Australia had a lot of opinions about Tony Abbott. Some liked him; some certainly did not – and while we can agree that he probably went a budgie too far, the automotive industry wasn’t exactly on the Abbot cheer squad.
The Liberal spill wasn’t entirely unexpected, and when Malcolm Turnbull lined up Abbott like a canetoad on the lawn and took aim for the back fence, those who depend on the car industry to feed their families probably breathed a collective sigh of relief. It wasn’t the cleanest kill, but the spill worked. Now the big question is will the automotive sector work under the Turnbull government?
His early moves after ousting the Abbott were well-received – talking up advocacy over endless slogans, respecting the intelligence of the Australian people and running an open government, seeking the information from the right people to inform decisions. His business experience, underlined by significant person wealth sees the new prime minster generally held in good regard by the public, and when AutoTalk spoke to a cross-section of the industry to gauge the mood of the showroom – and it seems to be a fairly positive message for the new leader.
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The new prime minster’s enthusiasm for innovation has impressed Australian Automotive Aftermarket Association boss Stuart Charity. He was complimentary about former minister for small business Bruce Billson’s achievements, highlighting the voluntary agreement on repair data sharing as a particular success. He noted that AAAA looked forward to working closely with the new blood – Kelly O’Dwyer around the small business portfolio, and Christopher Pyne in his role as minster for industry, innovation and science, particularly at this critical time for the future of automotive manufacturing in Australia. The country’s quality performance, racing and 4WD equipment generates $5bn in local sales and $800m in exports, said Charity.
If the new Government works on the basis that the automotive industry must survive without government vision, strategies and support, it offers little hope to thousands of skilled auto workers. said Charity, on what the new government’s impact on the automotive sector could be.
This would be a major lost opportunity to maintain high end manufacturing skills and infrastructure. It would also be a callous outcome for thousands of working Australian families.
The new Prime Minister seems to be open to consulting with and working with industry and there are good signs so far. As we do not yet have a sense of what the new Federal Government will do, we hope they are open to ideas to maintain and integrate the components sector into our already successful parts and accessories sectors.
Importer Ross Prendegast from Road and Track points out that the next generation of the Australian vehicle fleet will be entirely sourced from overseas, and that without a manufacturing base there’s a real to bolster ancillary industries.
The Australian fleet of vehicles will become 100% imported as manufacturing of cars exits the country, he says, Malcolm believes in all Australian industries being competitive, and I’m sure that the Australian car industry is another sector that Malcolm would want to be competitive.
Bruce McDonald, Australian Automotive Dealers Association chief executive says that Turnbull’s appointment may bring a much-needed air of positivity.
If you are talking about business confidence then Malcolm Turnbull’s appointment has lifted business confidence which has also been reflected in the polls, he says. AADA members are the franchised new car dealers in Australia who sell new and used vehicles to consumers. They compete in the most highly competitive right hand drive market in the world. This is reflected in the price and choice of vehicles on offer to the Australian public. For the vast majority of the Australian new car market, a model is competitively priced compared to Japan, the UK or NZ. Consumer confidence is very important.
At the last Board meeting of the Reserve Bank of Australia on
1 September, it was observed that recent indicators of consumer sentiment and retail sales had been consistent with some increase in consumption growth. Consumer confidence is something that has been lacking and Mr Turnbull’s appointment has been regarded by many as positive.
Greg Roebuck, chief executive of Carsales.com, said that while the impending demise of the car industry in South Australia was a key factor in the lack of support that Tony Abbott received from political colleagues, there’s little that the new PM can do about it.
The change of leadership will probably make a number of sitting Liberal members feel more confident about the future, said Roebuck. However, the future of 25,000 SA auto workers will be difficult for the new PM to fix in the short term. With an estimated 200,000 auto industry workers headed towards the dole queue in 2017, and the loss of their spending power, there is clearly a great deal to be done. The new PM is behind the eight ball here because previous governments of all persuasions have failed to address the decline of the industry. New technology investments will not be quick to implement. I would like to think that if the Government is committed to seeking a future of the industry, then members of the auto industry will be invited to the PM’s new economy summit.
Federal Chamber of Automotive Industries chief executive Tony Weber is hopeful that the focus on innovation and technology will breathe new life into the car industry.
