Should you care about the changes to the personal car import laws?
Changes to car import laws will come into play in 2018 , but despite the automotive industry’s hue and cry most car buyers won’t care.
FIRST, A QUICK SUMMARY. As Australian car manufacturing will shortly end (2016 and 2017, depending on whether you’re Ford, Holden or Toyota), the Government has decided to ease import restrictions and permit people to import new cars from overseas, provided they are right-hand drive and have less than 500km on the clock. We’ve got a full analysis you can read here. These imports are sometimes referred to as grey imports or parallel imports.
Should you care? If you are an average car owner who doesn’t much care about vehicles other than to grab a bargain, then you can stop reading about now. That’s because this move will not open up vast swathes of cheap new cars, and your best bet for cheap, worry-free motoring is still to amble down to your local dealer and do the best negotiating you can. This change of law is not going to make Australia similar to New Zealand, where they import thousands of relatively new cars from Japan. But if you really can’t find the car you need in Australia, then maybe you should talk to an importer.
So, with Joe Average off to read some of our reviews and car advice, we’re left with the car enthusiasts or those with enough money to be shopping at the very top of the automotive tree, where the savings are likely to be made. And it is you people who will benefit, because now you can excitedly browse the websites of car manufacturers in the UK, Japan (and possibly other countries), more or less, taking your pick of what you see.
We put a few examples on the original analysis article that included kei cars, the Honda Civic Type R, a Crown, Delica 4WD peoplemover, Honda S660 micro sports car, and a three-door manual Toyota Prado, some of which form the title image for this article. For lovers of cars, this is equivalent to Christmas every day of the year, and there’s probably three main reasons you’d want to import:
- Can’t get the car – the model you want simply isn’t available in Australia;
- Don’t want to wait – it is available, but there’s a very long waiting list; and
- Different trim specifications – maybe you want a top spec model not sold here, or a three-door version of a five-door wagon (Prado), or automatic or manual transmission, a 7-seater version of a 5-seater 4WD (Pajero Sport). Or even a plug-in hybrid version (most Toyota hybrids are plug-in overseas).
So what’s not to like? Entirely predictably, the car industry response is split between the car manufacturers and everybody else. Broadly, the car manufacturers oppose the move, the rest welcome it. So let’s unpack the car industry response, based on press releases from the Federal Chamber of Automotive Industries (FCAI), Mercedes-Benz (MB), and Jaguar Land Rover (JLR). Let’s have MB set the tone:
“We have a number of serious concerns over the lack of specific detail and the irresponsibility and misconceptions that the Governments statement and position will create.”
After reading all the responses, there’s common themes which can be summarised:
Lack of warranty
JLR: “Aside from the fact that the privately imported vehicle may have a warranty and possibly other features such as a service plan which have been issued in another country and therefore are not recognised here in Australia, the owner will not enjoy the benefits which come from the substantial investments made in local dealerships and support networks by brands which sell new cars in this country.”
FCAI: “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, and that recalls are captured so consumers are informed if something needs to be fixed. This system is also underpinned by Australian Consumer Law.”
Not actually a new car in all cases
MB: “The Government says it is not proceeding with allowing second hand cars to be imported yet it claims that a ‘New Car’ can be up to twelve months old and have up to 500km. Nowhere in the world is a car up to 12 months old and with up to 500km’s regarded as new. In the industry this is NOT a new car, it is categorized as a DEMONSTRATOR and is a second hand vehicle.”
FCAI: “the Government is misleading consumers by telling them a used vehicle with 500kms or one that is twelve-months old, is new.”
No protection for the consumer, lack of support from the manufacturer
JLR: “A new car purchased and delivered here is automatically covered by Australia’s comprehensive consumer laws. This means that a locally delivered new car owner has recourse in situations such as when his or her vehicle proves not to be fit for that person’s needs. Unfortunately the owner of a privately imported car will not be eligible for any of this peace-of-mind security.”
MB: “Australian Consumer Law currently provides comprehensive protection for automotive consumers when a vehicle is imported to Australia by the OEM. The owner of a privately imported vehicle will have ZERO protection under Australian Consumer Law.”
Imported cars may be inappropriate for Australia
JLR: “Factories building cars for Australia incorporate many important features which recognise that this country is different. Cooling systems for engines and transmissions are designed to work efficiently in our extreme temperatures, as are air-conditioning systems. Navigation and infotainment systems are set up for this country from the outset, and engineering takes into account a range of factors as diverse as our towing regulations and the composition of our fuels from the earliest stages of developing a vehicle for export to Australia.”
FCAI: “In its announcement today, the Government failed to acknowledge that Australians who personally import a vehicle made for another country may end up with a vehicle that does not meet their needs or operate as required in Australian driving conditions.”
JLR: “The Government is misguided if it believes that these changes will be a positive thing for the Australian new vehicle buyer. We are very concerned that the reality of the situation is that the consumer will in fact be exposed to considerable risk and be far worse off compared with the current system.”
What’s the actual risk?
So if we can summarise; the car companies are not concerned about themselves, but are worried about car buyers ending up in trouble. We know this because there’s not a single word on the impact to their own businesses – no analysis of jobs lost, impact to the economy. There’s also no concern about safety, deathtraps littering our roads. It’s just the car companies looking out for the Aussie car buyer.
