Cash for clunkers: AAAA delivers broadside

The Australian Automotive Aftermarket Association is out for blood. Within days of Prime Minister Julia Gillard announcing Labor's plan to take older cars off the road by offering a cash incentive, the Aftermarket Association's Executive Director, Stuart Charity (pictured) has come out, guns ablaze.

"The only segment of the automotive industry that benefits from this scheme is new-car importers and dealers," Charity was quoted as saying in a press release.

"The Government has overlooked two other critical industry segments -- the vehicle and component manufacturers and the aftermarket parts, service and repair segments.

"The vehicle manufacturing industry employs more than 64,000 people, produces about eight billion dollars worth of cars and battles a tough competitive global market to earn vital export dollars. They do not need a government incentive that encourages Australian consumers to buy imports."

"There is only one car currently made in Australia on the Government Green Vehicle Guide list. We find it difficult to see policy logic in a Government investing $6 billion in automotive industry assistance, and that same Government announcing a sales incentive program that will direct consumers to a list of imported vehicles."

Charity and the organisation he represents have drawn attention to Industry Minister Senator Kim Carr describing similar schemes introduced in Europe as "expensive."

In a press release issued in July of last year, praising the government's business tax breaks for turning around new-car sales, Senator Carr said: "We've outperformed Europe, where the latest figures show a 4.9 per cent drop, despite the fact that many European economies have adopted expensive scrappage programs aimed at stimulating vehicle sales."

The government's Cleaner Car Rebate, as it is officially known, achieves practically nothing, in the view of the AAAA -- and for a variety of reasons.

"The reality is that many Australians drive pre-1995 vehicles because they cannot afford the average new car change over cost," explains Charity.

"Thanks to a robust and well regulated aftermarket, and a healthy and competitive second hand car market, most Australian families can enjoy personal mobility.

"Even the clunker car owners interviewed at the staged media launch of this scheme admitted they could not afford to take advantage of the rebate."

Even though few private vehicle owners will be in a position to accept the hand-out in part exchange for a new car, Charity believes that the rebate's very existence will be adjusted by retailers in a way that will disadvantage new-car buyers.

"As the market already provides an incentive for purchasing a new vehicle via a trade-in, we are at a loss to understand how the Government funding this program will change consumer behaviour. There is little doubt that the highly margin-sensitive car dealership industry will factor this incentive into their car pricing. The price of eligible new vehicles will simply rise by $2000 in 2011". 

And the environmental incentive to upgrade appears to be a greenwash-on-spin, argues the Association.

"There is no debate that cash for clunkers schemes are a very costly way to reduce greenhouse gases," Charity declares.

"As an environmental tool, this Government scheme fails because it does not account for emissions produced in the destruction of cars and the manufacture of the new cars it hopes will be sold.

"On the other hand, perhaps the Government takes the cynical view that this scheme reduces Australian emissions, because most of the cars bought will be manufactured overseas.

"The most cost effective way to minimise emissions is to encourage people to properly maintain their vehicles. Routine maintenance to manufacturers' standards saves millions of litres of fuel and tonnes of vehicle emissions a year."

Charity offered his opinion on what was an environmentally ideal age for the national vehicle parc -- and it wasn't the 10-years-or-less consensus that has been popular for decades.

"International research on the environmental impact of vehicle manufacturing found that the optimum age for vehicles in a national fleet to be about 19 years. This random Government announcement conflicts with dedicated environmental studies, its own existing automotive industry policies and programs, and it appears regressive in benefiting only consumers who can afford to purchase new vehicles that qualify for the rebate."

But Charity is naturally most concerned about the welfare of the AAAA's members, most of whom are small, family-owned businesses employing in excess of 300,000 people and generating $8 billion of turn-over for the national economy.

"This policy will hurt aftermarket companies that manufacture, distribute, sell and install vehicle parts on used vehicles, and those who rebuild/remanufacture or recycle vehicle parts," Charity concluded. 

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