FTA could put luxury cars in reach

New European-built cars could become much cheaper in Australia under an option to slash the tariffs on imported vehicles that the government is considering for a possible free-trade agreement with Europe.

News Corp Australia can reveal that removing the 5 per cent tariff charged on imported vehicles is part of scoping work on a potential FTA with Europe, which supplied about 16 per cent of new cars sold last year. Agreements to phase out the tariff were recently struck for cars imported from Japan and South Korea, while zero rates already apply under deals with countries including the US and Thailand.

Trade Minister Andrew Robb told News Corp Australia: "Tariffs on automotive imports from major Asian markets such as Japan and Korea will be eliminated under the free-trade agreements we have concluded, which will save consumers an average of $1500 on the purchase of a Japanese or Korean vehicle. In regard to European imports, we are currently doing some scoping work on an FTA with the European Union and tariffs are being looked at in this context." 

With Ford, Holden and Toyota having announced plans to end production in Australia by 2017 - marking the end of the nation's car manufacturing industry - there will no longer be a need for tariffs to protect a local industry. The tariff raised $920 million in 2013-14 and is forecast to raise $820m this year, but this is due to fall to $660m in 2017-18.

A government source stressed tariffs were "leverage items" in trade talks. "If we eliminate tariffs we expect commensurate benefits in return for our exports," the source said.

The Productivity Commission has urged the government to consider removing the tariff after Ford, Holden and Toyota stop manufacturing cars in Australia

The move is sure to spark fresh calls to scrap the 5 per cent tariff to deal with complaints that some nations' car exports get preferential treatment. It is also sure to renew pressure on the government to dump the 33 per cent luxury car tax that adds $100,000 to the cost of a Porsche 911 Turbo S or Audi A8.

Yesterday Mercedes-Benz said it wanted the tariff axed across the board, including from countries that did not have trade deals in place. Some Mercedes-Benz C-class vehicles imported to Australia's shores are manufactured in South Africa, while others are made in Germany. Other European brands have similar set-ups.

Mercedes-Benz communications chief David McCarthy said he backed the talks with EU nations, but wholesale dumping of the tariff and the luxury car tax would make "the market freer".

The Productivity Commission has urged the government to consider removing the tariff after Ford, Holden and Toyota stop manufacturing cars in Australia, declaring there is no rationale for keeping it when the last of the big car makers exits in 2017. The government has promised to review the tariff and the luxury car tax in its tax white paper.

The development comes as the auto industry ratchets up its campaign against Coalition proposals that could allow personal imports of new cars so long as they comply with international standards.

Members of the industry will meet Assistant Infrastructure Minister Jamie Briggs next week, when they are expected to raise concerns over the proposals in an options paper released last month.

The Federal Chamber of Automotive Industries is arguing that the majority of the new car fleet is more competitively priced in Australia than in "comparable" overseas right-hand drive markets. 

FCAI head Tony Weber said consumers who purchased new cars from overseas dealers and via the internet would not have the same protections on matters such as warranty, service and parts.

Companies including Volkswagen, Audi, Porsche and Skoda have told the government's infrastructure ministry - which is consulting on the proposals - that "if the government is serious" about lowering costs of cars, it should remove the "inconsistently applied" import tax and the "unique" luxury car tax.

Audi Australia general manager of corporate communications Anna Burgdorf said the exemption to the vehicle import duty for countries with trade deals created "disparity in the market, based on the country of origin".