Car dealers won’t be as impacted as significantly by Australia’s upcoming New Vehicle Efficiency Standard (NVES), provided the federal government makes a key change to its new emissions policy.

This morning, the Australian Government announced it’s prioritising work for vehicles’ emissions to be counted at the point of sale rather than when they’re imported, with a review due in 2026.

This means instead of carmakers forcing dealers to stockpile lower-emissions vehicles which may not sell in great volumes, they can continue to sell vehicles based on consumer demand – resulting in more predictable costs for franchises.

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“Emissions should be counted when the vehicle is sold,” Motor Trades Association of Australia (MTAA) CEO Matt Hobbs said in a media statement. 

“By looking to count the impact of CO2 at the point of sale, the Government will remove the temptation for car companies to push vehicles onto dealers, no matter the demand of consumers, just to hit a compliance number for a particular year.”

While the NVES came into effect on January 1, 2025, carmakers won’t be penalised for exceeding CO2 targets until July 1, 2025.

All new passenger and light commercial vehicles sold with a mass of less than 4.5 tonnes are covered under the scheme.

If carmakers exceed an average carbon emissions target on the vehicles they sell each year, they will be penalised $100 per g/km of CO2 for every vehicle which exceeds the target.

For 2025, the mandate for passenger cars (Type 1) is 141g/km or less of CO2, with light commercial vehicles and heavy-duty SUVs (Type 2) set at 210g/km.

These CO2 caps will reduce every year until 2029, when they will be much lower at 58 and 110g/km respectively, forcing manufacturers to sell increasingly efficient vehicles.

Brands can also earn emissions ‘credits’ by beating their fleet-wide targets, which can then be used in a subsequent year to help meet tighter CO2 targets, or sold on to other brands to help them reach their emissions targets.

The MTAA had previously called for greater protections for car dealers, based on the claimed increased costs of carmakers meeting the NVES requirements.

“How manufacturers will manage these additional costs remains uncertain. However, given the highly competitive nature of the market, passing the full cost onto consumers may not be a viable option for all manufacturers,” the MTAA said last month.

“Instead, strategies may include absorbing costs, trading credits with EV-only brands, adjusting product lineups, or re-evaluating dealership structures to maintain profitability.

“Regardless of how these fines are managed, reduced profit margins for manufacturers will inevitably trickle down to dealerships, making an already challenging business environment even more difficult. 

“Dealerships, which operate on tight margins and depend on strong sales volumes, may face increased financial strain, potential consolidation, or even closures if profit pressures continue to rise. Given this increasingly challenging environment, dealers need greater protections than ever before.” 

In addition to the NVES change, the federal government has extended the protections laid out in the Unfair Contract Terms and Unfair Trading Practice to automotive dealerships.

This has been tied in with a two-year, $7.1 million investment for the Australian Competition and Consumer Commission (ACCC) to better enforce the Franchising Code of Conduct, a new version of which comes into effect on April 1.

“More active enforcement and compliance work by the ACCC will help target bad behaviours without increasing the regulatory burden for those in the sector already doing the right thing,” said Minister for Small Business Julie Collins.

These reforms have delivered on calls from industry bodies such as the MTAA and the Australian Automotive Dealer Association (AADA) to better protect local vehicle dealers, following the departure of Holden and legal disputes between dealers and Honda and Mercedes-Benz after these brands moved to agency models.

“Today’s announcement recognises that Australian automotive retailers need a balanced approach as they deal with large companies who are facing global headwinds and considering their Australian operations,” Mr Hobbs said. 

“This is a culmination of years of advocacy by MTAA, the State MTAs, and the VACC, and we are pleased to see the Government take decisive action to address these challenges.”

Both the changes to the NVES compliance regulations and the new Franchise Code of Conduct were welcomed by AADA CEO James Voortman.

“These changes are a major step forward for Australian Dealers who are navigating the most significant transformation in automotive history,” Mr Voortman said. 

“The exit of Holden from the Australian market, along with the ongoing court cases between dealers and Honda and Mercedes-Benz, have underscored the urgent need for stronger protections.

“Dealers deserve fair treatment, reasonable contractual terms, and the ability to make business decisions with confidence. These reforms deliver on that need.”

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