Proposed Import Law Changes Shake Industry

Consumers will unlikely benefit from changes to new car import rules, and local operations will be hurt, says an increasing number of voices from Australia’s auto industry.

Michael Deed,  Policy Director - AADA, Terry Keating, Deputy Chair - AADA and  Patrick Tessier, CEO - AADA discuss imports with Senator Kim Carr at the FCAI Annual Dinner. Photo: Donna Ellis.

Michael Deed, Policy Director – AADA, Terry Keating, Deputy Chair – AADA and Patrick Tessier, CEO – AADA discuss imports with Senator Kim Carr at the FCAI Annual Dinner. Photo: Donna Ellis.

The Federal Government is proposing amendments to new car import rules which would give consumers the ability to import new cars into the country outside of established frameworks; an issue which has been comprehensively covered in the pages of Automotive Dealer.

The AADA’s stance is firm: relaxing new car import laws is not only unnecessary, but potentially dangerous to the consumers it is supposed to benefit.

Our voice however, is just one amongst a myriad of others from across the auto industry, many of which are uncovering the pitfalls of this proposed scheme.

The decision to relax new car importation laws is set to go to cabinet ahead of a decision later this year and according to Federal Assistant Minister for Infrastructure, Jamie Briggs ‘any potential changes… will be focussed on ensuring consumers have access to the lowest cost, safety and youngest car fleet possible.’

But don’t consumers already have access to this in Australia? And will new import rules actually benefit the consumer at all?

These questions were tackled head-on in a detailed investigation which recently appeared in the Sydney Morning Herald titled What Drives New Car Prices.

The story, which examines the import issue from a number of angles, highlights that the Government’s plan is flawed since ‘most European car makers will not sell new individual vehicles to the public, meaning prospective users of the scheme would need to go through a secondary channel that could bring safety and insurance repercussions.’

The bottom line is that when compared with equivalent models sold in markets such as Japan and the UK, Australia’s new cars are competitively priced and often better value as evidenced in the table below. This new car affordability data is referred to as one of the many ‘inconvenient truths’ often ignored by industry skeptics.

What’s more, a comparison of popular nameplates from today (compared with their forefathers from over 20 years ago) further demonstrates just how competitive and generously equipped new cars are in Australia today.

One aspect of the new car pricing system that does push up prices (and quite ironically as pointed out in the SMH article) is the way cars are taxed.

Even if importation laws are relaxed and consumers are able to bring new cars into the country themselves, they will be subject to the same range of taxes included on cars sold through the Dealer network.

This includes GST, the import tariff (on cars from selected countries) and the Luxury Car Tax (LCT) which Automotive Dealer readers will be well aware of.

All these taxes would still be payable on cars imported independently, along with substantial shipping fees estimated to be in their thousands per vehicle, more than what manufacturers (who ship in bulk), pay.

What Australians pay, compared with similar overseas right-hand drive markets:

Notes: 1. Prices are Manufacturer’s List Price and includes GST applicable to the base/standard specification model but does not include dealer delivery and various government charges (e.g. registration fees, stamp duty, CTP and the like) normally included in a ‘driveaway’ price. Any LCT applicable is shown in the notes column.  2. For conversion purposes we have used the average daily exchange rate during the 1st half of 2014 from the Reserve Bank of Australia, Exchange Rate Data [http://www.rba.gov.au/statistics/hist-exchange-rates/index.html]—$1 to £0.55 GBP.  3. Price in the UK if a model with the same level of specification as Australian variant was available. Where a model with this level of specification is not available, these prices are based on estimates from the brand.

Notes: 1. Prices are Manufacturer’s List Price and includes GST applicable to the base/standard specification model but does not include dealer delivery and various government charges (e.g. registration fees, stamp duty, CTP and the like) normally included in a ‘driveaway’ price. Any LCT applicable is shown in the notes column.
2. For conversion purposes we have used the average daily exchange rate during the 1st half of 2014 from the Reserve Bank of Australia, Exchange Rate Data [http://www.rba.gov.au/statistics/hist-exchange-rates/index.html]—$1 to £0.55 GBP.
3. Price in the UK if a model with the same level of specification as Australian variant was available. Where a model with this level of specification is not available, these prices are based on estimates from the brand.

The combination of these factors seems to negate any perceived savings to the privately-importing consumer, notwithstanding the potential safety issues raised by many industry players.

