NVES to unsettle ute market, says Mitsubishi

MITSUBISHI Motors Australia Limited (MMAL) says the introduction of the New Vehicle Efficiency Standard (NVES) is causing not only uncertainty, but a potentially untenable situation for importers reliant on diesel-powered light commercial vehicles to turn a profit.

Speaking with GoAuto at the launch of the sixth-generation Triton in South Australia last week, MMAL chief executive officer Shaun Westcott said that although the standard is necessary, the proposed changes are a case of too much, too soon for many ute-centric importers without an electrified backstop.

“The industry is not against a standard. What we want is a standard that is practical and achievable against the pace of technology, aligned with what consumers want, and aligned with what consumers can afford,” he stated.

“We are working with our parent company to analyse the impact of the options put forward – options we have only seen in the past few days – and obviously we will have to reset (our current position).

“The reality is that wherever the standard lands, it is going to have an impact on every OEM in this country. It means that all of us are going to have to recalibrate where we are and what NVES means for us (because) some of us have options like PHEVs, and others don’t.”

Mr Westcott said that even for those manufacturers with options such as BEV, HEV and PHEV elsewhere in their range, the sheer volume of light commercial vehicles sold versus those with some form of electrification may mean the purchase of NVES credits becomes de rigueur.

In that case, manufacturers would have no alternative but to pass on those costs to the consumer, potentially driving up the price of popular light commercial utilities and ute-based SUVs like the Mitsubishi Pajero Sport, Isuzu MU-X, Ford Everest and Toyota Fortuner to an unattainable point.

Even brands like Hyundai, which already have a range of BEVs, popular small models and an increasing number of HEVs in their line-ups, will be forced to change the mix of products they bring to market if the NVES is legislated with the feds’ proposed policy settings.

However, adopting less ambitious targets than the proposal of catching up with the United States within five years threaten to leave Australia lagging even further behind other mature markets.

“It is going to have different impacts on different players across our industry – and some of those players are right out on the spectrum where they only have BEVs. The issue is, those are nearly all passenger vehicles, when the two best-selling vehicles in Australia are pick-ups,” explained Mr Westcott.

“This is what Australians want. The reality is, at the moment, that battery electric pick-ups are out of the reach of middle Australians. They are priced north of $100K.”

Whether utes and SUVs are what Australians really need or want is up for debate according to a report commissioned by climate advocacy group Comms Declare that claims car-makers more than doubled advertising spend for SUVs and utes in the past 10 years while halving passenger car ads by 55 per cent.

Comms Declare correlated this shift in focus with an 80 per cent increase in SUV and ute sales and a 63 per cent decline in passenger car sales.

Mitsubishi’s own market research shows that sales of the new Triton ute to families will outstrip tradies by a significant margin.

Despite this, Mr Westcott pointed out that applying current BEV tech to utes “does not work when you put a real payload on the vehicle or attempt to tow with it”.

“This doesn’t work for the tradie or farmer, or for the recreational pick-up owner … those are realities that need to be faced up to.”

Mr Westcott said he believes that while it is incumbent on the industry to move to make the changes necessary for vehicles to meet both requirements, he remains doubtful that, for most, a suitable solution can be found within the proposed five-year timeframe.

“We (as an industry) need to look at how we’re going to provide a solution, and how we’re going to offset (the current range of vehicles in the market),” he said.

“For Mitsubishi, we are in the fortunate position that we do have PHEVs and the reality is that our PHEVs are growing extremely rapidly. But there are some realities that people who aren’t in the industry do not understand.

“There are nuances that include a product development cycle that takes years, and in this case, we are not just talking about a new model, we are talking about a significant step change in technology which has not yet been perfected.

“There will be potential implications that we haven’t modelled – and that’s because there is a certain pace that this technology evolves.

“Globally, there are billions of dollars being spent on research and development of various forms of powertrain, yet none are yet to a stage where they can replace the current formula.”

Highlighting the payload, towing and range stipulations required by Australian ute and SUV owners – particularly those in regional locations – Mr Westcott said it was vital that NVES rules didn’t leave certain buyers behind.

He said that for many buyers, a light commercial utility was more than a form of transport, and that the livelihoods of those buyers could be jeopardised by the hasty implementation of an uncompromising standard.

“These vehicles are what keeps the wheels of Australia turning – and we need to keep the wheels of Australia turning,” he emphasised.

“The practical realities of this situation are not being fully understood. It is part of our challenge, and our job, to try and make that problem known. But with only a couple of weeks to get that point across, the tide is against us.

“It seems that we’re going to have to see where the NVES lands and take it from there.”

If the NVES is introduced as hard and as quickly as is being proposed, one outcome could be that motorists be forced to hold on to older, more heavily polluting, and potentially less safe vehicles for years to come; the average age of vehicles in markets like Norway that have strong emissions-reducing policy settings has increased.

This not only presents obvious challenges against the primary intentions of an emissions standard but will have what Mr Westcott describes as the “perverse outcome” of reducing to a trickle the sales of new vehicles for many of Australia’s leading importers.

“I call it the perverse outcome – and it is a potential reality. And this comes at the same time as we’re facing a very real economic downturn,” he stressed.

“New technology vehicles have an inbuilt price premium, and now so will the more popular vehicles that sell in high numbers.

“Add to this higher mortgage repayments, cost of living pressures, and lower levels of disposable income and we will see more older, heavier polluting vehicles remaining on our roads for even longer – that is what I mean by a perverse outcome.”

When asked if the NVES proposal will affect sales of other models in Mitsubishi’s range – those without electrified technology – Mr Westcott was circumspect, saying Australia’s unique landscape plays a part in deciding what vehicles people choose to buy.

“I think the harsh reality is that we are not the United States and we are not Europe,” he stated.

“Models that work in those countries won’t necessarily work here. We have a relatively small population with long distances between our key centres. We don’t have recharging stations at sensible intervals. So, the reality is that we need these kinds of SUVs.

“And yes, there are other OEMs who are in a worse situation. They don’t have the options we do. We will have to manage the portfolio within our business and try to offset and balance as much as possible the new energy vehicles with our diesel- and petrol-powered models.

“Ultimately, you cannot force a consumer to buy a certain type of car … I was in the United States recently for the National Automobile Dealer Association meeting and one of the hot topics raised was how legislation introduced there has seen dealers left with lots full of cars they can’t sell – and it is public knowledge.

“General Motors and others are winding back EV production because they are producing cars that people don’t want to buy.

“Now, the reality of all of this is that we are companies that have to survive by selling cars, and if you bring cars to market that people do not want to buy, then we cannot force people to buy them.

“Consumers will ultimately dictate the types of vehicles that are purchased, because they buy vehicles that suit their needs, and in many cases their business – this is a reality that I believe we are going to see play out in the next couple of years.”