Federal Govt Considers Blowing New Car Dealer And Manufacturer Import Sectors Apart Photo:
Tim O'Brien | Apr, 17 2015 | 25 Comments

Under its review of the Motor Vehicle Standards Act (MVSA), the Federal Government has rolled a hand-grenade into the new car dealer and vehicle manufacturer import sectors.

A release yesterday from the Assistant Minister for Infrastructure and Regional Development, the Hon. Jamie Briggs, states, "Cabinet has now agreed to consider possible options to reduce restrictions on the personal importation of new vehicles after further public consultation is undertaken."

The industry umbrella body, the Federal Chamber of Automotive Industries (FCAI), has labelled the Minister’s position "misguided".

That it has arisen however, and, as we have learned, been under discussion with the sector for some time, is precisely as we warned following the report of the Harper Review into Competition Policy (which made recommendations on parallel importing of second-hand vehicles).

"The danger in this report for new vehicle manufacturers and importers," we warned, "is that an acceptance of its findings by Government may also set some to thinking about new cars."

That thinking would appear to be accepted by the Federal Government.

The Assistant Minister’s announcement states, "As part of this process (the review of the Act) the personal importation of new cars has been a key consideration, particularly given the end of light vehicle manufacturing in Australia in 2017-18."

Its position is that it wishes to "ensure we strike the balance between appropriate safety standards, in line with international best practice, and consumer access to vehicles at the lowest possible cost".

All of this comes as part of the Government’s review of the Motor Vehicle Standards Act (MVSA). The Act defines national vehicle standards for new motor vehicles and regulates the supply of imported vehicles to the Australian market.

That this review of the Act and the apparent policy position the Federal Government has taken on vehicle imports and competition policy has alarmed the industry is an understatement.

"The Australian Government’s complete disregard for the serious consequences that would flow from a plan to allow Australian consumers to personally import new motor vehicles is irresponsible and short-sighted," FCAI Chief Executive Tony Weber warns.

FCAI’s position is that if the Government were to proceed, the rigorous protections afforded to consumers through Australian consumer law for vehicles purchased from new car dealers here, would not apply, nor be enforceable, for vehicles purchased overseas.

FCAI further warns, "Brands selling in this country make substantial investments in Australia by way of dealerships, workshops, technology and training to support and service their products. This means consumers can be certain their vehicles can be serviced and repaired appropriately."

"I am bewildered that Assistant Infrastructure Minister Jamie Briggs can take such a simplistic view of an issue and appear to completely discount the advice of the industry it directly affects," Mr Weber said.

Mercedes-Benz Australia, whom, among other premium brands is potentially most threatened by this proposal from Government, also warns of the consumer protections put at risk should this proposal gain the acceptance of the parliament.

"Without the same level of protection for the consumer from rebirthed cars, stolen cars, insurance write-offs or vehicles under finance, that is the prime risk," Mercedes Benz spokesperson David McCarthy told TMR.

"Australian consumer law provides extremely robust protection in these areas and a vehicle imported privately would have none of this protection," he said.

But is there ‘a competitive benefit to consumers’ in this proposal?

David McCarthy again, "In regard to new cars, the FCAI carried out extensive research into like RHD markets and proved that there is little if any advantage (for purchases) under $150K.

"In fact, some cars are actually cheaper in Australia than other RHD markets. As any opening up of the market would only benefit approximately two-percent of buyers and would strip them of consumer protection, we can see no logical reason to do so," Mr McCarthy said.

As reports in recent years from CommSec (among others) show, car affordability in Australia is at the best it has been in more than 35 years.

And, a comparison report by automotive data specialists IHS Automotive (commissioned by the FCAI, 2014) shows that the average consumer in Australia pays an approximately equivalent price to that paid by car buyers in equivalent RHD markets for models of ‘like’ specification.

This report, and a comparison chart of sample vehicles by specification, price and model, can be found here (fcai.com.au).

Importing a new Porsche from the UK would still attract LCT, GST and other costs.
Importing a new Porsche from the UK would still attract LCT, GST and other costs.

There is however a price advantage to buyers in the upper premium market, for cars selling in this market above $150,000.

But a large part of the premium paid by Australian buyers is in the Luxury Car Tax (LCT).

It applies at an astonishing 33 percent on every dollar above the threshold of $61,884, or $75,375 for fuel efficient cars.

