Loophole in Australian new-car emissions rules to be plugged
Yesterday at 07:26 PM
An important change has been made that will prevent car companies from dumping thousands of high-emissions vehicles on their dealers before fines for selling high-CO2 cars are introduced.
A loophole in Australian emissions rules for new vehicles – which could have seen car companies dump thousands of high-polluting models on their dealers before the scheme came into effect – is set to be patched.
The New Vehicle Efficiency Standard (NVES) in force this year will set targets for the average CO2 emissions of the vehicles brought to Australia by a car maker each year, and impose fines if they cannot meet them.
It was planned for vehicles to be counted when they arrive in Australia – once they are added to a government database known as the Register of Approved Vehicles – rather than when they are sold to a customer.
It would open the door for car companies to rush in thousands of high-emissions cars before the NVES begins tracking vehicle arrivals on July 1, 2025, and sell them over the following 12 to 18 months without blowing out their CO2 average.
MORE: NVES explained – everything you need to know about Australia's new vehicle emissions rules
Now the Federal Government has announced it would "prioritise work" to count a vehicle's emissions at the point of sale, rather than when it arrives in the country, ahead of a more comprehensive review of the emissions scheme in 2026.
Officials in Canberra have previously acknowledged the loophole – and its impact on dealers forced to take on stock they cannot immediately sell – but until now had suggested it could not be addressed until the 2026 review.
The changes will bring Australia's CO2 rules in line with those of other countries – where emissions are counted at the point of sale – and will allow dealers to sell cars as customers want them, not when they are needed to avoid fines.
"Emissions should be counted when the vehicle is sold," Matt Hobbs, CEO of the Motor Trades Association of Australia, said in a media statement.
MORE: Car industry body accused of 'undermining' Australian new-vehicle emissions rules
"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."
The NVES will continue to allow car companies to sell high-emissions vehicles that exceed their CO2 targets – adjusted based on a car's classification and weight – but they must be offset by low-emissions models to avoid government fines.
After a given calendar year of vehicle sales, brands have another two years to offset their emissions to dodge penalties, whether by buying 'credits' from other car brands who have met the rules, or using sales of low-emissions cars in later years to balance out polluting cars in earlier years.
The rule changes also prevent car companies from flooding dealers with low-emissions cars in November or December to meet targets for that year, even if the vehicles are not sold until after January 1.
MORE: Car brands to pay $2.8 billion in fines by 2029 under new emissions rules, claims study
Alongside the changes to the NVES, the Federal Government has announced revisions to the Franchising Code of Conduct to better protect dealerships from the decisions of global car companies.
It follows a group of Mercedes-Benz's landmark victory in a Federal Court case, in which a group of its dealers claimed they were entitled to compensation when the brand switched to fixed-price new-car sales.
A similar case has been brought against Honda Australia by one of its dealers following a fixed-price sales switch of its own, where the car maker owns showroom stock, and dealers become 'agents' charged a fee for every car they sell.
MORE: Dealers appeal loss against Mercedes-Benz Australia court case – report
The changes announced include $7.1 million in funding over two years from the 2025-26 financial year to help the Australian Competition and Consumer Commission (ACCC) enforce the updated Franchising Code, in effect from April 2025.
The Federal Government says it will also "extend protections from Unfair Contract Terms and Unfair Trading Practices to businesses regulated by the Franchising Code, following consultation".
"Franchisees may be vulnerable to Unfair Trading Practices given a franchisor controls key aspects of a franchisee's business, such as branding, marketing, supply chains and operational processes," a media release from the office of Julie Collins MP, Minister for Small Business, reads.
"Unfair Contract Terms and Unfair Trading Practice reforms will help address the power imbalance that franchisees may face and improve the fairness of relationships between franchisees and franchisors."
MORE: Honda Australia ordered to pay $13.6 million to former dealer – report
In a media statement, Australian Automotive Dealer Association CEO James Voortman called the revisions "a major step forward" for car dealers.
"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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