A Productivity Commission recommendation that Australia open its doors to imported used vehicles, or so-called ‘grey imports’, could slash the new car market by up to 50 per cent, according to GM Holden chairman and managing director Gerry Dorizas.
The advisory body urged the federal government to remove barriers to the importation of used cars from countries such as Japan in February this year, claiming it would give consumers more choice and cheaper cars.
However, the auto sector in Australia, which employs as many as 500,000 people factoring in sectors such as maintenance and retail, has long been opposed to any relaxation of the rules.
Such a move, goes the common argument, would turn Australia into a dumping ground for dodgy vehicles from overseas, fitted with parts that are not stocked by their maker’s Australian divisions since, despite wearing familiar branding, they were never officially sold here.
Other concerns include the proliferation of vehicles that have untraceable histories and that in many cases may have been tampered with in ways including having their odometers wound back, not mention the devastating affect it would have on the residuals of ‘genuine’ used cars sold and driven in Australia across their life-cycle.
Of course, the real point of contention is that the more people are lured into buying a cheap but possibly dodgy used import from overseas, the fewer people will buy new cars sold here in Australia. Any large-scale drop in new vehicle sales would have huge consequences for a sizeable chunk of the population.
Across the Tasman, New Zealand enacted a similar policy to relax importation regulations in the 1990s in a bid to give people access to cheaper used cars.
But what has happened, according to the industry, was a sudden increase in used vehicles that gutted new vehicle sales and increased the average age of the New Zealand vehicle fleet from 11 years to 13 years.
Australia’s vehicle fleet has an average age of just under 10 years, which is older than much of Europe and developed parts of Asia. The common wisdom says that used imports would increase this average age, and older cars tend to be both less green-friendly and less safe.
This week, Holden called the potential relaxation of used import restrictions a key issue for the whole industry, and said it was lobbying government hard through the Federal Chamber of Automotive Industries (FCAI) to counter the Productivity Commission report.
New vehicles are more affordable relative to wages now than any times since the 1970s, Holden says, because of wage growth, low interest rates and the strong dollar. While signs of an economic slow-down are now rife, as we reported recently, huge market fragmentation here has indeed resulted in big strides in new vehicle affordability.
Grey imports, the company claims, will “undermine the new car industry and damage brands, adversely affect environment and safety performance (and) reduce residual values and increase lease rates on salary packaging”.
Speaking exclusively on the issue this week to CarAdvice, Holden boss Dorizas (above) made the bold claim that a deluge of used imports could clash the Australian new vehicle market from 1.1 million to 550,000 units. Such a cut would be be devastating.
“I think it’s not only Holden’s business model (that it affects), I think it’s everyone’s business model,” Dorizas said.
“I think it’s not about Holden, [it’s] the whole business, whatever is going to happen to Holden is going to happen to everybody, in terms of residuals, in terms of older cars on the market, it’s just going to be a mess.
“The total industry has invested in a certain setup, and if you want to change that setup it’s again like taking away the ATS [Automotive Transportation Scheme]. It could halve the market.
“If we’re talking about pricing, I don’t think anybody is going to get a better-priced car [on an apples-for-apples basis]. You may get a better priced car because the cars may be older, will have more kilometres, and I tell you, if they’re selling 5000km [old] cars as they are saying, who knows if they have touched the odometer?”
Dorizas said Holden would lobby the government to ignore the PC recommendation through the FCAI peak body, “be cause it’s an industry issue”, and said he was confident the car-makers and the industry’s position would prevail.
“As I said, I believe in logic, and I think politicians are logical here in Australia.”