Imported cars cheaper in 2015

The Australian new car market is in healthy shape, despite a moderate two per cent decline in 2014. But 2015 could bounce back and set new records with some brands slashing thousands of dollars from the list price of their cars, affecting potentially hundreds of thousands of buyers.

From January 15, 2015, import tariffs on cars arriving from Japan will be reduced by five per cent as part of a new Free Trade Agreement (FTA). The South Korean FTA also cut five per cent import tariffs in December 15, 2014.

But the main reason for the widespread price cuts are currency exchange rates.

The exchange rate with the Japanese Yen continues to favour Australia and already some brands have pre-empted the Australia-Japan FTA to slash prices by more than $10,000. For instance the range-topping Subaru Liberty 3.6R has had a whopping $14,000 hewn from its list price, falling to $41,990.

Mazda, Toyota and Subaru have all announced that price cuts will take effect in 2015, with modest cuts of around $500 the average saving customers can expect; some cuts are significantly higher, others slightly lower.

One media outlet reports that the price cuts could affect an estimated 460,000 imported vehicles in Australia in 2015. This is unlikely due to the fact that only Japanese, and not Korean imports will see price reductions – despite the Australia-Korea FTA easing.

In 2014 around 360,000 vehicles were imported from Japan, and many of these vehicles will see a price reduction. But if 2015's new car sales are anything like 2014, the 228,000 vehicles imported from Thailand will remain unaffected. And the 134,000 that come from Korea are not expected to benefit from price cuts in 2015 either, despite the new FTA.

Holden, Kia and Hyundai, three major brands that source vehicles from Korea, each made it clear to motoring.com.au that price reductions were unlikely. This is due in large part to the strengthening of the Korean won compared to the Aussie dollar.

Holden imports several models from Korea but Executive Director of Corporate Affairs, George Svigos, pointed out that the brand already offers "some of the most competitive deals in the Australian market" via offers that require no deposit or repayment until 2016 and free upgrades to automatic transmissions on some models.

Hyundai Australia's Public Relations General Manager, Bill Thomas, confirmed Hyundai would not cut prices but in the face of strong competition from Toyota and Mazda said the value equation would improve on some models.

"We won't be lowering prices but will add extra features and technologies to updated models later in the year. New i30 will be one example," he said.

"Exchange rate pressures have made trading very difficult – especially with the double whammy of a very strong Korean won and relatively weak Japanese yen. We are also faced with a strong Euro, so that affects our Czech-sourced vehicles, to which the Korea-Australia FTA obviously does not apply."

Kia Australia's General Manager of Media and Corporate Communications, Kevin Hepworth, remarked that Kia also has no plans to adjust prices – up or down.

"We have not increased any prices this year that would have been passed on in a normal January price rise," he observed, noting that the new year often brings higher prices.

"If it was a 20 per cent tariff cut with the FTA, then maybe we would look at reducing prices," said Hepworth, who reiterated Thomas' remarks that the Korean won's strength made it difficult to cut prices.

"You wear the currency fluctuations. In good times you drop the prices," said the Kia comms chief, who confirmed there would be some equipment upgrades when updated models arrived here.

Furthermore, Japanese brands Honda and Mitsubishi confirmed they had no plans to reduce prices in 2015 like Mazda, Toyota and Subaru.

Mitsubishi Motors Australia's Product Communications Coordinator, Genevieve Kerin, noted that the Japanese brand had "been preparing for the introduction of the Japanese Free Trade Agreement for some time," and that the company had already rolled back prices in 2014 to pass on savings to customers.

Honda Australia's Public Relations Manager, Melissa Cross, explained that most of its products now come from Thailand, so the weaker Japanese currency and FTA wouldn't have much effect on the range.

"We have a couple of models manufactured in Japan, mainly the Odyssey and Accord Euro," she said, but stressed that Honda Australia had "been providing significant savings since November 2014" with its Free For All campaign that adds things like free rego, CTP insurance, extended warranty and roadside assist.

The other major Japanese importer, Nissan, says it is yet to make a decision on the effects of the FTA. 

"It's still under review," said Nissan Australia's General Manager of Corporate Communications, Peter Fadeyev.

The price reductions on big-selling models, such as the Subaru Impreza (down $500), Mazda 3 (down $510) and Toyota Corolla (down $700) are primarily related to currency and secondarily linked FTA changes. Lump in intensifying competition that is increasingly evident in the Australian new car market and, for the mid-term at least, car prices are likely to remain low.