‘You buy a car from a Dealer in Australia and the consumer protection is incredibly robust. But buy a vehicle from overseas, and there’s every risk that it’s stolen, under finance or it’s two cars welded together as one. It’s a huge issue’ says David McCarthy – Mercedes-Benz Australia corporate communications manager.

This is echoed by Porsche Australia spokesman, Paul Ellis:

‘If [the deregulation plan] is allowed to go ahead it will bring into the country cars with questionable ownership history and questionable servicing history… it will also jeopardise resale values of existing cars that meet stringent quality standards put in place for new vehicle sales in Australia’ Mr Ellis said.

Another factor that weighs into the debate includes the modifications made to overseas vehicles so that they’re able to cope with Australian conditions.

Many manufacturers tweak the cars they import into Australia to cope with hotter climates, coarser roads and Australian-specific motoring preferences. Vehicles intended to be driven in Europe, Asia etc. that are brought directly into the country will likely underperform compared to their Oz-spec equivalents.

AADA agrees that in all retail industries, Australian consumers deserve a fair deal and prices. However, the lowest price does not always mean the greatest value – and considering the range of drawbacks consumers could likely face if import laws are relaxed, deregulation does not seem like the greatest option.

David McCarthy puts it well: ‘Of course we want to protect our business. But our business is also protecting our customers.’

Considering the uncertainty surrounding the price of importing mainstream cars (adding taxes and shipping fees), the question remains:  Will consumers really be better off?

Senator, the Hon Kim Carr Acknowledges AADA Concerns

Senator for Victoria, the Hon Kim Carr recently responded to a letter from AADA CEO Patrick Tessier which outlined the Association’s concerns surrounding the impact of relaxing private new car importation laws.

In his response, Carr states how ‘Labor is concerned that the Government has ignored the warnings of experienced Dealers that safety and service standards cannot be guaranteed in direct personal imports of cars.’

He also highlights the complexities of purchasing a car and that sub-standard products cannot simply be returned: ‘Buying a car is not like buying a book on Amazon,’ Mr Carr says, ‘once the car arrives the consumer can hardly return it if it is faulty and there will be none of the support traditionally provided by car dealerships in Australia.’

Carr says that Labor will closely monitor the Government decision regarding this issue and assures that it ‘will not support any change in the law that allows potentially sub-standard vehicles to flood the market.’

8 comments

  1. To quote from above ” consumer protection is incredible robust”

    I purchased a new Hyundai i30 Trophy and from the moment she drove it from the forecourt it had gearbox problems, after three attempts to rectify the problem it went back to the dealer to have replacement synchro’s to first and second gear, however, the problems persisted with the gearbox and I asked Hyundai to replace the troublesome gearbox and as there were hundreds of people experiencing the same problem I thought it was justified.

    Hyundai would not replace the gearbox and would only repair it as part of their warranty commitment. I sold the car back to the dealer after three months of ownership and only 465km on the clock and lost just over $3000 in the buy back price as I didn’t have confidence in the vehicle.

    I will never again buy any car from Hyundai and would hands down take my chances buying and importing a car myself, he’ll it can’t be any worse than the treatment I received here from our ” incredible robust consumer protection”

  2. Dave

    I would never buy a new vehicle overseas, no warranty unless you ship the vehicle back to them. Local vehicles are designed for local conditions. They have things like revised suspension and damper rates for Australia, they have larger radiators and higher capacity air conditioners to cope with Australia’s higher temperatures.
    Some markets have different airbags because the country they come from don’t have mandatory seat belt laws and they assume the airbag will be the main safety feature, not the seatbelt.
    People buying vehicles overseas will ruin our current account deficit with large amounts of funds going overseas, sure it will with the mainstream dealers but owners are more likely to buy their parts online, being shipped direct to them personally avoiding GST, that the dealers have to pay.
    If you smash it and there’s no parts, no big deal until you order the part from OS and when it arrives it’s the wrong one.
    Even tyre sizes on imported vehicles can be hard to match, because the size is only imported into Australia in small quantities and therefore hard to get and expensive , they might be rated for low temperatures and blow when subject to high sustained temperatures they were never designed for.
    How much is is going cost to get the car certified, their not going to just let them into the country without it. what about resale, insurance, and the list of possible fails is endless.
    You are not covered by Australian Consumer Law, so if a vehicle needs a recall, you wear it not the manufacturer. Heaven forbid the recall fault could kill you and because your not in the country you never get to find out until it’s too late. NOT FOR ME THANKS.

