NRMA supports New Vehicle Efficiency Standard, Tesla and Polestar exit FCAI

The public conversation around the introduction of a New Vehicle Efficiency Standard (NVES), that would see carmakers fined if they do not bring down the average emissions of the vehicles they sell, is heating up in Australia.

While the NRMA, Tesla, Polestar, Volkswagen and Hyundai have expressed support for vehicle efficiency standards to help Australia meet its Net Zero 2050 goals, Toyota and the Federal Chamber of Automotive Industries (FCAI) have pushed back, claiming the policy would increase costs for drivers.

The rift has widened even further in recent days, with EV makers Tesla and Polestar publicly declaring to exit the FCAI. With Tesla’s Model 3 and Model Y accounting for two out of the ten top selling vehicles in February, it’s a strong message.

Update: Volkswagen has also now stated it will exit the FCAI, saying on Monday that, "A strong NVES is in the best interests of this country."

What is a New Vehicle Efficiency Standard?

Australia is, along with Russia, one of few countries in the world that does not currently legislate the level of carbon emissions produced by new vehicle sales, also known as vehicle efficiency.

In February the Albanese federal government revealed plans to legislate an NVES, with the aim of bringing Australia in line with other developed jurisdictions such as the US and the European Union.

It has proposed three policy options:

• "Slow Start” promises limited emissions abatement, little incentive to bring more clean transport options to Australia and adopts “supercredits” for alternative technologies that do not reduce fossil fuel consumption.
• “Fast and Flexible” is the government’s preferred option. It would help Australia catch up with the US by 2028 and ensure more choice of EVs for Australians while giving carmakers time to adapt. 
• The last, “Fast Start,” would help Australia catch up to the US by 2026 but risks failure if carmakers cannot adapt quickly enough. 

The Albanese government has invited comments from stakeholders and the public before committing to one of three policy options. Under similar rules overseas, carmakers sell zero and low emissions vehicles to offset the emissions of internal combustion engine vehicles.

NRMA has expressed its support for policy options that will help Australia transition to clean transport, supporting all Australian governments' Net Zero 2050 commitments while lowering fuel use and bolstering Australia’s liquid fuel security.

On Sunday in a submission to the federal government, the NRMA noted it has already given support for a balanced NVES, adding that: “A lack of compulsory standards has resulted in Australian motorists being left with less choice when it comes to buying more affordable fuel-efficient vehicles.

CEO Rohan Lund said via a statement that, “Australia could not continue down the path of voluntary targets as it left us behind when it came to choice and the NRMA is strong advocates for choice so that motorists can buy the cars they wish to drive.

“A business-as-usual approach meant that Australian families and businesses were not benefiting from the best technology designed to reduce fuel consumption." 

NVES divides automotive industry

Toyota and the FCAI - which represents some 60 automotive brands - claim the introduction of a NVES would increase the cost of cars for drivers.

Toyota Australia sales and marketing boss Sean Hanley said to media in late February that customers would bear the cost of any fines.

"You've got three options when it comes to the fines. One, you pay the fines, [but] that ultimately has got to be passed on to the consumer," Hanley said according to Drive.

"Two, you stop bringing those cars in. Some people would love that idea, but there's a bunch of people – in rural Australia, grey nomads, farmers, mums and dads – who probably wouldn't like that idea.

"Or three, you buy credits [from car makers which have met the targets]. I can tell you ... we're not buying credits.

The FCAI, whose top board members hail from Japanese carmakers Mazda, Toyota, Mitsubishi and Honda, copped criticism in May 2023 for allegedly orchestrating a strategic campaign to undermine fuel efficiency standards, has also pushed back against the introduction of an NVES.

The FCAI previously introduced voluntary standards for carmakers, which most have routinely failed to achieve.

On Wednesday, the FCAI said in its submission to the government that anything but a slower start would result in “unaffordable price hikes for new vehicles.” It claimed the government’s preferred policy option would “impose ... extremely aggressive targets and severe penalties, to be effective on very short notice.”

It says the proposed CO2 targets would result in large increases in prices for consumers. As reported by news.com.au, the FCAI claimed prices for best-selling utes would rise by up to $14,490 by the end of the decade.

Tesla and Polestar to leave FCAI

On Thursday, Tesla issued a statement criticising the FCAI’s stance and confirming it will exit the organisation at the end of the 2023/2024 financial year.

“Over the past three weeks, Tesla considers that the FCAI has repeatedly made claims that are demonstrably false,” it wrote in a note. “Tesla is concerned that the FCAI has engaged in behaviours that are likely to mislead or deceive Australian consumers.”

Tesla accused the FCAI of cherry-picking data, misrepresenting how fines would be calculated and ignoring the fact that by selling low or zero emissions vehicles, carmakers would avoid paying fines altogether.

“Of the 20 top-selling vehicles in Australia that the FCAI has referred to, 11 are sold by companies that performed below their target for EPA standards in the USA,” it wrote. “Although many of these companies still sold highly polluting vehicles in the USA, they balanced out their sales with more efficient vehicles and paid no penalties under EPA standards in 2022.”

On Friday, Geely-owned Volvo offshoot Polestar followed Tesla’s suit, saying: “The brand cannot in good faith continue to allow its membership fees to fund a campaign designed to deliberately slow the car industry’s contribution to Australia’s emissions reduction potential.”

It also accused the FCAI of cherry-picking data, adding that, “In contrast, The Grattan Institute’s modelling suggests prices may increase by an average of 1%." The modelling, it said, showed that consumers would be better off thanks to lower fuel and maintenance costs both in the short and long term.

The exit of Tesla and Polestar from the FCAI means their sales figures will no longer be issued by the organisation’s Vfacts monthly report.

However, Tesla and Polestar have confirmed reporting will not be impacted. “We will release our sales data, just not through the FCAI,” said Tesla spokesperson Sam McLean in a note to NRMA.

“We’ll look into alternate reporting streams, but for now we’ll issue our own sales figures,” said a spokesperson for Polestar. 

Hyundai and Volkswagen support NVES

Carmakers Hyundai and Volkswagen have publicly stated support for an NVES. Hyundai, which sells the Kona Electric, the Ioniq 5 and the Ioniq 6, said in a statement it is “committed to working with government and industry to ensure Australian consumers get access to the widest range of affordable low- and zero-emission vehicles.”

Volkswagen – which is set to launch its ID range of all-electric vehicles this year – noted in a statement that the carmaker “is driving toward majority all-electric vehicle sales in Europe by 2030. In the US and China, the company has set itself ambitious BEV targets in the same period.

"Volkswagen Group Australia has long been among the voices calling for the introduction of binding auto industry standards that benefit Australia,” it added.