E-Class diesel hybrid on the way

Mercedes-Benz has a diesel-engined hybrid E-Class model due to arrive in Australia during the second half of 2012 – but meagre though its fuel consumption may be, the car itself won't come cheap.

Inevitably, the new car will be significantly more expensive than it should be, says local Benz spokesman, David McCarthy. Speaking in his capacity as Senior Manager of Corporate Communications for the prestige importer, McCarthy explained to the Carsales Network today that the while the E 300 BlueTEC Hybrid will certainly use less than 7.0L/100km – and will therefore incur the Luxury Car Tax dispensation up to $75,000 – it will still cost perhaps $5000 more than it should.

Since the purchase price of the diesel/electric Benz is anticipated to exceed the $75,000 cap the Greens hammered the government to accept in exchange for supporting the increased Luxury Car Tax (from 25 to 33 per cent), the excess above $75,000 will be subject to the 33 per cent LCT.

"We don't think we're going to sell hundreds and hundreds and hundreds of [the E-Class hybrid]," McCarthy explained, "but we want to bring it because it demonstrates [diesel hybrid] technology, and there is some demand for it."

The new model won't be a volume seller of course. McCarthy settled on a number of around 15 a month.

"It's very hard to estimate [projected sales numbers]; we'd want to be doing a couple of hundred a year to make it worthwhile complying the vehicle and stocking the vehicle."

Although it's not a car for the masses anyway, the E-Class Hybrid's sales will remain influenced to some extent by taxation. Speaking hypothetically, McCarthy posited a $15,000 premium for the hybrid-drive system in the car over the price of a conventional diesel E-Class model – and as much as $5000 of that will be attributable to the LCT. In essence, buyers of the frugal 'E' will be penalised, despite the car's expected 4.1L/100km fuel use.

The Greens' initiative, amending the LCT legislation to allow dispensation for vehicles using less fuel – and therefore emitting fewer greenhouse gas particles – has resulted in an unforeseen surge in the introduction and sale of LCT-free 'seven-litre' cars. It has become, according to McCarthy, "a badge of honour" to be seen driving a car that is LCT-exempt for this reason. That doesn't encourage him to suggest the adoption of other incentives to purchase low-emissions vehicles – such as hybrid car lanes – since such initiatives would cause "social dislocation", as he wryly describes it.

Still, McCarthy believes that in the current 'climate' of carbon tax debate, it makes sense to revisit the government's attitude to assisting not only the local manufacturers, but also importers to field the most environmentally benign cars possible in this market. That means finding reasons (incentives) for buyers to choose more efficient vehicles. Benz previously mounted a campaign to link taxation with vehicle fuel efficiency in response to the government's announcement it would raise the LCT to 33 per cent.

Among the ideas McCarthy floated were a dispensation for the five per cent import duty for vehicles that were 'green', or a sliding scale of incentives based on cars achieving not only better than 7.0L/100km, but below 6.0 or even 5.0L.

At present, he considers that the industry is copping a lot of the blame for greenhouse gas emissions, without consideration of the fact that road transport only accounts for around 13 per cent of greenhouse gas emissions in this country and that the contribution to the problem by new cars has been steadily falling over recent years.

It's a point that is largely misunderstood by the public and the government's policy is inextricably entangled with economic theory and how best to serve the interest of constituents actually employed by the industry. A cynical view of the situation is understandable.

"The car industry is like a big ATM," McCarthy says. "The government comes along and punches in a code – and money comes out. But like most ATMs, it doesn't accept deposits – unless you're a local manufacturer."

Based on his remarks, it may seem like sour grapes from an importer, but McCarthy is actually supportive of the government's expenditure through the Green Car Innovation Fund (GCIF). He recognises the need to support the development of greener cars by the local manufacturers, but it has to be done in a way that's consonant with commercial realities.

"The government is happy to spend hundreds of millions of dollars, providing an incentive to local industry to produce lower-emission, more economical cars; and I support that," he says, but it's his view that 20 per cent of the market is receiving largesse that the other 80 per cent doesn't see – and there's little reason why the 80 per cent should be left out.

Benz already has Euro 6-compliant models in its range and the argument goes that were the government serious about the greening of the industry, it wouldn't be limiting the scope of its programs to the local manufacturers. Nor need the support for the green efforts by the local manufacturers be limited to the GCIF. Cars such as the Toyota Camry Hybrid might benefit from a retail incentive too.

The Toyota has not been selling in numbers as large as the Altona-based manufacturer would like and the mid-size sedan doesn't appear to be attracting private buyers up to the 40 per cent of sales Toyota originally forecast. The GCIF has helped the Toyota become a production reality in Australia – and the Australian version is almost certainly the best example anywhere in the world, says McCarthy - but that hasn't helped sales of the car.

Up until its cessation, the GCIF funding for the Camry Hybrid (and cars from Ford and Holden as well) provided environment-focused assistance for local manufacturers and boosted job security for employees of local manufacturers – both designs of the Gillard Labor government to keep faith with the electorate.

"What, no one works for the importers?" McCarthy responds to that point. Benz employs 1200 people around the country; roughly a third of Toyota's staff.

"My point is that the government is concerned with maintaining local manufacturing jobs – and we absolutely support that. We employ a number of local suppliers with our G-Wagen."

"I support the local industry; I think it's vital for the future of Australia that we have a skilled manufacturing base – and there are few things that are more skilled than the ability to conceive, design and manufacture a vehicle from scratch. That's a significant advantage, and it has a huge flow-through to other industries.

"[But] then the question is: more than 80 per cent of the market is imported... [and gets] no incentive in terms of low-emission outcomes. The government will say 'okay, there's the 7.0-litre limit', [but] what about the cars under the Luxury Car Tax?"

In McCarthy's view, the government has been providing a "quasi incentive" in the GCIF. While he doesn't say as much, it seems clear that the GCIF amounts to a token gesture without government-supported retail incentives to buy cleaner, more efficient cars.

"If the government wants a lower-emissions [national] vehicle fleet, what they're doing flies in the face of reality. Australia is the only developed market in the world where there isn't some incentive [to purchase] an electric or hybrid vehicle that is very low emissions or zero emissions.

"So why does the Australian government think that Australians are going to adapt to this technology, which is significantly more expensive – without an incentive, when every other market provides an incentive?"

It's important to Benz that consumers begin to adopt hybrid-drive technology. Hybrids are an important component of the manufacturer's alternative energy strategy, along with EVs, fuel cells and DiesOtto combustion engine technology.

"They're absolutely a stepping stone," McCarthy says of hybrid-drive vehicles. The same basic technology will underpin fuel cell vehicles in the future; the only significant difference being that all motive power will be delivered by electric motors.

"Hybrids, as they go through generational change, they get better and better. There are customers out there that would like to buy a hybrid Mercedes – and we want to satisfy that demand. We do think though that demand is relatively small. Truly I believe there needs to be an incentive.

"Effectively the government is giving the Camry Hybrid an incentive with the [GCIF] subsidy that they paid, which, on the basis of the number of vehicles sold, is pretty substantial."

It's McCarthy's view that an advanced, locally-manufactured eco-friendly car like the Camry should be selling at a more affordable nett price, as should imported cars that offer similar environmental gains.

"I believe there should be a greater incentive, offered by the government, for very low emission vehicles; also for electric vehicles – because every developed market and some developing markets offer electric car and low emission incentives.

"You could actually have something revenue-neutral, if you structure it the right way."

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