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The federal government will water down proposed carbon emissions laws for vehicles, as it seeks to appease auto makers who feared it would push up the price of some cars by thousands of dollars.
Enforcement of the climate standard will also be delayed by six months from its scheduled New Year start date to July 2025.
The changes will shift some car models from the stricter emissions limit for passenger vehicles into a softer standard for "light commercial" cars, meaning cars like the Isuzu MU-X and Ford Everest will no longer have to meet the strictest fuel economy rules.
And seeking to combat claims it is imposing a "ute tax" on the industry, the government will raise the ceiling on emissions limits for all light commercial vehicles.
In a sign it has won the broad support of the motor industry, Climate Change Minister Chris Bowen and Transport Minister Catherine King stood shoulder to shoulder with executives from Toyota, Hyundai and Tesla, as well as other senior industry representatives.
Toyota Australia chief executive Matthew Callachor said the standard would still be tough to meet, but it was time for change.
"We shouldn't be under any illusions there still remains a very big challenge in achieving these ambitious numbers ... but the reality is we just simply need to get on with it now," Mr Callachor said.
"We wanted an emissions standard to basically help us with long-term product planning, and we wanted an emissions standard that was ambitious but also brings people on the journey ... which is where we are."
In a pointed rebuke of the campaigning by the Opposition, Mr Callachor also rejected suggestions the scheme amounted to a "ute tax".
Tesla Australia representative Sam McLean said the policy was a "solid compromise".
"This is a very moderate standard that takes Australia from really the last place in this transition to the middle of the pack," Mr McLean said.
The motor industry has advocated for emissions laws to be imposed on them for years, with Australia and Russia the only major economies without an efficiency standard.
Car makers say that has made it hard to convince global headquarters to ship efficient cars and EVs to Australia, when they are trying to meet similar standards in other countries.
Mr Bowen said not everyone had gotten what they asked for, but said the government had landed on a reasonable compromise that took into account the concerns of industry.
"This legislation will mean Australian motorists are no longer at the back of the queue, no longer treated as second-class citizens," Mr Bowen said.
"No longer will Australia be in the 'G2' of Australia and Russia as the only two major economies without vehicle efficiency standards."
The less stringent standards will still result in an estimated 50 per cent reduction in emissions by 2029, compared to the previously expected 60 per cent reduction.
Without intervention, transport emissions would be the biggest source of pollution in Australia by the end of the decade.
That softening accounts for the fact that the government is seeking to catch up to the United States vehicle emissions scheme by 2028, but without using any of the bonus credits car makers can claim overseas.
The New Vehicle Efficiency Standard will require car makers to ensure their total sales each year get below a carbon emissions limit that will become stricter each year.
If they fail to do so, they must buy credits generated by other car brands whose cars did get below that limit, or else pay a heavy fine of $100 for every gram of CO2 per kilometre they exceeded by, applied to every car they sold in that year.
The scheme incentivises car makers to get under the limit by selling more of their most efficient cars or electric vehicles, or by selling fewer high-polluting cars.
The government is yet to win enough support to pass the proposed laws in parliament, with the Greens still demanding changes to separate legislation on gas project approvals before offering support for the vehicle efficiency scheme.
Legislation will be introduced to parliament tomorrow.