Australia has a fleet of fuel guzzling passenger vehicles. Australia’s 14 million registered cars consume petroleum-based fuels at an average rate of 10.1 litres for ever 100kms, which well above what is usually regarded as efficient at 7.0l/100km.

This equates to 19,486 megalitres of fuel per year and means that transport emissions account for 18% of Australia’s greenhouse gas emissions and transport related carbon emissions have risen 63% since 1990.[2]

The Australian government’s energy department regards a vehicle with emissions of less than 120g CO2e/km as a “green” vehicle ,which includes all EV’s, hybrids and some conventional engine vehicles, with these “green cars” accounting for 3.8% of sales in 2017.[3]

With our current fleet average of 181.7g/km in 2017, the emissions intensity of passenger vehicles is 45 per cent higher than Europe at 118.5g/km.[4]

Currently, Australia has a low uptake of low emission cars, particularly electric vehicles (EV’s).  At present there have only been 5,644[5] sales of EV’s to date, in a vehicle market that usually sells in excess of 1 million new vehicles per annum.

This limited number of sales of “green” vehicles in the Australian market is likely due to limited choice, high prices and very few second hand choices for consumers to purchase a used efficient vehicle.  By comparison, the used vehicle market in Australia is estimated to be around 3 million vehicles per annum.[6]

It would obviously be a good outcome for Australia’s commitment to the Paris Climate accord to facilitate the replacement of older polluting vehicles with more efficient, less polluting vehicles.

Multinational automotive firms have been keen to preserve the status quo as they price discriminate between different countries, much the same way that an airline price tickets for effectively the same product meaning that even after considering GST, luxury sales tax and the 5% import tariff that vehicles here are much more expensive.

Interestingly, that even after Holden’s departure, that consumers still pay a 5% tariff on imported vehicles and the 33% luxury car sales tax above $65K(~$75K for vehicles with fuel efficiency of 7.0l/100km or less) that was supposed to protect the local limousines, the Holden Caprice and Ford Fairlane also still remains.

Grey Imports History

 “Grey imports” are those which are legally imported from another overseas market, using channels outside of the manufacturer’s distribution network.

Also known as “parallel imports”, this additional importation channel occurs without the sanction of the intellectual property owner and often covers products such as the sale of music, films, and video games.

In the automotive sector,it is where an automotive brand faces competing sales of its own used vehicles,where another secondary importer chooses to buy used vehicles from another country and imports them to sell and compete against the sales of the brand’s used vehicles.

These competing importers take advantage of cheaper used prices, which usually reflect a lower new car price in the country from which the used vehicle is sourced.

The automotive brands do not like this as the effect of lower used car prices is to lower their ability to sell their new vehicles at a higher price in the market where grey imports occur.

Historically, many countries have banned these grey imports, especially where they have local manufacturing in an effort to protect them from perceived “unfair” competition.

A particularly salient example is New Zealand, which in the early 1990’s opened its automotive market to grey imports after the local assembly of vehicles from CKD (Complete Knock Down) kits ceased.

Prior to this time, New Zealand was known for a vehicle fleet of ageing mostly British, Australian or Japanese origin vehicles that were assembled domestically behind the protection of high import tariffs.

Since this time the opening of the market had a significant impact, with annual second hand vehicle imports exceeding new vehicle imports in every year but three since 1989.[7]

Most of these used vehicles were imported from Japan, another Right-Hand-Drive (RHD) market, which has local registration and other rules that encourage the disposal of vehicles after a relatively short time, encouraging new car sales there and hence a steady supply of used vehicles.

In 2013, the Australian government launched the Harper Review of competition law in Australia which included a review of grey imports of vehicles.

Then, in April 2015, after this review was completed and after also receiving advice from the Productivity Commission, the then Assistant Minister for Industry, Jamie Briggs announced..

We allow people to purchase all sorts of goods from overseas on the internet. There seems no reason why we shouldn’t allow people to buy new cars from overseas markets if there’s an opportunity to do so.”[8]

 By February 2016,  Paul Fletcher, the Federal  Minister for Major Projects, Territories and  Local government then announced..

“It is true car dealers are not enthusiastic about this change, but we expect the quantity of imports to be modest….Most Australians will continue to purchase cars directly imported by manufacturers and sold through their existing dealership network”[9] as they proposed the facilitation of grey imports from 2018, after the last of the local automotive manufacturing ceases in 2017.

Then in 2017, the Road Vehicle Standards Act was proposed which would allow the importation of “near new” vehicles from the UK and Japan if they were less 12-months old and had driven less than 500km.

Whilst not an “open door” to used imports, it was at least encouraging that there would be additional competition to new car sales with these “near new” vehicles.

Unfortunately, the government appeared to have bowed to pressure from the MTAA (Motor Traders Association of Australia), the FCAI (Federal Chamber of Automotive Industries) and the AADA (Australian Automotive Dealer Association) as by December 2018, when the bill was legislated, these “near new” vehicles were excluded from the legislation.

