Tariff confusion

We're three weeks into the new year already, and some car companies are yet to decide how to parlay the imported passenger vehicle tariff reduction into a retail incentive. Indeed, some companies are waiting and watching for their rivals to show their hand; still others have definitely concluded that they will not be passing on the discount to their customers.

The tariff reduction was announced years ago by the federal government, long before the Global Financial Crisis (GFC) could have been foreseen. It effectively slices five per cent off the landed cost of a new car. A 10 per cent tariff payable by car importers applied to passenger vehicles shipped here before December 31, but passenger vehicles arriving in Australia post January 1 are only taxed at a rate of five per cent.

The lower tariff has the potential to make imported passenger cars more affordable for buyers of new passenger cars and picks up the ball in the aftermath of the business investment allowances that underpinned improving retail sales during 2009.

In practice however, the car companies are not required to pass on that cost-cutting measure to the consumer. If they were burned by the GFC, they're holding back the extra profit freed up by the lower tariff to recoup some of their loss from last year.

Certain companies have reduced the prices of select models, while some have held the retail prices steady, but ordered the cars from the factories with added equipment. By this means, resale values won't be affected and the importer will maintain consumer confidence in the brand.

Contrary to the intentions of the federal government then, the reduced tariff may not find its way directly into the pockets of the new-car buyer. For those importers forced to buy and ship vehicles when the Australian dollar was roughly 60 per cent of its current value, they're still catching up with market reality and it's unlikely they'll pass on the lower tariff to consumers immediately. That's not to say it won't happen eventually -- just not right at this point in time.

So what are the car companies' various responses to the tariff reduction? We've listed them below for your information.

Audi
Passing on the lower tariff to consumers, in the form of reduced prices. The only two vehicles unaffected are the Q5 and Q7 SUVs.

BMW
No change to pricing. To keep buyer interest percolating during 2009, BMW offered equipment upgrades across its range of models, but the cupboard's bare now and the prestige importer has no plans to discount prices based on the lower tariff. The last general price increase for the prestige brand was two years ago.

Chrysler
Product range changes unrelated to the tariff reduction. Chrysler, Dodge and Jeep are holding fast their product specification and pricing. Prices for the Jeep Cherokee and Dodge Journey were reduced late last year, but that was a matter of aligning those models with the market's perception of them, rather than leveraging the five per cent tariff, says Chrysler. The Jeep is already imported subject to a five per cent tariff.

Citroen
Minimal changes to the range. The C5 will be shortly upgraded for the 2010 model year and will take advantage of the lower tariff by featuring new engines and revised trim. Pricing and specification for other models remain unaltered.

Ferrari
Importer anticipates discounted pricing. Back in October, the local distributor for the hallowed Italian marque issued a price list for the period post-January 1 and the revised pricing took into account the five per cent tariff.

Fiat
No change to pricing or specification.

Ford
No changes reported to date.

Holden
No change to pricing or specification, but monitoring competitors' actions constantly.

Honda
Follows Mazda's example of price discounting. Jumping the gun by a month, Honda reduced prices of its range to reflect the new tariff.

Hyundai
No changes at this time.

Kia
Discount for Cerato, Rondo and Grand Carnival. Kia has just announced that the Cerato small car is now priced from $18,990 (manufacturer's list price), inclusive of on-road costs. Similarly, the Rondo remains priced from $24,990, but that price also incorporates the on-road costs, as does the price of $38,990 for the Grand Carnival. For the time being, other models in the range remain at their pre-2010 pricing.

Land Rover
No changes to pricing or specification.

Lexus
Price reductions across the board. Lexus has dropped prices of the IS, GS, LS and the SC 430 sports car by amounts ranging from roughly $2600 ($2590 for the IS 250 Prestige) up to $9000 for the LS 600hL.

Maserati
Prices revised for most models, in line with the tariff reduction.

Mazda
Discounted prices in advance of the change in tariff. Mazda reduced prices late last year, pre-empting most of its competitors in the marketplace.

Mercedes-Benz
Progressive introduction of equipment upgrades. The German prestige importer has readjusted the pricing and specification of the B-Class to fill the gap left by the former entry-level model in the range, the A-Class. This repositioning of the B-Class has been possible through the reduction of the tariff from 10 to five per cent. Although nothing further has been revealed by Benz, this is just the "first wave of product enhancements". Nonetheless, Benz had previously admitted that most models were being upgraded with extra equipment -- and that was a process commenced as long ago as June '09. Feedback from its customer base leads Benz to believe they prefer equipment upgrades over price discounting, since the former won't erode resale values.

Mitsubishi
Added safety features to maintain Lancer's competitive edge. Holding its cards very close to the chest, Mitsubishi is reserving different options open to it, but to date, only the standard inclusion of side-impact/curtain airbags across the Lancer range has been revealed. Expect other incentives to be announced in due course.

Nissan
No change to pricing or specification of passenger vehicles. The X-TRAIL SUV came in for some tweaking of specifications in December, but not only was this added equipment unrelated to the tariff reduction, it was accompanied by a price increase for higher-grade models. Nissan has not announced any further changes to its product range.

Peugeot
Tariff reduction passed on to consumers by discounted pricing. Peugeot announced during the first week of 2010 that it would reduce prices of its entire range.

Porsche
Comprehensive pricing reductions. A new price list for the Porsche range was released just before Christmas, reflecting the impact of the reduced tariff on pricing for the range in 2010.

Renault
2010 models to benefit from tariff change. Current (2009) stocks of the Renault range are being marketed and sold in accordance with the previous 10 per cent tariff. As the importer introduces 2010 models, it will do so with revised pricing and/or enhanced equipment. For the time being, the precise changes are not for public disclosure.

Skoda
Price discounting across the board. Prices for the Skoda range have dropped as a result of the lower cost to import the vehicles here after January 1.

Subaru
One variant benefits from reduced tariff. Intimating that it would recover some of the loss incurred over the year, Subaru was not shaping up to pass on the reduced tariff to its client base, but acquiesced in the case of the Impreza R manual.

Suzuki
Price drop for Alto and Swift. The entry-level light car in the local Suzuki range, the Alto, has only just arrived in the country, but it has already been discounted in price from the commencement of this year. The larger Swift has also been reduced in line with the tariff reduction, we're informed by Suzuki.

Toyota
Comprehensive adjustment to pricing; some cuts, some increases. Yaris, Corolla, Tarago and Kluger have come down in price. The Aurion, HiAce Commuter, RAV4, LandCruiser 70 Series and 200 Series have risen in price. Camry, Prius, HiLux, Prado, Coaster, Avensis and HiAce van have held steady. Toyota has added some equipment to the Corolla specification over the past couple of months.

Volkswagen
No decision yet concerning pricing

Volvo
More icing on the cake, but C70 price slashed. Added value in the C30 range is as much as $7000, according to Volvo, and the S40/V50 models are better equipped to the tune of $6700. In the final months of 2009, Volvo reduced the price of the C70 by over $10,000 and has introduced a revised S80 range, featuring all-wheel drive for the D5 variant and new standard safety features for the V8 -- all for no extra price.

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