Well, that’s very nice of them but on behalf of every single car enthusiast in the world, can I just say:
Australia already has enough nanny-state laws and institutions without the car companies getting in on the act, telling people what’s good for them and acting the over-protective parent.
Realistically, the only people who will private import are car enthusiasts who will be fully aware of the risks described and consider them a worthwhile tradeoff for the car they really want.
Anyway, there are tens of thousands of imports already on the road. Cars from the UK, USA, Japan and other countries run perfectly well here, and enthusiasts care enough to keep them going. Skyline performance cars, Cube microcars, American muscle cars, Elgand peoplemovers, converted RHD big American trucks… if you know your imports, you’ll see many a day, it’s not uncommon and they don’t seem to have affected the huge growth in the local new-car industry. Nor do we hear of horror stories involving second-hand imports sold to unsuspecting buyers.
Is there an economic impact?
Nevertheless, let’s also look at the economics, because while the car companies are focusing on the consumer it’s obvious that’s just a facade and their real concern is their own bottom line – can’t blame them for that, just like any well-run business.
There are around 1.1m new cars sold each year in Australia. The government reckons there will be 30,000 imports per year, at most. That’s 2% of the market, assuming that each import is a loss to a new-car sale locally – and that is very unlikely, as many imports are likely to be additional, special-purpose cars. Even the 30,000 figure is up for debate, as when we spoke to leading importer Kristian Appelt he reckoned it would be more like 3000 per year. And there’s already many cars being imported to Australia overseas, so it’s not as if this is an entirely new source of vehicles.
Is the public car import industry in poor shape? Hardly. Every month when VFACTS release their new-car sales figures it is only a matter of time before bragging press releases land in journalists’ inboxes, highlighting how many more cars this or that carmarker has sold compared to last month, last quarter, last year or whatever else. I don’t know why anyone bothers with these releases, it’s not worth a story but it is indicative of an industry in rude health.
As described above, Joe Average is not going to buy an overseas car because it won’t be any cheaper. But hey… if a car was significantly cheaper to import, doesn’t that say something about the local prices?
What the car companies really fear
What we believe the car companies are really worried about is not this set of private import laws, but what may happen next.
This revision just focuses on new or nearly-new cars, but the carmakers are looking worriedly across the Tasman to New Zealand which imports vast numbers of secondhand cars from Japan. The reason – in Japan the government wants everyone to drive relatively new cars for reasons of emissions and safety, so they levy increasingly higher taxes on cars as they get older than about three years. This means many people buy new cars, and do so frequently. That then leaves a huge supply of new-ish, right-drive cars… which NZ buyers snap up. When I lived there I owned several imports and it was just brilliant, so much choice, so little to pay, I could have a 4WD, a sportscar and a city runabout.
If mass second-hand imports were permitted in Australia then there would be an effect on the new-car market, and that is probably the concern of the FCAI and its members.
However, you’d have to think the NZ car industry would be all for Australia following NZ as the greater the demand for ex-Japan cars, the greater the prices paid and the less price difference to a new car. But the NZ new car market is far smaller than the Australian market, so on a global scale, it’s a loss to the carmaker, and each carmarker has its own local operations who don’t really care about how well their equivalents in other countries do… other than to beat them so they look better on the worldwide sales chart.
What we do need to change
Aside from their bluster, the car companies do make a well-aimed point:
JLR: “It is actually the government who is making a significant margin per unit sold in Australia and therefore grossly over taxing the best technologies and innovations available for consumers in the industry. Fixing the inequitable tax arrangements of a combined LCT [luxury car tax] and GST that adds 43% of cost to vehicles over $63,184 would be a better way of addressing car affordability for the Australian consumer.”
FCAI: “The best way to continue to deliver a greater range of choice in new cars and motorcycles is to accelerate the removal of unique regulatory standards and administration. If the Government is so concerned about car affordability, it should look at the taxes and other government charges that make up around 20 per cent of the price of new cars in Australia. Fixing those tax arrangements, including the poorly-designed Luxury Car Tax, is a better and more targeted way of addressing car affordability than a change that will only ultimately hurt consumers.”
We don’t disagree in principle, but the fact is that the government needs to get its revenue from somewhere and a user-pays principle such as LCT is no bad idea. The implementation of such a tax is another question, and in the case of the LCT that certainly needs revision as the “luxury” in LCT is really a joke. Some expensive cars are necessities, some cheaper cars are luxuries. It would arguably be fairer to rename the LCT to UVT – Unnecessary Vehicle Tax – and apply it to sportscars, top-spec trim models, vehicles with larger engines than others in the range and the like. But you can see the myriad problems with that approach even as you read the sentence, a nice theory collides and smashes to pieces on the cold hard rock of reality. Tax is always tricky, we all need it, nobody wants to pay it.
Another area where the new car industry is on point concerns the call to “accelerate the removal of unique regulatory standards and administration”. You have a hint that’s right because the aftermarket industry, politicians and everyone else are united in wanting to standardise regulations across Australia instead of the unique-to-each-state system we have now which acts as a giant handbrake on every single part of the automotive industry. If we can get rid of that, free up import laws and maybe let adults decide for themselves how they’ll spend their money then we will be on the way to having a world-class motoring environment, and that’s something we should all care about.