Prestige car prices to plummet if tariffs go

THE price tags at Nick Theodossi's North Melbourne prestige car showroom would plunge dramatically if calls for the scrapping of the 5 per cent tariff on imported cars and the luxury car tax are taken up by the government.

As Joe Hockey yesterday confirmed the government would consider dropping the imposts after the departures of Ford, Toyota and Holden left no carmaking industry to protect, car buyers were contemplating savings of more than $10,000 on a $93,000 BMW 335i sedan, and significantly higher price cuts on six-figure vehicles.

Dealers like Mr Theodossi, who have long opposed the protection given to the local car manufacturing industry, were cautiously welcoming the possibility that high-end brands such as BMW, Audi and Land Rover might soon be within reach of mainstream buyers. Mr Theodossi, 62, said he was yet to be convinced the government would follow the recommendation of leading economists and scrap the luxury car tax, but it would be a massive boost for the industry -- and consumers -- if it happened.

"I can't see the government scrapping it, but it would be fantastic if they did," he said. "Everybody could buy a Mercedes." After the Australian Automotive Association this week called for the scrapping of the tariffs on imported cars in the wake of the demise of the Australian car manufacturing industry, the Treasurer said yesterday the idea would be considered.

"The car industry is not going until 2017, but this is something that will certainly be considered by our review of taxation, which will occur in the next 18 months or so, and certainly before the next election," Mr Hockey said. The import tariff raises about $900m a year, and the luxury car tax about $400m a year.

While the removal of the 5 per cent tariff on imported passenger cars could cut several hundred dollars or more off the cost of a mid-range car such as a Mazda 3, expensive cars that attracted the tariff and the luxury car tax could fall by thousands of dollars. Mr Theodossi said he thought consumers rather than dealers would be the main winners if the tax was abolished.

His most expensive car in stock is a 2013 Bentley Continental Coupe, which although he can sell it for less, retails for $500,000 excluding GST. With fuel consumption of 9.9L/100km, it does not meet the government's fuel efficiency threshold of 7L/100km, and is taxed at a rate of 33 per cent on the portion of the price of the car above $60,316, making the luxury car tax (LCT) component of the price $145,095. 

The scrapping of the LCT would therefore reduce the price of the Bentley from $500,000, to $354,904. Trade Prestige Cars dealer Stephen Curtain said he believed the case for abolishing the imported and luxury car taxes was compelling.

"If they're charging the tax to try to protect Australian car manufacturers and there are now no Australian car manufacturers, it makes no sense to keep it." Mr Curtain predominantly deals in used luxury cars, but said he expected sales of new high-end cars to increase significantly if the tax was scrapped. "No doubt if someone knocks $8000 or $10,000 off the price of a car, that will drive up sales of luxury cars."

Ateco Automotive executive chairman Neville Crichton, whose Sydney-based group owns dealerships that sell vehicles ranging from the Chinese-made Chery to Italy's Maserati, said he had no doubt that tariffs and the luxury car tax should be scrapped.

"The luxury car tax was put in place to protect the local producers with the (Holden) Statesman -- they don't make those cars any more," Mr Crichton said. "It's become a revenue situation rather than a protectionist tariff. I think the luxury tax is extremely unfair."

He said car prices would plunge if they were scrapped. "Right now, if you look at a $600,000 Ferrari, close to 30 per cent of that is going to the luxury car tax. It doesn't take Einstein to work out that suddenly that $600,000 car becomes a $400,000 car," he said.

"It'll open the market up considerably." But he said BMW and Audi would be the big winners. "The brands that would certainly benefit would be Land Rover, BMW, Audi, Mercedes, Maserati. There's still only a limited amount of people who would want to own a Ferrari or a Lamborghini. It would bring a lot of the BMW and Audi range into a normal car bracket again."

ADDITIONAL REPORTING: SID MAHER, DARREN DAVIDSON, MARK SCHLIEBS