NVES and the FBT change: the two policies quietly reshaping what Australia buys

If you want to understand why nearly half of all new cars sold in Australia in May 2026 were electrified, don’t start with the model launches. Start with two pieces of policy most buyers have never heard of.

1. The New Vehicle Efficiency Standard (NVES)

The NVES took effect on 1 January 2025, with credits and penalties beginning 1 July 2025. In plain terms, it sets an average CO₂ target that each brand’s new-car fleet has to meet:

• 141 gCO₂/km for passenger vehicles and 210 gCO₂/km for light commercials, tightening every year.
• Brands earn credits for selling cleaner vehicles and incur a liability of $100 per gram over target, per vehicle.
• Makers have until 31 December 2027 to offset shortfalls with credits before fines apply.

The effect is simple and powerful: every brand now has a commercial reason to sell more EVs, PHEVs and hybrids, and to price them to move. That’s a big part of why affordable electrified models — many of them from new Chinese entrants — have flooded the market.

2. The end of the PHEV FBT exemption

The Fringe Benefits Tax exemption that treated plug-in hybrids as low-emissions vehicles ended on 1 April 2025. From that date, only battery-electric and hydrogen vehicles still qualify; PHEVs no longer do (pre-2-April binding leases were grandfathered).

The deadline created a remarkable spike — PHEV sales jumped around 380% in March 2025 as buyers rushed to lock in the benefit. What’s more interesting is what happened after: PHEVs were supposed to fall off a cliff, but in May 2026 they sold 9,315 units, up 202.3% YoY, driven by a wave of affordable Chinese plug-ins. The product got cheap enough that it didn’t need the tax break.

The combined result

• BEVs hit a record ~20% share in May 2026 (21,303 units, up ~111% YoY).
• BEV + PHEV combined reached 29.6% of the market.
• All electrified vehicles — BEV, PHEV and hybrid — reached 46.4%.

What it means for dealers

Policy is now a sales lever, not a footnote. Buyers are confused about what NVES means for them, whether a PHEV still makes sense after the FBT change, and what a novated lease actually saves now. That confusion is an opportunity: the dealer whose website and enquiry replies answer these questions clearly — in customer language, not legislation — earns trust before a test drive is ever booked. Generic “ask us about EV incentives” copy doesn’t cut it anymore.

Sources: NVES Regulator, Electric Vehicle Council and CarExpert.