Stand-by for a short-term price war as car dealers panic sell to clear orders cancelled due to the Rudd Government’s controversial changes to Fringe Benefits Tax rules.
“Thousands of cars here or on their way here have had their orders cancelled or postponed because of the sudden changes to FBT," said Richard Dudley, the CEO of the Australian Automobile Dealers Association.
“There will be an initial glut of new cars but what happens [to discount prices] depends on the outcome of the election. The government is not prepared to move on its FBT decision whereas the opposition says they will abolish the changes."
As Ford Australia confirmed it is considering cutting production of the Falcon sedan and Territory SUV, its arch rival Holden issued an urgent bulletin to dealers offering new discounts across most of its model range.
“Due to the uncertainty created by the recent announcement on FBT … Holden is offering an additional bonus over and above the current retail incentives”, the confidential bulletin obtained by News Corp said.
All new Holdens except the Commodore have an extra $1000 slashed from their prices while the Colorado 4WD has an extra $2000 discount. It means the cheapest car in the Holden range, the Barina Spark, can be bought for $12,990 drive-away.
Toyota is understood to be preparing to clear up to 1000 Camrys over the next two months because it is unable to cut production at short notice. The last time Toyota had to quit Camrys, prices dipped to $27,990 drive-away, about $5000 off RRP.
Ford, which will end production in Australia in 2016, has foreshadowed further cutbacks. “We can confirm we are looking at what [the FBT changes] mean for our August production,” said Ford spokeswoman Sinead Phipps.
Ford Australia has also put an immediate halt on its employee company-car program. “We’re not calling cars back, but we’re not issuing any new ones at this stage.”
Manufacturers have stopped most company-car deliveries to their own staff because the new rules will increase their FBT bills by more than $50 million -- an estimated $20 million each for Toyota and Holden and about $15 million for Ford which has a smaller fleet.
The car industry is yet to accurately measure the impact of the FBT changes on new-car sales because the data is compiled on the last day of the month.
“It is too early to determine the impact of the FBT on sales after just 10 days, but we will likely see a slowdown in the next two months,” said Tony Weber, the chief executive of the Federal Chamber Automotive Industries. “Long term, if the FBT changes are not reversed, we expect to see a reduction in new-car sales of at least 10 per cent.”
Industry estimates say a 10 per cent drop in new-car sales would wipe $1.3 billion in GST revenue a year. When the Rudd Government announced the changes to company car tax rules it forecast a contribution of $1.8 billion towards the axing of the carbon tax.
State governments would also miss out on an estimated $100 million in stamp duty revenue from new-car sales and about $50 million in registration fees each year.
Luxury car buyers will also be able to grab a bargain. BMW took out advertisements in daily press during the week advising customers against novated leasing because under the new circumstances “a novated lease may no longer be the most suitable way” to buy a new car.
Mercedes-Benz is understood to have a surplus of about 400 of its most affordable sedan, the C-Class, which is Australia’s second-biggest selling medium-sized car after the Toyota Camry.
This reporter is on Twitter: @JoshuaDowling