FCAI cautions against amended MV standards act

Consumers face serious risk if Motor Vehicle Standards Act comes to reflect Productivity Commission recommendations

Opening up the local market to large-scale grey and parallel importation will hurt consumers, the FCAI has argued... And that hurt will be physical as much as financial.

In its 'Interim Response to the 2014 Review of the Motor Vehicle Standards Act', the FCAI (Federal Chamber of Automotive Industries), has cited a number of cases exposing legislative pitfalls here and in New Zealand, where parallel and grey imports have been permitted for a number of years.

The FCAI represents all the car companies currently selling motor vehicles (including motorbikes) in Australia, and has already voiced its opposition to parallel importation and grey imports after the Productivity Commission recommended opening up the local market. According to the FCAI, however, any such move to free up importation would be unlikely to go ahead with the Motor Vehicle Standards Act (1989) in its current form.

Now, with the Act undergoing review, the FCAI has decided it's the right time to strike. In the executive summary accompanying the submission, the FCAI observed that "There is no compelling public policy case for reducing the barriers to personal importation of new vehicles ('parallel imports') or the importation of second-hand ('grey') vehicles."

However, the FCAI does call for three types of change to the act. These are:

1. Modernise and strengthen the legislation,

2. Harmonise Australian Design Rules (ADRs) with other global certification standards,

3. Impose "a more intensive certification, compliance and auditing regime" for higher-risk concession scheme arrangements.

In other words, enforce updated legislation; make it easier for importers to comply with the local vehicle certification standards, but toughen up the process for companies shipping in small numbers of vehicles under existing low-volume importation schemes.

There are several bases for the FCAI's opposition to parallel/grey importation. To start with, importing used cars will age the national car parc faster, and slow the universal adoption of leading-edge safety features. Furthermore, where parallel/grey imports offer those features, they may not be calibrated specifically for the Australian environment. Intelligent high-beam control is one such feature.

The FCAI anticipates that future V2V (vehicle to vehicle communications infrastructure) will have to be uniquely rolled out in Australia, with radio frequencies already settled for Japan likely to be in conflict with the mobile phone spectrum in Australia. Grey imports will not be compatible with a nationwide system developed for the local market – or could be quite expensive to re-engineer. The Austroads Cooperative ITS Steering Committee is currently working in conjunction with ACMA to harmonise local frequencies for V2V with Europe and the USA.

Emissions will be another consideration, with Australia's ADR 79/05 (Euro 6 equivalent) due to take effect from July 2017. An aging vehicle parc will be another roadblock on the way to the CSIRO's projection of motor vehicle exhaust emissions reduced by 2030.

During the period from 2002 to 2012, the average age for the New Zealand parc – where grey imports literally accounted for as much as 60 or 70 per cent of all new registrations during any given year – has risen from less than 12 years to almost 14. In contrast, the average age of the Australian parc fell from 10.5 to 10 years during the same period – with consequent benefits that are probably best exemplified by the falling road toll.

New Zealand's older parc has forced the government there to delay introduction of mandatory stability control until next year – for new cars. Grey imports won't be required to be fitted with stability control until 2020. Victoria mandated stability control for new passenger cars from 2011, and the rest of the country followed.

The FCAI has identified consumer protection as a major factor working against parallel/grey imports, but these largely fall outside the scope of the Motor Vehicle Standards Act review. Nevertheless, the Chamber has seen fit to remind those reading the interim report that amendment to the act could have repercussions where warranty, parts, service and recalls are concerned.

An anecdote provided in the report concerned a recall for E46-generation 3 Series models sold in New Zealand. Vehicles officially subject to the recall number around 3400, but BMW NZ faces the prospect of addressing perhaps double that number, with the balance being grey imports. That's a best-case scenario, in the event that BMW NZ can track down the owners of those grey imports.

Similarly in Australia, an off-road vehicle built by Kawasaki was subject to an American recall, but had never been officially sold by Kawasaki Australia. The official importer didn't carry the necessary parts in stock, and couldn't even order them through its online parts database.

