BMW boss slams LCT

Prestige brands selling cars in Australia have laboured long and hard to convince government from both sides of the political divide to rescind the luxury car tax (LCT).

BMW Australia CEO Vikram Pawah has taken another swing at the tax this week, citing the end of local manufacturing as reason enough to do away with what has been described in the past as "an illogical, inequitable tax".

The BMW executive believes that the 2017 closure of local manufacturing plants owned and operated by Holden and Toyota has made the LCT redundant. There is no longer a local manufacturing industry to protect by pricing prestige cars out of contention with the locally-built product.

"We still keep on complaining to the government – that the luxury tax should not exist. It doesn't have any reason anymore," Pawah told carsales during the launch of the new BMW 1 Series (pictured) earlier this week.

"The luxury car tax for us should be gone by now. Customers are telling me: 'Why can't I buy the same 3 Series that my American counterpart is buying at the same price level?'"

The LCT has been on borrowed time for some years, according to the automotive industry – expected to fall victim to a free trade agreement (FTA) with the European Union –  although no one has come up with a new revenue stream that could equal the value of the LCT.

Australian-based importers of European prestige brands are sitting tight and waiting for a positive outcome from discussions held in Brussels during July. For the moment, however, there's no further news on that front, but the Federal Chamber of Automotive Industries continues to lobby the government to drop the LCT.

"In a declining market the government should be looking at how [they] can foster the industry back, because it's a big employer, no doubt about it," Pawah observes.

"There are so many people employed in this industry, directly and indirectly.

"The customers, on the other side, want the latest technology as well. They want the latest emissions or the latest safety features in their cars, and the premium segment is the one that provides that."

Asked whether axing the LCT would change BMW's local line-up to any large degree, Pawah indicated it wouldn't. What it would do, he suggests, is open up the market above the current LCT threshold ($67,525) to buyers who presumably object to paying more for tax when they could be spending more on equipment.

So that cut-price M2 for $75,000? No chance. Pawah rhetorically asked in response whether an M2 customer would want a bare version or a "fully-loaded version".

"I don't think the premium segment works like that; you don't drive your model line-up based on what the regulations are or the tax structures are.

"I think it's driven by what customers are asking for, and... we don't make special products for Australia. We homologate for Australia, no doubt about it, but our products are designed for the world."

There are also external factors at play. European prestige brands "still have to meet the higher [emissions] regulations" in their home markets, Pawah explained, making it even less likely that the German prestige Euro brands would backtrack from the sub-7.0L/100km cars they've been selling in Australia to circumvent the LCT between the threshold and the 'green car' ceiling, which is currently $75,526.

What's going on in Europe is a good model for Australia, Pawah implies.

"What the government needs to do is introduce the latest emissions regulations in Australia."

But whatever happens – tougher emissions regs or an FTA with Europe... or both – the government needs to put the LCT to the sword, Pawah says.

"The luxury car tax kind of removes the level playing field. You're distorting the market... you're discouraging people [from] looking at a car that's more advanced.

"And I don't think $75,000 is a luxury car really... technically."