Carmakers Face Heavy Penalties in Australia for Missing Climate Targets
Major automotive brands, including Mazda, Nissan, and Subaru, are confronting the possibility of substantial financial penalties in Australia after failing to comply with newly implemented climate targets for new vehicles. According to data from the first six months since the Albanese government introduced a vehicle efficiency standard, 40 companies—representing 68% of the total—exceeded their initial targets for average emissions efficiency per kilometre. However, 19 companies missed their benchmarks and could be required to purchase credits or pay fines if they do not significantly improve their performance over the next two-and-a-half years.
Potential Liabilities and Industry Performance
Mazda has accrued a potential liability of approximately $25 million, Nissan faces more than $10 million, and Subaru around $7 million. These liabilities are subject to change and will become due in 2029. Other notable companies that missed their initial targets include Hyundai, General Motors, Honda, Porsche, Ferrari, and Jaguar. In contrast, brands such as BYD, Toyota, Tesla, Kia, Ford, Volkswagen, BMW, and Polestar were found to have sold vehicles that, on average across their fleets, released less carbon dioxide per kilometre than required by the standards.
Federal Transport Minister Catherine King highlighted that the average pollution for new light passenger vehicles across the industry outperformed the target by 21%. She stated, "These results make it clear the vehicle efficiency standard supports both lower emissions and consumer affordability." Despite this progress, electric vehicles constituted only 12% of new sales in the second half of last year, a figure that falls significantly short of what is needed for the scheme to contribute effectively to national climate goals. The remaining 88% of sales were petrol and hybrid vehicles.
Global Context and Regulatory Framework
Globally, about 25% of new cars sold last year were electric, but Australia has consistently lagged behind other developed and many developing countries in EV uptake. China remains the world's largest EV market, accounting for over 60% of global EV sales, as reported by Our World in Data. The Australian vehicle efficiency standard mandates that carmakers supply new vehicles meeting an average per-kilometre emissions target, which will be progressively reduced to encourage cleaner cars. Importantly, no vehicles are banned; more polluting models can still be sold if offset by electric or low-emissions vehicles.
Companies that exceed their targets earn credits, which can be sold to those that miss their targets to offset extra pollution. In the first six months, companies earned 17.2 million credits for beating their targets, while those that missed faced a combined potential liability of 1.3 million tonnes, resulting in a net surplus of 15.9 million credits available for future years.
Industry Reactions and Future Outlook
The Electric Vehicle Council praised the results, with Chief Executive Julie Delvecchio noting that critics had previously warned of supply shortages, soaring prices, and market disruption when the standard was legislated. She said, "The reality was emissions were coming down, the choice of new cars was expanding, and EV sales were growing. Instead, the first performance report shows strong industry performance, healthy competition, and a clear acceleration in cleaner vehicles coming to Australia." Delvecchio emphasized that clear, predictable standards drive innovation and investment, modernising markets rather than breaking them.
She also called for an upcoming review to strengthen targets, warning that failure to do so could slow momentum in clean car adoption as companies accumulate excess credits from targets that are not stringent enough. Additionally, the National Automotive Leasing and Salary Packaging Association expressed encouragement but cautioned that Australia might fall short on EV uptake and climate targets if a contentious fringe benefits tax exemption on clean cars is removed.
