“Critical” Euro free trade deal due in 2022

A free trade agreement scheduled for introduction in early 2022 will be “critical” to the future of European automotive brands in Australia.

The Australia-European Union Free Trade Agreement (A-EUFTA) is widely expected to cut the current five per cent import tariff for Euro-made vehicles to zero.

It should also save money for brands by increasing harmonisation of EU ECE vehicle regulations and Australian Design Rules.

“I just hope that it happens for all the European brands,” said Renault Australia managing director Anouk Poulman. “It’s extremely critical and I am confident it will happen.”

Poulman shied away from any commitment to cut prices for customers once the import tariff is gone. Instead, she said it would aid dealer viability.

“The problem now is the cars coming from Europe come with an import duty … so that just makes the cost of goods higher,” she explained. “It makes you less competitive.

“It’s not that we are trying to pass that cost on to the customer; we can’t because you need to be competitive in the market space and I truly think our cars are competitive from a pricing position.

“But it just reduces the margins for the dealers. If you have more economy of scale, more revenue, you can do more and you grow faster. It’s the basic elements of economics.”

Last October, Poulman attended a stakeholder briefing during the fifth and most recent round of negotiations in Canberra for the FTA between Australia and the European Union which settled on the end of 2020 as the completion date for terms.

It then has to be ratified by the European Union and Australian parliament ahead of a scheduled introduction in the first semester of 2022.

While the immediate end of the import tariff and more regulatory harmonisation are both expected to be ratified as part of the agreement without issue, the fate of the push to cut federal and state luxury car taxes at the same time remains less clear.

The EU representatives, urged on by German car manufacturers -- with Toyota cheering them on in the background -- are campaigning to have the taxes ditched.

Attempts by carsales.com.au to gain an update on this and other issues relating to A-EUFTA – including fuel quality -- from the federal department of foreign affairs were unsuccessful, despite a series of phone calls and emails over several weeks.

While A-EUFTA’s automotive content is only a small part of a far larger agreement, it’s still a chunk of business. To the end of November more than 160,000 of the new vehicles registered in Australia in 2019 were imported from EU member states.

All-up, a third of new vehicles imported to Australia are still subject to import tarriffs.

Poulman said there were times Renault Australia lost out because cars could be despatched more cheaply from factories to closer countries that did not require unique ADR-style modifications such as top-tether child seat anchors.

“It just takes time to get the car ADRed for the Australian market,” she said.

“And the challenge as a European-based global manufacturer is you have different markets with different volumes with different requirements, so you need to test cars and you need to make those changes.

“In France they are also looking at which cars are they going to test first? Is it for Australia or this country? Is it this model or that model?

“We have the import duties, less margins, we are very far away [and] not yet the biggest volume for the group.”

Poulman confirmed Groupe Renault in France was taking a keen interest in the A-EUFTA negotiations.

Renault has announced a swathe of new vehicles recently. The Kadjar SUV is now on sale and the Koleos has been updated, as has the Trafic van. The new Clio and Captur will be here in 2020, along with the third-generation ZOE EV.

It will be looking to these vehicles to boost sales that are down 16.1 per cent year-on-year to the end of November 2019. That dip is partly caused by a culling of Renault’s mainstream Megane small car range.

Renault Australia has in recent times overhauled its customer service and support plan and intends to expand its dealer network by around 10 to about 70 outlets by the end of 2020.