UK-built cars may not be cheaper despite FTA

Don’t hold your breath for cheaper car prices under the Australia-United Kingdom free trade agreement announced last week.

Automotive industry sources contacted by carsales instead suggest the forecast tariff cut would more likely result in added equipment in new vehicles and forestalled price increases.

Car companies that export cars from the UK to Australia are staying quiet on the matter until they see more detail.

Brands theoretically impacted by the Australia-UK FTA include Nissan, which imports the LEAF, JUKE and QASHQAI from the UK to Australia; Jaguar Land Rover; MINI; hyper-luxury brands Bentley and Rolls-Royce; sports car makers Aston Martin, Lotus and McLaren and niche brands Morgan and Caterham.

Nissan’s response was typical of their caution.

“We need to understand the finer details and dates when this free trade agreement will be implemented, to determine the impact on new vehicle prices for Australian consumers.”

In the first three months of this year, VFACTS data shows 9733 UK-built vehicles have been registered in Australia until the end of May 2021. That’s up 24.8 per cent on the same period last year.

That makes it the number eight import market for Australia. Japan dominates with 164,752 registrations.

Cars imported to Australia from the UK are currently subject to a five per cent tariff.

In a press statement Australia’s trade minister Dan Tehan said that tariff would be ended “immediately”. By that he meant when the legislation passes both houses of parliament and the FTA comes into force.

With a 600-800 page legal agreement yet to be written, thrashed out and signed off by both governments, that approval is not expected until July 2022.

“I can’t see that [a price drop] happening,” one multi-franchise dealer told carsales. “There will be five per cent off the list price but there will still be luxury car tax and GST and stuff like that.

“It’s more likely to be value adds for customers. I don’t expect the brands to pocket it. The product guys use it to enhance the product somehow.

“If you give a discount and change the price people you have sold cars to before get the s---- big time. Residual rates for businesses and fleet companies are also affected.”

Another automotive industry veteran with experience in both the brand and dealer segments was pessimistic about the prospect of price cuts because of the FTA.

“I don’t think prices will come down, but it may be some of the brands that build cars in the UK will be able to stave off price increases. Prices may not go up as much as they otherwise would.

“It may well prompt a brand to change its production sourcing for a model, say from Japan to the UK, but that saving may not necessarily be passed on to the customer.

“It would just be a sourcing decision.”