Australia’s car market is changing in 2025, and not just because of new models or shifting buyer preferences. On January 1, 2025, the New Vehicle Efficiency Standard (NVES) officially took effect, marking one of the biggest regulatory shifts the Australian auto industry has seen in decades.
For buyers, this means price changes, new vehicle options, and more emphasis on efficiency. For dealers, it means adjusting stock, educating customers, and staying ahead of shifting demand. Let’s break down what NVES actually is, why it’s happening, and what it means for both buyers and sellers in the year ahead.
What is NVES and Why Was It Introduced?
The New Vehicle Efficiency Standard is a federal policy designed to reduce Australia’s vehicle emissions. For years, Australia lagged behind many other developed nations when it came to regulating car efficiency. Unlike the US, EU, and even New Zealand, there were no clear rules pushing carmakers to improve fuel economy or cut emissions.
That changed in 2025. NVES introduces a carbon emissions cap for car manufacturers and importers. If car brands exceed these caps, they will face penalties. Conversely, companies that sell more low-emission cars (such as hybrids and EVs) can earn credits. These credits can offset penalties or even be traded with other manufacturers.
The aim is clear: nudge the Australian market toward cleaner, more efficient vehicles without banning popular models outright.
How NVES Affects Car Prices
One of the first questions many car buyers ask is: “Will cars get more expensive?”
The short answer: yes, in some cases.
Here’s why:
- High-Emission Models Could Cost More
Larger SUVs and utes that consume more fuel may face indirect price increases. Car companies will likely pass on some of the penalty costs to consumers. For example, a popular family SUV such as the Toyota Kluger hybrid could be pushed into higher price brackets if it no longer meets efficiency thresholds.
- Luxury Car Tax (LCT) and NVES Combined Impact
Some hybrids and larger vehicles may be hit by both the NVES penalty and the luxury car tax. This double whammy means families shopping for practical 7-seaters or performance SUVs might notice significant price hikes.
- Smaller Cars and Hybrids May Stay Stable (or Cheaper)
On the flip side, efficient vehicles could benefit. To balance their emissions averages, brands will push hybrid and EV sales harder, sometimes with better deals, finance packages, or incentives. Buyers who are flexible about size and style might find more affordable options.
What This Means for Car Buyers
If you’re planning to buy a new or used car in 2025, here are some takeaways:
- Expect More Hybrids and EVs on the Market
Dealers will likely increase the stock of efficient cars. Expect to see more hybrid and plug-in hybrid versions of popular models.
- Do Your Homework on Running Costs
Even if some efficient cars cost slightly more upfront, they often save money in the long run through lower fuel use. Comparing lifetime running costs is more important than ever.
- Timing Matters
Some buyers may rush to purchase high-emission vehicles before prices increase further. On the other hand, if you’re open to EVs or hybrid cars , waiting a few months could mean more variety and sharper deals.
- Used Cars Could See Ripple Effects
While NVES only applies to new cars, used cars are part of the picture. If new large SUVs become more expensive, used versions may rise in demand (and price). Buyers considering a used SUV should keep an eye on this trend.
What This Means for Dealers
Car dealers sit at the centre of this transition. Here’s how NVES changes their world:
- Stock Strategy Will Shift
Dealers will need to balance consumer demand for big SUVs and utes with the pressure from manufacturers to sell more efficient models. That means more hybrids, compact cars, and electric vehicles on showroom floors.
- Educating Customers Becomes Crucial
Many Australian buyers are still learning about EVs and hybrids. Dealers will need to explain charging, maintenance, and running costs more clearly than ever. Transparency here could make or break sales.
- Trade-Ins Could Get Interesting
As new car prices rise for larger models, used versions may become hot property. Dealers who can secure good-quality second-hand SUVs and utes will likely see strong demand.
- Marketing Will Evolve
Dealers can no longer rely solely on selling “bigger is better.” Messaging around efficiency, lifetime value, and compliance with new standards will become key selling points.
Challenges and Opportunities
Like any policy change, NVES brings both risks and opportunities.
- Challenges:
- Higher prices for family-friendly large vehicles
- Adjusting to fast-changing consumer preferences
- Educating buyers about new technology and policies
- Opportunities:
- Selling more hybrids and EVs to eco-conscious buyers
- Boosting used car sales in the SUV/ute category
- Positioning as a trusted advisor in a confusing time for buyers
Final Thoughts
The New Vehicle Efficiency Standards represent a turning point for Australia’s car market. For buyers, it means looking beyond just the sticker price and thinking carefully about efficiency, long-term running costs, and resale value. For dealers, it’s a chance to adapt quickly, provide guidance, and stock the right mix of vehicles.
While NVES may make some cars more expensive in the short term, it also opens the door to more choice and innovation in the market, for those willing to adapt, whether buyer or seller, the transition could bring benefits as well as challenges.