Under Australian consumer law, an official importer is required to carry the parts for any vehicle it sells, and it must be able to service the vehicle too – which often means buying special tools and equipment. In the case of grey imports, all that risk is borne by the consumer. There are further risks in buying a car with an unknown history, as many New Zealand owners of stolen Japanese cars can attest. Because Japan doesn't abide by the ISO (International Standards Organisation) VIN system, vehicles must be re-stamped with a compliant VIN (Vehicle Identification Number) when re-sold in NZ and Australia. It is a relatively simple matter for the Yakuza to rebirth Japanese cars and sell them through agents to unsuspecting Kiwis.

According to BMW NZ, a vehicle imported from Singapore and sold in New Zealand was subsequently found to have been stolen – but only after a vehicle with the same VIN was imported. Being an 'illegal' vehicle, the rebirthed BMW was taken off the road – at the expense of the current owner, who had paid NZ $25,000 for it. The owner could not recover the money lost, as the car had changed hands in New Zealand on multiple occasions, and the importer had gone out of business in the meantime.

It's not just stolen cars that are leading a new, born-again life in NZ. So too are flood-damaged cars shipped across after the Japanese tsunami and earthquake in 2011. A BMW X1 imported into New Zealand – from Australia – was subsequently discovered to be a flood-damaged write-off here. The certification process in New Zealand failed to uncover its earlier history and it was being sold with lower kilometres and a lower price than a dealer demonstrator. Fortunately, the prospective buyer checked with BMW New Zealand and was informed about the vehicle's past.

Grey imports, according to the FCAI, are often 'not fit for purpose'. Towing capacity of four-wheel drives can vary between the locally delivered models and grey imports, as one example. The Mercedes-Benz M-Class comes to Australia with larger cooling fans and heavy-duty alternators for towing purposes. M-Class models imported from other markets are unlikely to be built with these features.

The FCAI and its members are agreed that vehicles manufactured for the local market are likely to offer different radiator, alternator, suspension, engine/ECU, electrics, heating/cooling, infotainment, child-safety seat restraints and sundry other parts.

Safety systems are another case in point. The Mercedes C-Class in Australia is fitted as standard with nine airbags, in the UK it comes with seven. And it goes on; satellite navigation, if the unit fitted is unsuitable for Australia, may cost $1000 to replace. It may not even be possible to replace remote central locking keys for a grey import in Australia.

A Fiat Ducato motorhome is another example of a vehicle that proved not fit for purpose, as another grey import cited in the report. The vehicle caught fire in Queensland after the clutch failed. Fiat Australia refused to cover the cost of repair, which was within their rights. Subsequently the vehicle was found to weigh 4.84 tonnes – without fuel, occupants or luggage. In Australia the certified GVM (Gross Vehicle Mass, which is kerb mass and payload combined) for the Ducato is 4.5 tonnes. As weighed it exceeded its GVM without any sort of payload. Fiat applied warranty restrictions to the vehicle and informed the owner that it could not legally be driven on a passenger car licence, unlike locally-delivered Ducatos.

Price, often cited as a factor in the favour of parallel/grey imports, is not as cut-and-dried as some suggest, the FCAI also argues. As of June 2013, the Falcon XT – built here in Australia – was at its most affordable level in 36 years, and relative to the average Australian wage, had been consistently dropping in price since the mid 1990s.

Some imported vehicles are only marginally more expensive here than in their home markets. Subaru's Forester is around $700 more expensive here than in Japan, for the same specification. The Land Rover Freelander 2 TD4 SE is actually $1700 cheaper here than in the UK.

And the FCAI concludes its report with the view that Australia, already with such a high level of vehicle ownership, would see the prices of used cars locally delivered fall, without necessarily taking new car prices with them. The gap between new car pricing and resale values of cars already sold and out in the community, would widen. This, in turn, would actually increase the time consumers would have to save in order to buy a new car – even if they haven't bought a grey import. And grey import owners would likely find resale values would leave them effectively poorer than before they bought the grey vehicle.

With the time between vehicle purchases set to change from three to four years, the new car market would shrink to 80 per cent of its current size, the FCAI predicts. That would take place over a number of years, the FCAI admits, but new car sales in recent years have been a bulwark for the Australian economy. Opening up the market for parallel/grey imports could hurt economic development in a serious way.

FCAI cautions against amended MV standards act

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