Sales of EVs fell by two-thirds last year. Photo / 123rf
Motor vehicle traders may be forced to charge more for petrol and diesel cars to counter higher penalties from the Clean Car Standard as they run low on offset credits due to low electric vehicle sales, according to the Motor Industry Association.
New targets for the Clean Car Standard (CCS) were introduced on January 1 and are designed to impose penalties importers pay if they bring high-emission vehicles into NZ.
And while the Government watered down the scheme with changes finalised in July last year - prompting EV advocacy group Better NZ Trust to mount a legal challenge - they will still bring higher costs to importers of high-emission vehicles.
Motor Industry Association chief executive Aimee Wiley says the changes to the “incredibly complex” CCS will actually lead to higher penalties this year on many vehicles in the light passenger segment that accounts for most sales.
“Looking ahead, the industry’s primary challenge will be navigating the stricter Clean Car Standard targets introduced for importers from January 1, simultaneously supporting the transition to lower-emission vehicles. Achieving this balance is essential to avoid significant vehicle price inflation in 2025 and beyond,” Wiley says.
There are three factors that will directly increase penalties for importing higher-emission vehicles this year, she says. One is a tightening of the CO2 emission or “tailpipe” target from 133.9g in 2024 to 112.6g in 2025. The second is a change to weight settings, the third is the penalty for every excess gram of CO2 rising from $45 in 2024 to $67.50 this year.
And then there is a fourth, less direct factor: A collapse in EV sales (more on which below) means far fewer credits are being earned to offset the penalties.
Although the headline CO2 target wasn’t changed for light passenger vehicles in 2025 (unlike light commercial vehicles, which did see a loosening), one of the key metrics used in the formula for calculating penalty payments - a CO2 emission to vehicle weight adjustment - was tightened by 46%.
“This change effectively makes CO2 targets harder to achieve for larger/heavier light passenger vehicles,” Wiley says.
The net result will be big increases in the penalties for importing many popular models.
Wiley - who has a background in number-crunching as a former finance and investment manager for Ford and Carter Holt Harvey and a low-emission vehicles programme director for NZTA/Waka Kotahi - says according to her sums the CCS penalty costs of importing a diesel Toyota Land Cruiser Prado will increase from $2655 last year to $7020 this year - a $4365 increase.
A diesel Ford Everest’s CCS penalties will increase by $4410 from $2745 to $7155.
Popular petrol and diesel models from Mitsubishi Subaru and Kia will also see increases in the thousands, while even the hybrid version of Suzuki’s Swift will end up in the red, with a swing from a $360 credit in 2024 to a $405 penalty in 2025.
A number of hybrid models in the top 10 will still earn credits for being on the right side of the CCS equation.
Wiley says the net result is that the cost of CCS penalties would increase from $13.5m in 2024 to $82.5m in 2025 across the top 10 light passenger vehicles if the leaderboard remained the same.
Wiley says changing consumer taste - driven by other government policies - could also play a role, making it more likely that some or all of the increased costs will be passed on to consumers.
That’s because the Clean Car Standard, introduced in 2021, involves a mix of penalties for importing high-emission vehicles - which can be offset by credits for bringing low- or no-emission vehicles into the country.
At the moment, many importers have lots of credits, but those are running out, Wiley says. Sales of no-emission EVs and low-emission plug-in hybrids hit record levels in 2023 on the back of the Clean Car Discount that, at its height, offered a government rebate of up to $8625.
But that carrot disappeared from January 1, 2023, leading to a dive in EV sales - made worse by the introduction of the $76 per 1000km (plus $12.44 admin) Road User Charges from April 1. Electric vehicle sales fell by two-thirds. At the same time, light commercial sales picked up with the abolition of the “ute tax”. Petrol and diesel vehicles saw their market share rebound.
The result is an imbalance in CCS penalties and credits.
“If EV volumes remain low in 2025, there won’t be enough CCS credits generated to offset what could amount to considerable penalties,” Wiley says.
“Looking ahead from 2025 into 2026 and 2027, as the CO2 targets and settings continue to progressively strengthen (annually on January 1 of each year), the question I am currently pondering and curious about is the point at which the industry (as a whole) will be forced to pass through the credit or penalty at an individual vehicle level directly to the consumer as a component of the vehicle sticker price. ”
Sales of EVs fell by two-thirds last year.
As the Clean Car Discount was scrapped and RUCs introduced, registrations of new electric vehicles fell from 19,795 in 2023 to 6363 in 2024, according to Ministry of Transport data released earlier this week.
Despite heavy discounting, EVs accounted for 5.2% of new car sales last year compared to the record 14.5% across 2023 as a whole - and the peak of 35.5% in December 2023, the final month of the Clean Car Discount of up to $7015.
Wiley says many EVs were being sold at below cost, with some up to half price as dealers sought to clear excess stock. The MIA head doesn’t see that level of discounting being repeated this year.
