Australia-Japan FTA Could Sharpen Pricing On Imported Cars: PM Photo:
Trevor Collett | Apr, 08 2014 | 8 Comments

Prime Minister Tony Abbott has highlighted Australian food exports and Japanese new car imports as the big winners in a new Free Trade Agreement (FTA).

Mr Abbott and Japanese counterpart Shinzo Abe are today expected to finalise the FTA, which could see cheaper cars for Australian consumers from the country that we buy more cars from than any other; Japan.

Of the 87,957 imported vehicles purchased in March, 30,132 (34 percent) originated from Japan, followed by Thailand (18,844 - 21 percent) and Korea (11,299 - 13 percent).

The tariff-cut for Japanese imports will also extend to electronics and whitegoods, but Japanese cars, on average, could be up to $1500 cheaper once the full impact of the removal of the five percent tariff is realised over the next 1-5 years.

Toyota’s Corolla and the Mazda3 have consistently topped the sales charts in Australia, and both could be cheaper under the FTA - although the Corolla sedan originates from Thailand, with which Australia already has a FTA.

However, carmakers may instead choose to add more value to their Japan-sourced models rather than cut ticket-prices, particularly if they feel the models are already competitively priced in their various segments.

Speaking with TMR, Mazda Australia communications manager Steve Maciver said the carmaker is considering which steps it will take as the FTA comes together.

"Ultimately we’ve got to look at the market, we’ve got to look at what our competition does, and we’ll work out what we do then," Mr Maciver said.

"There’s potential there for either savings or value-add in the region of about $700."

He added that there has been confusion among onlookers over the potential savings that could be found at the retail end.

"That $1500 is essentially based on a retail price. Somebody’s taken a $30,000 car and said ‘if you take 5 percent that’s $1500.’ That’s not the way that tax is applied. That import duty is applied on the landed cost of the car, which is of course less than full retail," Mr Maciver said.

"So if you wanted to take an average Mazda3 price of around $25,000, what the import duty portion of that would be would be around the 7-800 mark."

"So to suggest that people are going to see $1500 discounts of a $30,000 car isn’t quite right," he said.

Mr Maciver said that, for now, the company will wait to see how the details of the agreement unfold over the coming months.

Australian Prime Minister Tony Abbott, speaking in Japan, said of the free trade agreement:

"This is the first time that Japan has negotiated a comprehensive economic partnership agreement or free trade agreement with a major economy, particularly a major economy with a strong agricultural sector," Mr Abbott said.

Mr Abe said the agreement with Australia would form a “new special relationship” between the two countries.

"In today's meeting, I have confirmed with Mr Abbott that we will elevate this strong bilateral relationship between our two countries to a new special relationship, so that we can work on forging an even stronger partnership together," Mr Abe said.

With FTAs expected to be in place with Australia’s top-two sources for imported vehicles, another FTA is expected to be finalised with South Korea this week as Mr Abbott continues his visit to the region.

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