Government presents plan for cheaper new cars

The Abbott Government has released a statement today, announcing long-expected plans to ease import restrictions for new cars as part of the Motor Vehicle Standards Act review.

It's not good news for the Federal Chamber of Automotive Industries (FCAI) and its members. 

Nor do the plans address the concerns of importers operating within the framework of the existing low-volume importation scheme. That legislative device is known as SEVS, the Specialist & Enthusiast Vehicle Scheme. As it stands, SEVS is putting the squeeze on import business owners, says a leading light in the parallel import industry.

Kristian Appelt is the director of Auto Services Group, an Adelaide-based company heavily involved in grey/parallel importation through a number of services. His companies include Iron Lady Imports for personal imports from the UK, Iron Chef Imports and Iron Block Imports – the latter two tracking down and importing vehicles from Japan and the USA, respectively. Appelt spoke with motoring.com.au today, and explained that the government announcement, delivered by Jamie Briggs, Assistant Minister for Infrastructure and Regional Development, contained few if any surprises.

"We knew that this was coming," Appelt said. "[Briggs] has been pushing it for a fair while... and it didn't actually have huge support on either side of the fence. To me it's more of a missed opportunity."

Appelt believes that the plan, as outlined by the minister, is likely to lead to an upswing in the importation of high-spec cars ('exotics'), rather than volume-selling passenger cars or commercial vehicles. 

And with no immediate changes forecast for SEVS-regulated used-car importation, it will be largely business as usual for the SMEs (small and medium enterprises) handling the importation – until everything "falls in a heap".

According to Appelt, running a business in this industry is getting tougher with every passing year. Under SEVS the scope is narrowing for these operators. The new-car industry is so diverse and offering such a wide range of models that there are fewer viable models that can be legally imported in parallel. A major sticking point with the existing SEVS structure – and one that Appelt would dearly love to see addressed – is the distinction between model and variant, or lack of distinction in fact.

Under SEVS, importers can no longer bring in Nissan Skylines, for instance, because the car has been sold here badged as the Infiniti G37. Other than badges and trim, the two cars are practically identical. Appelt believes SEVS should be amended to allow an importer to bring in different variants of the same model sold by a factory-appointed distributor – on the basis that the specific variant wouldn't be available to local consumers otherwise.

A further example cited by Appelt is the Subaru Forester STI (pictured). The high-performance SUV can't be sold in Australia by a parallel importer, despite Subaru Australia not offering the flagship variant in its local Forester range.

Another factor narrowing the revenue base for parallel importers is the changing complexion of overseas markets. In Japan, the manufacturers have moved away from the sporty (turbocharged) rear-wheel drive or all-wheel drive models that have been so popular in Australia in the past. Only the recent launch of the Toyota 86/Subaru BRZ has reversed that trend at all.

The changes in Japan have forced the importers here – often focused on models up to 10 years old – to look at bringing in the Toyota Mark X, as one example of a car Appelt describes as "more luxury/sports than straight-out sports."

"Let's just have another look at SEVS and see if there's a way that we can broaden the mix a little – without necessarily increasing the overall numbers – working within the constraints that we've already got, but having a broader mix of vehicles available."

As Appelt understands it, the government intends for parallel import restrictions to be eased for new cars or cars less than 12 months old and showing under 4000km on the odometer. This is one of the few points where "used vehicle importers and mainstream distributors agree," in Appelt's own words. By that, he means it's not an effective solution. He expects that dealers in other markets will be barred from selling to international buyers flying in from Australia. That will place individuals at the mercy of wholesalers and "backyarders" in those international markets.

Nonetheless, there does seem to be an opportunity presenting itself for Appelt, who has people on the ground in Japan and the USA to facilitate pain-free importation from those markets. But in the short term he's more concerned with reworking SEVS to support sustainable business models for parallel importers.

Furthermore, he feels much of the angst from the FCAI's side of the fence is unwarranted. The matter of a foreign car being rebirthed in Australia is less likely since the Japanese industry adopted engine immobilisers in 1992. The cars more likely to be rebirthed here are older (pre-1989) cars that can already be brought into Australia legally anyway.

As for the argument from the FCAI that cars imported in parallel won't necessarily match the specification of cars officially sold here, Appelt counters that argument with his experience that HPDI-equipped BMWs will run on Australia's higher-sulphur content fuels without damaging the engine, to use one example. The fuel consumption may be the same or slightly worse than a port-fuel injected model, and catalytic converters may need to be replaced more often. That's it...

