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Australians could save up to $1000 a year in fuel under the federal government's new long-awaited fuel efficiency standards.
Australia is one of the last developed nations to impose a fuel efficiency standard.
Minister for Climate Change and Energy Chris Bowen unveiled the preferred model, which is expected to deliver more choices to would-be buyers by encouraging car makers to sell more electric and fuel-efficient vehicles.
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The standards will apply to new passenger and light commercial vehicles in Australia, and bring it into line with the United States.
If Australia matches the United States in average vehicle efficiency by 2028, drivers should save about $1000 per vehicle per year, Bowen said.
"Because of a lack of action on an Efficiency Standard, Australian families are paying around $1000 a year more than they need to be for their annual fuel bill – the Albanese Government is delivering long-term cost-of-living relief to fix that for new vehicles and put money back in people's pockets," Bowen said in a statement.
"We're giving Australians more choice to spend less on petrol, by catching up with the US – this will save Australian motorists $100bn in fuel costs to 2050.
"This is about ensuring Australian families and businesses can choose the latest and most efficient cars and utes, whether they're petrol and diesel engines, or hybrid, or electric."
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Climate groups and industry bodies including the Electric Vehicle Council (EVC) praised the move, saying the country had finally "joined the rest of the developed world".
"This announcement from the federal government, when legislated, will give Australians a greater choice for the cars they want and put money back in their pockets through lower fuel bills," EVC chief executive Behyad Jafari said.
"Within a few short years, it will mean the average family will not have to spend as much on imported petrol, which we know is hugely volatile on price.
"Australia has always been at the back of the queue when it comes to the best and cheapest electric vehicles, because car makers have been incentivised to offer them elsewhere first.
"That should end now with this policy, and Australian car buyers should notice the change very quickly."
The government will consult on the preferred model for a month and introduce the legislation as soon as possible, with the new cost-saving rules to come into effect by January 1, 2025.
