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Lift restrictions on used vehicle imports: PC
Commercial scale importation of grey market vehicles will benefit the consumer, says Productivity CommissionThe Productivity Commission has outlined recommendations expected to have far-reaching consequences for the local automotive industry over the next decade, if adopted by government.
Last week the Commission released a position paper recommending that government refrain from further industry assistance once the existing Automotive Transformation Scheme has concluded – in 2020.
In the same position paper, the Commission offered other recommendations – among them opening up the local market to grey imports and ending federal and state government fleet policies that favour purchasing vehicles built in Australia.
This is the view of the Commission, as expressed in the position paper, with regard to freeing up so-called grey-market imports:
"There are restrictions on the importation of second-hand vehicles through the Motor Vehicle Standards Act 1989 (Cwlth). These restrictions impose costs, including by potentially increasing the prices of second-hand vehicles and reducing consumer choice, which may exceed the benefits, and thus the rationale for such a policy is weak."
In essence, the Commission is promoting a market environment similar to New Zealand's, which, at its peak in the early years of the previous decade, saw grey market (used) imports outnumber factory-approved (new) imports in a ratio of two to one. Here's how the Productivity Commission explains the status quo for importing near-new vehicles:
"Under the Motor Vehicle Standards Act, applications for approval to place a used import plate (or to supply to the market a used imported vehicle without such a plate) ‘can only be made in respect of a single used imported vehicle’ (sections 13C(2), 16(3)). The Motor Vehicle Standards Regulations 1989 (as amended up to 2012) also prohibit automotive workshops from importing more than 100 used vehicles in each vehicle category in a 12-month period (Part 3 (6a))."
According to the Commission, "there appears to be no pathway for the import of a significant number of recently built second-hand vehicles that would meet Australian Design Rule standards."
In the main, such vehicles would come from Japan, which is the country best placed to benefit from deregulating the grey market importation in Australia. The Commission has noted that the Motor Vehicle Standards Regulations are aimed at "consumer protection", to ensure the cars imported meet the required standard for road safety. But the aim of the Regulations is to limit untrammelled importation of cars that are already available here, new, from factory-approved distributors.
Based on the NZ experience, the Commission suggests a more liberal approach to importation of grey market vehicles would apply downward pressure to used car prices in Australia and provide a wider choice for the consumer. One example, the 2006 Toyota Corolla (picture), was found to be up to 20 per cent cheaper in New Zealand than in Australia, based on a small survey of advertised prices.
Back in 1987, around the time New Zealand was doing away with import tariffs and hurling the gates wide open to grey imports, a 20-year old Ford Cortina Mk I was worth close to $4000 (NZD). In 2014 a very low-kilometre Ford Telstar that is also 20 years old could set you back as little as $3600 (NZD). Higher mileage examples are advertised for barely half that sum.
It's the view of the Commission that without this competition in the used car market, car companies have been free to charge higher prices for new cars too, often in excess of any impact rendered by the Luxury Car Tax – which the Commission believes should be abolished anyway.
As for the relative safety of the grey imports, the Commission cites a 2005 survey by the Monash University Accident Research Centre indicating that there was negligible difference in crash safety between new and used (grey import) vehicles of the same year of manufacturer.
Despite the Commission's view that grey market importation restrictions should be relaxed, it also cautions that cars brought in under a new regime like that should still comply with safety and environmental standards that also apply to new cars. And, the Commission also suggests, the new framework should be introduced slowly, and with care. This will ensure that investment decisions made by leasing companies are not adversely affected – where residual values are concerned, for instance.
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Written byCarsales Staff
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