Authors
National Leader, AutomotivePartner, Business Services
The 2025 Interim Emissions Values (IEVs) have been released by the New Vehicle Efficiency Standard (NVES) Regulator for the period 1 July 2025 to 31 December 2025, outlining the emissions position of each of the original equipment manufacturers (OEMs) for the first compliance period.
OEMs that are in a liability position have until 31 December 2027 to acquire credits to reduce their IEV to zero or a negative value. If they fail to do so, they will be issued an infringement notice (penalty) calculated as their Final Emissions Value (FEV) multiplied by $50, simply put, their liability units multiplied by $50.
The NVES is understandably a point of concern for Australian new vehicle dealers, particularly when traditional OEMs are compared to newer market entrants. Our automotive team have analysed the Regulator’s data and overlayed basic commercial assumptions to assist dealers in interpreting the release. A summary of that analysis is set out below.
The background of NVES is assumed to be broadly understood, given the substantial coverage following its release in 2024. If a refresher is helpful, you can read our earlier article on the impacts of the NVES on Australian dealerships.
Not surprisingly, low or zero emission OEMs are the big winners under the NVES.
Importing a fleet of vehicles that collectively falls below the emissions cap for any given measurement period will generate OEM credit units. These credits can be:
In acquiring credits, this either reduces the penalty a non-compliant OEM must pay the Regulator or takes their FEV to zero so that OEM does not receive an infringement notice.
Compliant OEMs are likely to take one of two paths:
It is important to look at each scenario separately, as failing to do so overlooks a fundamental difference in the market impact of each OEM.
If compliant OEMs sell their credits to non-compliant OEMs, credits would have a basic value of $3.55 per credit unit. This figure is calculated by multiplying the total number of liability units issued by the Regulator for 2025 by $50 and dividing that amount by the total number of credit units issued to compliant OEMs.
The key limitation to this approach is that it assumes all credits are up for sale. As noted above, some OEMs won’t look to sell their liability units but rather bank them for future years where they expect to be in deficit as the carbon caps become harder to meet.
Our analysis applies assumptions on which OEMs will likely continue accruing credits each year, whether they are electric vehicle (EV) only or high-volume, low-emission OEMs (e.g. BYD). For these OEMs, selling credits may make commercial sense if they do not expect to be non-compliant in future periods.
The total value of penalties is calculated as 1,217,811 liability units x $50 each, or $60,890,550. Based on the figures released by the Regulator and using the basic credit value outlined above ($3.55 per credit), this equates to an estimated benefit for BYD of $562.75 per vehicle, when assessed against their imports from July to December 2025.
While the total liability units issued by the Regulator for the 2025 period exceeded 17 million, our assessment is that the realistic number of credits available for sale from zero or low-emission OEMs like BYD, Tesla, Geely, Polestar and Zeekr is closer to 10.3 million. Dividing this into the $60 million total value of penalties above provides a more realistic value of $5.87 per credit.
This increase gives BYD a theoretical benefit of $972.62 per vehicle imported. For illustrative purposes only, doubling our estimate to $12 per credit would lift BYD’s benefit to $1,903.74 per vehicle - a substantial credit per vehicle, though still well below some analyst estimates.
To this point, we’ve assumed a market exists for OEMs to trade credits. However, what does the alternative look like, where OEMs simply pay their FEV infringement notices?
In this scenario, credit units generated by compliant OEMs do not translate into a direct financial return. Rather, compliant OEMs (such as BYD for 2025) gain a competitive advantage as non-compliant OEMs face an increased cost per vehicle, resulting from the NVES liability unit paid to the Regulator.
Our assessment of the estimated increase in cost per vehicle for selected non‑compliant OEMs in 2025 is as follows:
A full list of non-compliant OEMs for 2025, together with our calculated penalties per vehicle are found below.
There is still much to play out. Before the 2025 FEV is finalised by the Regulator, Australia will see two federal budgets against a volatile economic backdrop.
It is plausible that the NVES structure could change, particularly considering the Government’s recent announcements on lifting tariffs, potentially restructuring or removing Luxury Car Tax (LCT) and widely anticipated tightening to the Fringe Benefit Tax (FBT) exemption for electric vehicles.
For dealers, the key focus should be on staying close to OEM partners and monitoring NVES strategies. Many OEMs have already expanded their EV line-ups to soften the impact of NVES in future periods.
Dealers must be assertive in managing inventory, limiting difficult stock that could drive up floorplan costs and negative gross margins, particularly for some EV and zero- and low-emission vehicles.
Our automotive team will continue to monitor announcements and data relating to the NVES and provide updates on any material developments.
Need support understanding how NVES may affect your dealership or OEM arrangements? Contact us to discuss your position and response options.
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