Federal Parliament, its details are still being finalised ahead of its implementation. Even though vehicle manufacturers will have until 1 July 2025 to avoid any potential penalties, this lack of detail has caused some degree of uncertainty in the industry. 

“Obligations to comply with the NVES Act rest with vehicle manufacturers, not with the purchaser or user of the vehicle,” he says. “The new Standard is about imposing emissions caps on manufacturers and dis-incentivising the production of fuel-inefficient vehicles. In other words, it is the Original Equipment Manufacturers (OEMs) that are regulated by the Act and not the consumer.” 

“Combined with the Electric Vehicle FBT exemption, the Government will basically have two different policy levers at its disposal. The FBT exemption targets the demand side by incentivising consumers financially to opt for fuel-efficient vehicles, including EVs,” Lincoln notes.  

“To be able to cater to this growing demand, the Government needs to support the supply side of the market, and that is what the NVES Act is all about,” he continues. “The objective is to increase the number of fuel-efficient vehicles available in the Australian market. The more makes and models we have, the more choice for consumers and, according to the Federal Government’s modelling, the lower the cost. This in turn will lead to an increase in the number of fuel-efficient vehicles on our roads and support the Government’s efforts to meet its Paris targets.” 

Lincoln says the new Standard is also likely to promote investment in the ‘green economy’, as well as promote Australia’s energy self-sufficiency and reduce its reliance on international supply chains. 

“In addition to the pollution reduction impact, there are a number of secondary economic positives resulting from the implementation of the Act. Job creation in the new energy sector – centred on battery manufacturing, solar panels, and renewable energy generally – and support for the Made in Australia policy framework are some examples. 

“There clearly is a strategy to move towards a reduced reliance on global supply chains, and in particular supply of petrol and traditional fuels,” Lincoln observes. “We simply don’t produce enough oil to manufacture sufficient fuel to power all the vehicles on Australia’s roads. We have to import fuel to keep them moving. So reducing fuel consumption by promoting more efficient engines effectively makes us more sustainable and resilient as a nation.” 

Lincoln points out that the Standard targets vehicle categories rather than specific makes and models. The Government has indicated that some 4WDs, AWDs, utes, and other types of medium-size goods vehicles between 3.5 and 4.5 tonnes are not currently subject to the required CO₂ testing, meaning these vehicles will not be impacted by the Act’s standards at this stage.

“While commercial vehicles contribute significantly to emissions, in my opinion the Act should consider various use cases beyond just utes before determining which exemptions to the Standard should apply,” Lincoln says.   

He cites the example of ambulance and paramedic vehicles to underline the importance of the consultation process before the Government announces the final details of the Standard. 

“The most recent clarification, which came out in August, related to this exception framework. What exemptions should apply and how are they determined”, asks Lincoln. “I think full transparency of the policy framework and some degree of public consultation ahead of any exemption decisions are really important,” he continues. “For example, you would not penalise fit-for-purpose vehicles such as ambulances simply because they require a powerful engine that is less fuel efficient. To avoid such vehicles from being impacted by the Standard, exemptions need to be applied to a class of vehicles, not a particular make or model,” Lincoln says. 

What does the NVES Act mean for vehicle fleets and those managing these fleets? Lincoln sees many positives, and perhaps most importantly, minimal upheaval.  

“The Standard is likely to achieve its objectives, in my opinion and, talking to most in the industry, there is broad support for it. It is fair and transparent, and it provides for sufficient mechanisms within the legislation to make changes as matters evolve,” Lincoln notes. “Regardless of the final exemption list, there are mechanisms in place to ‘carve in’ other vehicles and classes as new technologies emerge, new makes and models come out, and testing regimes evolve.” 

“Despite the widespread support for the new Standard, its success ultimately rests largely with OEMs,” Lincoln observes. “They obviously have the option of simply not offering particularly fuel-inefficient vehicles within the Australian market. Hopefully though, they will choose to bring in more efficient vehicles in the form of hybrids and EVs to offset popular but higher emitting vehicles across their brand,” he says.

“That is very much a commercial decision of course, and if a particular OEM determines that adjusting to the new Standard isn’t feasible from that perspective, some may actually exit the market. Conversely, we will also potentially see new market entrants, particularly from brands currently not present in Australia. So overall, I think we are going to have more vehicles, more choice, more price points, more features. For organisations that are already making decisions around what their fleet mix and policy will look like, that means there will be a greater choice of vehicles to consider,” Lincoln predicts. 

“We have been organising our popular SG Fleet EV Drive Days for some years now to help our customers make those decisions on the right vehicle, and when we first started doing these events, there were only about eight EVs on show. At the last one, we had 35 different passenger vehicle models, as well as some light commercials. The number of makes and models coming into market is steadily growing, comfort levels with EVs are increasing, and organisations increasingly have more options to choose from to meet their specific needs,” he notes.

“I don’t think the NVES Act is front of mind for a lot of fleet managers right now because it focuses on the supply side.  But when the new Standard achieves its objective of bringing in a wider range of fuel-efficient models, that is when they will feel that for their particular requirement there now finally is a fit-for-purpose vehicle available. And that is where SG Fleet plays an important role in helping the fleet manager match that requirement with the right solution,” Lincoln concludes. 

Want to know more about the NVES Act and fleets? Speak to SG Fleet today.

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