  3. It’ll be interesting to see how many people decide to take the gamble and order their cars from overseas. In some ways it will be good because someone can get the exact model that they want, even if it isn’t necessarily offered here. However, I do agree, importing cars that haven’t been made to Australian specifications could be a slippery slope. Our country offers a very unique set of challenges for automotive engineering. Volatility does have it’s benefits for certain areas of the auto industry, we are a Car Buying Service and people buying lots of cars means that others are selling lots of cars. Interesting to see how this unfolds.

  4. Billy Burgen

    Do the guys from Merc and Porsche have rocks in their heads or are they scaremongering? Their going on about poor service history and two cars welded together, etc. The new laws are about individuals importing new cars.

  5. Jose

    I’ve had three privately imported cars and I’ve never had an import that couldn’t handle Aussie conditions… I wouldn’t hesitate importing my own car from overseas.

  6. Tom Tomic

    It is more so buyer beware in Australia. On my many travels to Germany, a friend in Germany purchased a used
    BMW and asked the seller if the car had ever been in an accident to which the reply was ” not that I know off or
    not since ive had it”. The car was purchased and tested with a magnet which fell off the panel which confirmed
    there was bog on the panel. The car was returned and the money was returned with an genuine apology.
    Now that is honesty.
    Buyers whom only purchase BMW’s, Audi, Merc and alike, know their cars. They dont need a dealer team to advise them on a purchase.
    Great deals can be bought internationally where you will save and have an holiday at the same time and still come home with change.
    My calculations say that a 25% saving from the price list on a car purchase provided in the box above can be
    achieved, in fact the more you spend, the more you save. Which means you can afford the car you really want.

  7. Fletcher Gow

    Really? Cars like Porsche, Merc and BMW etc are built to a global standard. They have International Warrantees and in most countries in the world can be imported and exported at will. When you pay between $30,000 to $100,000 extra for your Porsche here in Australia for absolutely no benefit then you realise that there is much for sections of the Automotive Industry to protect. BTW the reason Nissan and Toyota are making very little noise is because their cars are already price on international standards.

    Any argument to suggest that a brand new Porsche purchased direct from the UK under a full international warrantee is any less than one delivered through Porsche Asia then Porsche Australia and then Porsche Melbourne is pure propaganda.

  8. Ross Stanley

    The above comments are by the AADA are naturally biased by the related party interests these various individuals hold. It makes common sense for the above individuals to make decisions that support the various Co’s they benefit financially. Whist they are directly involved in the industry, I believe they have a right to have a say. Personally I do not adhere to all of their reteric. What I have noticed we have a extra 30% luxury car tax. I would have thought that tax would have been reduced as we are not manufacturing cars in Australia any more. So therefore subsidy money is not being paid out. Why not give some relief to the motorist that pay it. Compared to other counties in the world we have a very poor public transport system. Yet our country is one of the largest in the world. All governments have one thing in common. They will take as much money in the form of tax, GST, duty, fees, etc, from their citizens as they think they can get away with. Whether correct or not. Interestingly, if you import a antique vehicle, and it is over the luxury tax threshold. You will pay in the order of approximately a extra 30% luxury car tax on top of the 10% GST and 5% duty. Yet the antique vehicle you import will not have the luxury items todays vehicles have. Such as wind up windows, heating, air conditioning. some vehicles are crank start, poor lighting. Some early models have no roof or doors. Yet we are expected to pay a luxury car tax on these vehicles. If that is the case the luxury car tax should exempt these vehicles. What the government is doing is actually taxing the history and antique value of these cars not the luxury value. If they want to pursue and include a course of a second taxation to include taxing cars of historical significance. They should not call the tax a “luxury car tax” it should be called a “import car tax”. I don’t see anything in the breakdown of the luxury car tax where they state the intention is to tax the incoming vehicles on their historical significance. Effectively what this wrongly placed tax does is it deprives the various Australian motoring enthusiasts the opportunity to enjoy, be it seeing, touching, driving or being a passenger in some of the most wonderful, historically rich vehicles in the world today.
    What a backward group of policy makers we have in Australia today.
    There are many more points I could bring up. Personally I think I have said enough to cover my thoughts.
    You can probably judge from my above comments, I would like to import some fantastic historical vehicles into Australia not only for my family and friends to enjoy, but also display in a museum for the general public to enjoy. The current and intended taxes are very prohibitive.

    My above comments are as equally biassed as the above AADA comments are.

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