Chinese electric vehicle maker BYD has accumulated more than 6.2 million carbon credits under Australia’s New Vehicle Efficiency Standard (NVES), the largest total recorded in the scheme’s first round of results. The outcome highlights how the new emissions framework is reshaping competition in the car market, with some manufacturers earning surplus credits while others face potential penalties.
The 2025 reporting period shows a significant oversupply of credits across the system, which could reduce the financial impact on brands that fall short of emissions targets.
What is the New Vehicle Efficiency Standard?
The New Vehicle Efficiency Standard is a federal policy introduced by the Albanese government to reduce carbon emissions from new cars sold in Australia.
The scheme sets annual average emissions limits for vehicle fleets:
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141 grams of carbon dioxide per kilometre for passenger cars in 2025
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210 grams per kilometre for light commercial vehicles
These limits tighten each year. Manufacturers that keep their fleet emissions below the threshold earn credits. Those that exceed the limits accumulate liabilities.
Companies that miss their targets face penalties of up to $100 per gram of excess emissions per vehicle. However, they can offset those liabilities by purchasing credits from manufacturers that have exceeded the targets.
Why did BYD accumulate so many credits?
BYD’s Australian fleet includes a high proportion of battery electric vehicles, which produce zero tailpipe emissions. Because of this, its average fleet emissions fall well below the NVES thresholds.
Despite being Australia’s eighth-largest car brand by sales last year, the company generated more than 6.2 million credits — more than any other manufacturer in the scheme’s first reporting year.
If valued at the scheme’s maximum penalty rate, those credits could theoretically be worth more than $620 million. However, the actual market value depends on negotiated prices between manufacturers and is likely to be significantly lower due to an oversupply of credits.
A BYD spokesperson said the results would not alter the company’s business plans.
Which brands face liabilities?
Several established carmakers recorded emissions liabilities under the 2025 results.
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Mazda, Australia’s third-largest seller last year, accumulated more than 508,000 liability units. At the maximum rate, this equates to potential penalties of up to $58 million.
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Hyundai recorded more than 84,000 liability units, equivalent to $8.4 million at the upper penalty limit.
Other brands with potential liabilities include Nissan, Subaru, General Motors, Porsche, and Honda.
Penalties are not due until 2027, giving companies time to trade credits or adjust their vehicle mix.
Why is there an oversupply of credits?
Government data shows more than 17 million credits were generated in the first reporting period, compared with 2.4 million units of liability.
This imbalance means manufacturers that need credits may be able to negotiate lower prices. A large supply also reduces the likelihood that companies will pay the full penalty rate.
What are the political and industry concerns?
The opposition Coalition has criticised the NVES, arguing it may increase vehicle prices if manufacturers pass compliance costs on to consumers. Opposition energy spokesman Dan Tehan said the scheme could increase reliance on imports from China.
Infrastructure Minister Catherine King said the results show the policy is working, noting that 68 per cent of vehicle suppliers met or exceeded their targets in the first reporting period.
Industry groups such as the Australian Automotive Dealer Association have called for reforms. They argue that credits are based on vehicles imported rather than sold, which could create incentives for companies to increase inventory levels.
BYD has denied suggestions it inflated imports to maximise credits, saying strong demand drove its shipment volumes.
What happens next?
Manufacturers will continue adjusting their fleet composition as annual emissions limits tighten. Companies that rely heavily on petrol and diesel vehicles may need to increase hybrid or electric offerings to reduce future liabilities.
Penalties for excess emissions are not payable until 2027, allowing time for credit trading and market adjustments.
The first NVES results provide an early indication of how Australia’s vehicle emissions policy may influence competition, pricing strategies and the pace of electric vehicle adoption.
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