Why new cars are so cheap

The government wants to relax car import laws in the belief it will make new cars cheaper, but the industry is concerned that dodgy cars will be imported by rogue operators.

The boss of Ford Australia has blasted the Federal Government's proposal to allow buyers to import new cars privately.

CEO Graeme Whickman says he is concerned the changes will make it harder to identify cars that may have been crashed and repaired before they are imported, and it will be more difficult to trace vehicles that may need to be recalled.

The Federal Government has been considering changes to the current legislation once Australia's three remaining car factories -- Ford, Holden and Toyota -- close their doors within the next two years.

Prices for mainstream cars are similar to or less than the same models overseas

Authorities believe the increased competition will help keep prices down, but the car industry argues Australia is already among the cheapest markets in the world for new vehicles.

Independent studies by News Corp have found prices for mainstream cars are similar to or less than the same models overseas, once equipment and taxes are taken into account -- but there are substantial price differences on cars priced above $100,000, largely due to Australia's luxury car tax, which is 33 per cent of the price above $63,184.

"I don't get a sense of what the government is actually trying to achieve … I'm trying to work out what we're actually trying to fix," said Mr Whickman, who was also speaking on behalf of the industry lobby group, the Federal Chamber of Automotive Industries (FCAI).

When asked if price pressure was behind the government's plan, Mr Whickman said: "There have already been studies done … in terms the of the amount of money you put down as a consumer, and you'll quickly realise we're in a competitive market. So it's not that. It can't be that."

Mr Whickman repeated the concerns of other industry representatives that the proposed changes could lead to dodgy cars being imported by rogue operators.

"At the end of the day, if it's brought in, then I don't know how it's gong to be enacted," Mr Whickman told media at an event in Melbourne today.

"What happens when a recall takes place? I'm worried about that. I've got no point of view around the history of the vehicle, it might be a near-new vehicle (but) what happens if it's been in a (crash) somewhere?"

I go back to 'what the heck are we trying to fix?'

The car industry has lobbied the government to understand why it wants to make the changes, but is yet to receive a formal response.

The proposal was first floated 12 months ago.

The assistant minister for infrastructure and regional development, Jamie Briggs, who is leading the enquiry into the changes, has declined repeated requests by News Corp Australia for interviews about the issue.

"I just see the whole thing fraught," said Mr Whickman. "I go back to 'what the heck are we trying to fix?' The FCAI has put our representation to the department to try to understand in a respectful manner what are we trying to fix?"

The CEO of the Australian Motor Traders Association Richard Dudley told News Corp Australia when the proposed changes were announced: "I'm not sure if this is a political stunt, but this announcement is premature and has been done without consultation with the industry."

"Why does the Federal Government want to make Australia the first country in the world to do this? If it wants to make cars cheaper, it should scrap the Luxury Car Tax," said Mr Dudley.

The Luxury Car Tax adds 33 per cent to the cost of every vehicle priced more than $63,184. Intended to slug buyers of BMWs and Mercedes-Benz cars the tax actually hits Toyota customers more than any other brand.

Australia is already the most competitive new-car market in the world, with 66 brands competing for 1.1 million sales annually compared to the US where 53 brands compete for 15.6 million sales annually.

Commsec data shows new-car affordability in Australia is at a 38-year high thanks to strong competition and record low interest rates.

For example, the price of a brand new Toyota Corolla and Nissan Pulsar are the same as they were 20 years ago -- $19,990 plus on-road costs -- even though the cars are significantly safer, better equipped and have more technology.

The prices of the same cars viewed online in the US initially appear cheaper but do not include state taxes, GST and dealer delivery charges, which bring them in line with prices in Australia.