Will relaxed rules on vehicle emissions keep a lid on car prices?
Pressure from the car industry has resulted in relaxed rules for the Government's incoming vehicle emissions legislation, but will it allow carmakers to keep costs under control?
Responding to widespread backlash from the auto industry, the Federal Government has reworked its proposed New Vehicle Efficiency Standard (NVES), reclassifying large body-on-frame SUVs and 4x4s as light commercial vehicles (LCVs) instead of passenger vehicles.
Considering the popularity of such vehicles - which include models like the Ford Everest and Isuzu MU-X - and the lack of truly fuel-efficient powertrains within that segment, the reclassification buys automakers valuable breathing room to introduce greener options.
However, many automakers are still concerned about the speed and ambition of NVES, saying the proposed year-by-year carbon dioxide (CO2) reductions of 12% per annum will be difficult - and for some vehicles, impossible - to achieve.
While the Government asserts that the NVES will be "good for the hip pocket" (a claim that we unpacked in February), carmakers are saying that the cost of compliance will have a flow-on effect on the cost of the cars, utes and SUVs that they sell - especially models that fall on the wrong side of the emissions cap.
The NVES proposal - which is planned to become law at the start of 2025 - aims to compel car companies and their importers to sell more fuel-efficient vehicles through imposing a cap on CO2 emissions on a per-vehicle sold basis, with that cap to be progressively reduced each year until 2029.
The actual CO2 cap will scale according to vehicle weight, but the proposed final target numbers for vehicles sold in 2029 are 58 grams per kilometre for passenger vehicles and 81g/km for LCVs and large SUVs.
For context, a Toyota Corolla Hybrid, one of the most efficient non-electric passenger vehicles available, emits an average of 81g/km of CO2, while a Ford Everest - the most popular large SUV sold last year - emits 187g/km in its most efficient form.
It's not difficult to imagine why carmakers have their reservations about the feasibility of the scheme, and with the proposed cost of non-compliance being $100 per 1g/km over the cap, it's also not hard to quantify the amount that retail prices might need to rise in order to pay off that emissions penalty.
In the case of the Nissan Patrol, a popular choice for offroaders and caravanners, its 334g/km average emissions figure would result in a whopping $24,300 impost for each Patrol sold in 2029.
A new Patrol with a more efficient engine is expected to launch before then, but the compliance costs will nevertheless still be huge if Nissan doesn't sell enough low-emission or zero-emission vehicles to offset its high-emitters like the Patrol.
Fully-electric cars and plug-in hybrid vehicles should easily comply with the NVES, but for automakers that don't have any EVs or PHEVs in their product portfolio, they may have no choice but to dramatically increase the costs of their vehicles toward the end of the decade if the government doesn't soften the scheme even further.
Get stories like this in our newsletters.