AADA CEO David Blackhall was quoted as saying “I congratulate the government and the opposition for the bipartisan approach they have taken in relation to this legislation,” …“Following the passage of the Bill, the AADA will now focus on supporting the development of the underlying regulations to make sure that greater numbers of grey imports do not come into Australia.”[10]

This now means that In the Australian context, used vehicle imports are currently banned except for returning expatriates, and under the Specialist & Enthusiast Vehicle Scheme (SEVS) which allows limited importation of a list of specific vehicles that were not sold by the manufacturer locally in Australia.

So, we still have grey imports basically banned in this country, despite that fact since Holden shuttered its plant in 2017, there is no local manufacturing to protect.

Australians paying a Passenger Vehicle Premium

As an illustration of the price disparity that exists just on new vehicles, we have examined the difference in price between a base model Prius in the USA and Australia.

In the US, the Toyota Prius is $23,370 + $930 ($USD) for delivery, processing and handling fee, which is equivalent to $34,658, whilst here, in Australia, the Prius is available for $40,570 on road, a 17% premium.

Figure 1- Toyota Prius Australian Pricing www.toyota.com.au
Figure 2- Toyota Prius US pricing www.toyota.com

 

When we compare the difference in used car pricing, a suitable example is comparing a used Nissan Leaf in Australia and Japan.  Looking at Carsales (www.carsales.com.au) we can find that one of the lowest priced, low mileage examples is for sale for $19,500.

Figure 3 – Nissan Leaf (Carsales)

Whilst for a similar vehicle in Japan from “Car from Japan” (www.carfromjapan.com) is available at a landed cost of $10,560, or roughly half the price, before we consider any local costs.

Figure 4 -Used Nissan Leaf (www.carfromJapan.com)

Grey Imports will enhance competition and improve “green” vehicle uptake

Opposition to grey imports is usually predicated on the basis of protecting local manufacture, for which we have none; or that vehicles are unsafe, and we cannot be sure of provenance, with respect to service history, accidents and stolen parts.

When considering safety, it is particularly difficult to believe that imported second vehicles sold into first world markets such as Japan and the UK are less safe than those delivered here.

The fact that the Takata airbag recall occurred in Australia in 2018, 4 years after the first major recall in the US in 2014 suggests that Australian standards are at least no better than those overseas.

It’s also difficult to believe that automotive groups such as the AADA are purely concerned about consumers protection from second hand imports when they presently represent used car dealers in Australia.

 

In the interests of consumers, we should allow the importation of used vehicles from suitable RHD markets such as Japan and the UK, into Australia.   This will create genuine competition in the sale of imported vehicles and enable consumers access to cheaper fuel-efficient vehicles both through the sale of used imports and by the competitive price pressure on new vehicle sales that it will create.

Concerns about provenance should be addressed by having strict and verifiable requirements regarding vehicle history, emissions standards should be imposed and fears about importing older vehicles could be addressed by imposing an age limit of 5 years, to ensure that used imports are younger than the current fleet average of 9.8 years.[11]

Newer vehicles, younger than the average age of existing vehicles will also be safer, with more modern designs and safety features.

Also, Australia is highly reliant upon imports of refined petroleum, which has volatile pricing and we only have around 3 weeks of fuel reserves meaning that the country is exposed to external supply shocks in times of crisis.

A move to more efficient vehicles, particularly EV’s is required to reduce transport sector greenhouse emissions as Australia’s vehicle fleet is old, polluting and inefficient.

Banning grey imports artificially reduces competition by limiting vehicle choice, which has a negative impact on consumers who have to pay a higher price for both new and used fuel efficient vehicles.

The government has no automotive manufacturing to protect, so should facilitate grey imports, remove the 5% import tariff and cancel the 33% “luxury” car tax which is only applied to vehicles and no other “luxury” goods.

It is time to allow consumers to have proper choice in choosing a low emission vehicle.

The current ban on grey imports of vehicles, especially fuel-efficient vehicles is unnecessarily delaying reductions in Australia’s vehicular greenhouse emissions, and consumers are paying too much for both new and used vehicles.

The federal government should follow the advice of both its Harper Review and the Productivity commission and open Australia’s automotive market to the sale of near new used vehicles for Australian consumers rather than represent the interests of the large automakers and car dealerships.

Index

[1]https://www.aaa.asn.au/wp-content/uploads/2018/03/AAA-ECON_Benefits-of-reducing-fleet-age-summary-report_Dec-2017.pdf

[1]http://www.abs.gov.au/ausstats/[email protected]/mf/9208.0

[2]https://www.theguardian.com/environment/2018/sep/13/transport-emissions-continue-to-rise-as-australia-lags-behind-other-nations

[3]https://www.energy.gov.au/households/transport

[4]https://www.ntc.gov.au/topics/environment/light-vehicle-emissions/

[5]https://premium.goauto.com.au/australias-electric-avenue/

[6]http://autotalk.com.au/industry-news/australian-car-market-expected-grow-5-2-annum-study

[7]https://www.mia.org.nz/Sales-Data/Vehicle-Sales

[8]https://www.whichcar.com.au/news/industry/government-backs-parallel-imports

[9]https://www.carsales.com.au/editorial/details/official-government-approves-parallel-imports-101205/

[10]https://premium.goauto.com.au/new-bill-spells-end-to-grey-imports/

[11]https://www.aaa.asn.au/wp-content/uploads/2018/03/AAA-ECON_Benefits-of-reducing-fleet-age-summary-report_Dec-2017.pdf

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