For example, on the X6 M we drove recently, of its $194,700 list price (plus on-road costs), more than $40,000 of this purchase price is LCT and GST, remitted directly to the Government. (There is also the additional cost of stamp duties paid to State Governments.)

For consumers who might contemplate a purchase of a new right-hand-drive Porsche (for instance) directly from the UK (unlike older classic imports, it won’t be registerable anywhere in Australia unless RHD), they will need to factor both LCT and GST into the purchase, which will be payable upon landing the vehicle.

There can also be customs duty (which can be an ad valorem tax impost, based on an assessed value of the car), and, of course, shipping, insurance, transport and delivery charges. There will also be the stamp duty payable upon registration.

To that, the consumer will carry the risk, and any costs involved, in foregoing the protection of the warranty.

We would need to do a broader comparison of premium vehicle prices between the two markets, and factor in taxes and charges that would apply, as well as factoring in exchange rates, to quantify the price advantage of a personal import.

But, when factoring in Australian taxes, charges, costs and currency variables that would apply, the benefit in a sub-$250k purchase may not be of the order that popular opinion supposes.

And it’s goodnight and goodbye ANCAP.

The press release from the Assistant Minister also states, "The Australian Government will continue to cut unnecessary red tape by accelerating the harmonisation of our vehicle standards with international best practice to ensure we lower costs for business and make Australia more competitive."

"Currently, the MVSA imposes $281 million a year in regulatory compliance costs to Australian business and we are confident these costs can be reduced substantially."

Let’s not misunderstand: though not strictly a regulatory cost, that will mean "goodnight and goodbye ANCAP".

The crash-testing of perfectly good new vehicles here is an onerous cost which, when local manufacturers shut-up shop on their manufacturing operations here, will be an unnecessary impost once the "harmonisation of our vehicle standards with international best practice" is complete.

And the danger to enthusiasts?

Before you join the cheer squad, consider the ominous warning in the following words tucked into the Assistant Minister’s release:

"We are, however, considering how we can continue to support specialist and enthusiast vehicles to be imported without impacting on road safety."

"Any potential changes in this area will be focused on ensuring consumers have access to the lowest cost, safest and youngest car fleet possible."

There is, in fact, a coded warning there which might easily be missed.

The code is in these words, "without impacting on road safety"…. "potential changes in this area"… and "safest and youngest car fleet possible".

When a Government talks of "potential changes", it is talking about changes it wants.

If that doesn’t have a certain Senator Ricky Muir running to the ramparts to let the Government know that there should be no changes to the importing and use of older classic cars, it should.

And it should also have the car clubs making sure their local member knows their thoughts on the issue.

Putting more jobs at risk?

The central issue for the industry is that these musings from Government paint a picture that is largely fiction: the fiction being that this is an uncompetitive, high-price market.

That fiction however, in driving this proposed policy position espoused by the Assistant Minister, and if adopted, will put jobs in the new car dealer sector at risk.

It will also threaten the investment of hundreds of medium and small businesses - new car dealerships - many of which, especially in country areas, are family businesses and important to the communities they serve.

It could, in fact, blow the industry apart.

Predictably, this is a point not lost on FCAI.

It urges the Government to investigate the implications on consumers and "on automotive dealers, on service and repair networks, on future intelligent transport and communications systems, and on the automotive brands that invest in the tools, training and technicians that are available in this county to service a motor vehicle".

Certainly, for the average car buyer, given the level of competition and choice that currently exists in the Australian new car market - among the most competitive on the planet - there would seem to be little evidence that the adoption of such a proposal will drive "greater competition and consumer choice in our vehicle market" as the Assistant Minister’s flagpole press release purports.

Perhaps the last word might go to the Victorian Automobile Chamber of Commerce.

"VACC is astounded by the Federal Government’s sudden concern about new vehicle affordability.

"For years, VACC has advised Governments to abolish the Luxury Car Tax. If it is serious about new vehicle affordability, then we are more than ready for that conversation," VACC Executive Director Geoff Gwilym said.

That might be a place to start, but don’t hold your breath.

Governments can be as pure as the driven snow when it comes to championing the sanctity of economic principle, except when it comes to a tax distortion. Then the conversation changes.

If you wish to feed your views through to the Government on this and the related issue of older classic car imports, information on the consultation process can be accessed online here (infrastructure.gov.au).

MORE: Competition Policy Review Opens Door To ‘Wide-Scale Grey Imports’

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