Sales of plug-in-hybrids, hit by both petrol tax and RUCs, albeit at the lower rate of $38 per 1000km also collapsed.
Regular hybrids - which escaped RUCs - enjoyed an increase in sales.
Sales of petrol vehicles increased slightly in what was a down year overall − helped by relatively buoyant SUV sales and an uptick in light commercial vehicle sales after the so-called “ute tax” was scraped.
December saw new vehicle registrations rise 5.6% over the same month last year.
But overall, new vehicle sales fell 13.5% for 2024.
The MIA pinned the fall on the “ongoing impact of regulatory changes, economic pressures, and shifting consumer preferences”.
While the Clean Car Discount was aimed at buyers, the Clean Car Standard was introduced in 2021 to influence vehicle importers.
It involves a complex series of fees for high-emission vehicles, based on their ability to meet emissions targets which can be offset by credits earned for importing lower-emission models.
The landscape for the Clean Card Standard was tricky because SUVs and utes dominated the NZ market, while EVs had stalled, Wiley said.
The emission targets tighten each year, progressively lowering the threshold where penalty payments kick in.
A law change last year, following a consultation that closed in July, saw the Ministry of Transport given the power to tweak Clean Car Standard emission targets.
Transport Minister Simeon Brown framed the changes as bringing NZ into line with the equivalent programme in Australia. He cited MoT analysis, which drew on an MIA submission that said if the original Clean Car Discount parameters were left in place, it would increase the cost of a new vehicle by an average of $5418 by 2027.
Wiley says the issue is that while emission targets for utes and other light commercial vehicles were slashed - winding up the likes of Better NZ Trust and creating the popular impression of a looser regime even as many popular light passenger vehicles resulted in big increases.
In October last year, Better NZ Trust, which pushes for expansion of NZ’s EV fleet, said it would take legal action over the CCS changes − which it called a violation of NZ’s Paris Agreement targets.
“The standards were watered down in July on a review that only invited submissions from the vehicle importers, and did not request submissions from Drive Electric [a fellow pro-EV group] and ourselves. So Simeon and the Government got the answer they wanted,” Better NZ Trust chairwoman Kathryn Trounson told the Herald.
Brown responded, “I directed officials to begin a comprehensive review of the Clean Car Importer Standard and ensured that the automotive industry was closely engaged throughout this review.”
He added, “The Government supports the Clean Car Importer Standard to ensure that New Zealand continues to receive the supply of low- and zero-emissions vehicles being manufactured globally.
“However, it is important that the Clean Car Importer Standard strikes the balance between reducing transport emissions and ensuring that New Zealand’s policy settings continue to allow the automotive sector and the wider economy to grow.”
This morning, Trounson said her group had dropped its legal action.
“We pursued a Judicial Review but subsequently we decided not to pursue it any further following the release of additional papers [during the discovery process],” she said.
“We still think the decision was wrong and will increase emissions, but our legal advice was that under the legal test, a Judicial Review wouldn’t be successful.”
Globally, market leader Tesla announced on January 2 that its sales fell for the first time in the company’s history in 2024.
The EV maker delivered 1.789m vehicles last year, compared to 1.808m in 2023.
Tesla shares fell 6% on the news, giving back some of their recent gains as chief executive Elon Musk emerged as a close confidant to President-elect Donald Trump.
Musk sees a sub-US$30,000 Telsa robocab, still in the works, playing a key role in keeping up sales if the regulatory path can be cleared.
The Light Passenger Vehicle CO2 headline target in 2024 was 133.9g. This decreased effective on January 1, 2025 to 112.6g. The headline target is not a universally applied target to all LPVs. Instead, there is a factor to weight adjust each vehicle to determine an individual vehicle target (to accommodate for vehicle weight and relative size).
Two illustrative examples.
Suzuki Swift Hybrid – weighs 923kg and has tailpipe emissions of 106g CO2
In 2024, the Swift Hybrid’s weight-adjusted individual vehicle emission target was 114g of CO2 per kilometre. The Suzuki Swift earned credits of 8g (8g x $45 per gram = $360 credits earned).
In 2025, the Swift Hybrid’s individual vehicle weight-adjusted CO2 target is 100. The Suzuki Swift will now attract 6g penalties in 2025 (that is, 6g x $67.50 per gram = $405 penalties).
Toyota Landcruiser Prado weighs 2389 kgs with tailpipe emissions of 240g
In 2024, the Prado’s individual vehicle weight-adjusted emission target was 181g. The Landcruiser Prado attracted penalties for 59g of emissions above the target (cost = 59g x $45 per gram = $2655 penalties).
For 2025, the individual vehicle CO2 target is now weight-adjusted to 136g. The Landcruiser Prado will attract 104g penalties in 2025 (cost = 104g x $67.50 per gram = $7020 penalties).
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
The New Zealand stockexchange reported a decline today as overseas markets led the way.