And in the case of the added cooling capacity of M-Class Mercedes, he believes the fan might work a bit harder, but most owners won't encounter any problems in the sort of day-to-day driving to which SUVs are usually subjected. And if you are going off-road – in the outback, towing a big caravan – upgrading the cooling system with the help of an aftermarket installer would be good advice anyway.

Where safety and trim levels are concerned, Appelt indicates that harmonisation of ADR (Australian Design Rules) to its European equivalent, UNECE, is about "98 per cent" complete. And importers will naturally endeavour to bring in vehicles that at least match the equipment level of a locally-delivered car. To do any less would place them at a commercial disadvantage.

One of the concerns with reducing restrictions on parallel importation is that it may encourage individuals to cut out the middle man and track down classic cars for parallel importation without advice from professional agents like Appelt.

If a Ferrari 458 has sustained a major impact that has damaged the car's carbon-fibre tub – and that tub has been repaired with fibreglass – the car could be imported by an individual, only to find that the Ferrari cannot be driven on local roads due to the pre-existing accident damage.

Appelt does worry that some agents in Australia can be less than scrupulous, and try to "slip stuff through," prompting him to express the view that the current legislation "lacks teeth" and the moral-free importers should "get clobbered".

"They tread heavily and carry a small stick," he observed of the regulators based in Canberra. An agent who repeatedly abuses the process should have their licence to import vehicles rescinded.

"Having said that... all the countries we're looking at importing from – UK, US, Japan, possibly Singapore/Hong Kong – those countries have procedures in place to make sure that the car's not stolen.

"To me it's a non-issue."

The import industry in Australia doesn't want the sort of "open slather" dumping that has been the order of the day in New Zealand, says Appelt. In the event that happened, existing small business owners would be swamped by larger businesses intent on importing thousands of used cars and making business uneconomical for the smaller operators, many of whom would be unable to compete on volume. Currently the parallel import industry is bringing in around 8000 cars a year; those smaller business underpinning the industry would be unlikely to have the resources to scale up, proportionately, to 40-50,000 units a year.

"We're not pushing the open-slather model either."

Appelt doesn't expect Australia to follow the New Zealand model. For a start, the needs are different. When NZ deregulated its import industry, decades of high import duties had made purchasing a new car an extremely expensive proposition. It was why New Zealand had one of the oldest vehicle parcs in the developed world. Once the floodgates opened, there was no holding back, but even though the grey imports were newer, they did skew the average age of the parc, which remains older today than the Australian parc.

The Australian government, being aware of the NZ case, will endeavour to maintain our parc's average age at 10 years. Appelt hopes that changes to SEVS will weight grey imports towards the younger end of the scale – less than 10 years old.

"That's where we're heading at the moment with SEVS."

What the government has planned
The statement made today by Jamie Briggs on behalf of the Abbott government reveals that personal importation of new cars was a key element of review. The new car industry – represented by the Federal Chamber of Automotive Industries (FCAI) – has lobbied hard against changes to the act, which are expected to take effect once Ford, Holden and Toyota cease building cars here, from as soon as late 2016.

In line with the government's commitment to reduce costs to business, the changes to the motor vehicles standard act (MVSA) will complete the process of harmonising ADRs with European counterparts. This is expected to save local business as much as $281 million in compliance costs – assuming the car companies pass on that saving to the consumer.

According to the minister's press release, Cabinet supports investigating options for parallel importation of new cars. Used cars are off the agenda, but the government is accepting submissions for an expanded remit for SEVS (Specialist & Enthusiast Vehicle Scheme).

The deadline for submissions is the end of May, and the government will announce its final decision later this year, after reviewing all the submissions.

During an interview with the ABC this morning, Jamie Briggs expressed the view that consumers are free to purchase other goods overseas... why not cars?

"We allow people to purchase all sorts of goods from overseas on the internet," the minister said.

"There seems no reason why we shouldn't allow people to buy new cars from overseas markets if there's an opportunity to do so."

There would remain some restrictions however, chief among them being right-hand drive. And the minister admitted that the so-called New Zealand experience was primarily the factor that dissuaded the government from loosening restrictions on used-car importation.