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77 per cent of new cars already have zero tariff

No tariff: Toyota’s Japanese-made Corolla hatchback would be no cheaper if Australia axes import tariffs, as the model is one of many covered by free-trade agreements with countries such as Japan, South Korean, Thailand and the United States.

Axing Australia’s import tariff would benefit less than one in four vehicle sales

5 Jan 2018

CALLS by road safety experts and the motor industry for the federal government to cut or scrap new-vehicle import tariffs in the interests of road safety would benefit less than a quarter of cars and light-commercial vehicles sold in Australia.

The theory goes that cutting the 5.0 per cent import tariff on new vehicles would make them cheaper and therefore tempt owners of older vehicles to trade up to cars fitted with advanced safety equipment and eco-friendly technologies.

With the death of the Australian car industry – the original reason for tariff protection against cheap imports – industry organisations such as the Federal Chamber of Automotive Industries (FCAI) and Australian Automobile Association (AAA) say the tariff is not needed, and discourages sales of advanced cars that would benefit society.

The deputy prime minister Barnaby Joyce told ABC radio on Thursday that the idea had merit but would have to be run by cabinet and the federal expenses review committee.

The biggest sources of motor vehicles sold in Australia – Japan, Thailand and South Korea – already ship cars and light-commercial vehicles into Australia without the 5.0 per cent import impost, thanks to free-trade agreements.

Vehicles from the United States, China and Malaysia are also covered by such arrangements.

In 2017, an estimated 920,244 or 77 per cent of the 1,189,116 vehicles sold in Australia – including 863,392 imports and 56,852 cars and utes made in Australia – were tariff free.

This means that import duty was paid on roughly 268,872 vehicles. According to industry sources, this contributes about $470 million to federal government revenue.

The biggest beneficiaries of a tariff cut would be European and United Kingdom motor manufacturers, as these jurisdictions are yet to seal a free-trade agreement with Australia. However, bilateral talks are thought to be still bubbling along with both of these regions.

European countries with the most to gain from a tariff removal would be Germany, with its 91,132 vehicle exports to Australia last year, and Spain (16,310).

German car companies Mercedes-Benz, BMW, Audi and Volkswagen would also benefit if tariffs were removed from vehicles imported from South Africa, Argentina and Mexico, as they import models such as the Mercedes C-Class, BMW 3 Series, Audi Q5 and VW Amarok from these places.

Under Brexit, the UK is expected to be excluded from any free-trade talks with the EU, meaning its trade arrangements are now being considered separately.

Last year, 35,441 British-built vehicles – including Land Rovers, Jaguars, Minis, Bentleys, Rolls-Royces and Nissans – were sold in Australia.

However, these are small numbers compared with Asia’s motor industries, with Japan responsible for 341,663 vehicles – about one third of all sales – in Australia last year.

Next biggest was Thailand which shipped 297,482 vehicles to Australia last year, including Australia’s top-selling vehicles, the Toyota HiLux and Ford Ranger one-tonne pick-ups.

South Korean manufacturers were responsible for 175,802 units, mainly from Hyundai and Kia.

Although Chinese vehicle imports have been small to date, improvement in the safety and quality of many of these cars, SUVs and utes from China resulted in 60 per cent a jump in sales last year, to 4689.

FCAI chief executive Tony Weber said the tariff reduction proposal should be viewed as an investment in safety and technology.

“Currently around 88 per cent of new vehicles are five-star ANCAP safety rated.

However, in direct contrast to that, the current average age of the total vehicle fleet on Australia roads is around 10 years.

“Abolishing the new vehicle tariff would pass on thousands of dollars in price cuts at the showroom, which would make more vehicles with advanced safety features such as autonomous emergency braking (AEB) and lane-keeping assistance more affordable for the average consumer.

“The flow-on effect of this would also benefit our environment because new vehicles produce fewer emissions and CO2.”

The AAA said cars built before 2000 accounted for only 20 per cent of Australian vehicles in 2015 but were involved in 33 per cent of road deaths.

The rate of fatal crashes for pre-2000 vehicles was also four times higher than for vehicles made after 2011.

AAA chief executive Michael Bradley said : “Australia’s car manufacturing industry has closed and the tariffs and taxes used to protect it over recent decades can no longer be justified”.

“Tariffs and taxes will add $5 billion to the price tag of new cars sold over the next four years and retard the fleet renewal needed if we are to make technologies such as lane-keep assist and autonomous emergency braking commonplace.”

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