I’ve seen a lot of PMs come into office and say a lot of things in their rhetoric, but the proof’s in the pudding and the delivery, says Weber. One positive thing is that the PM has had a focus on innovation in the early stages of the change. We think that innovation is absolutely fundamental to the future of Australia and actually driving automotive. From that perspective I think it’s a very good thing, and we need to put the role of automotive in the economy-wide perspective. The senate inquiry will inform the debate, but there are many inputs that will inform the debate and the senate inquiry is just one of those inputs.
Just what Turnbull needs to do to ensure the car industry weathers the manufacturer shutdown is crystal ball gazing at its finest – but our panel of experts have a good handle on how the freshly-minted prime minister can approach it.
Stuart Charity believes the aftermarket industry is a good place to start – not surprising, given his position with AAAA. But this is also something reflected in Ford’s grand plan post-manufacturing, which includes the ambitious goal of becoming the country’s biggest automotive employer by 2018.
In many cases, the companies that supply parts to the car makers also produce the same parts for the aftermarket, he says. They are the same products, just packed in a different box.
With virtually no government support our members have established a solid base with exports all over the world. The new Government must launch an economic stimulus package applied to the automotive aftermarket sector. That sector is in the best position to soak up the skilled workers and sophisticated equipment to be made redundant when car makers close.
Supporting this sector for further growth will enable some car component makers to remain in business, notes Charity, and provide new work opportunities for redundant car company employees to find new jobs.
Greg Roebuck backs battery power as a possible saviour: I do think the future of the electric car market could be significantly brighter as Turnbull has always been a backer of innovation and technology and his love of the electric car could combine to mean Australia is an important centre for the industry, he says.
New industry minister Christopher Pyne appears to have enthusiastically embraced his new role and is talking up the future of disruptive technologies and this is to be applauded.
Australians are world leaders in technology “ look at the carbon fibre wheels being fitted to the new Mustang and the potential for this Australian business to take this technology around the world. Turnbull needs to celebrate and encourage our rich heritage of world class innovation in the auto industry.
It is important to remember that vehicle manufacturing only represents one-fifth of Australia’s automotive industry, he says. The other four-fifths are in retail, service and repair industry, which keep Australia’s 17 million registered vehicles on the road.
Ross Prendegast wants to see the politicians rethink the laws around how cars are sold here.
The car industry needs legislation changes that will create competition in the market place, he says, starting by removing the protectionist measures in the current Motor Vehicle Standards Act.
Bruce McDonald agrees that changes around import laws are a necessity.
The first thing Mr Turnbull and Paul Fletcher, Minister for Territories, Local Government and Major Projects, can do is reaffirm the Government’s announcement that there will be no large scale importation of used motor vehicles into Australia, he says. We do not want the NZ experience replicated in Australia where it has taken over 10 years for new car sales to reach previous levels.
As you know the Government is also looking at the relaxation of restrictions to allow large volumes of parallel and personal imports into the country. We do not support this proposal. It imposes a number of risks on the consumer and will ultimately hurt new car dealerships, a quarter of which failed to make a profit in 2014.
As almost all motor vehicles will be imported into Australia, the exchange rate devaluation will have an effect on the price of motor vehicles and other goods imported into the country, McDonald explains. This is not something that Dealers can control. However, the public needs to be made aware of these matters.
Tony Weber believes that recognising the capabilities that Australia already has, and building on them, is the way forward.
The vast majority of the manufacturing jobs will actually go – that’s the absolute reality, he says. What will be left is Australia’s strong capacity in R&D, engineering and design. We need to create an environment that fosters those that are making things grow and remain in this country and taking them to an even more vibrant level that they are at the moment. A lot of Australians out there don’t realise just how vibrant and capable we are already and how internationally competitive we are.
What we’re talking about here – and it’s not just about the automotive sector – it’s about many things, but what’s important is the capacity to undertake advanced manufacturing in this country. The automotive sector is probably the most important technical transfer network around the world, and with R&D, engineering and design capacity in this country between Toyota, Ford and Holden, we still link into that design network and technology transfer.
One thing that the entire car industry – and most others – know, is that the luxury car tax is an awkward impediment that was designed to protect a local manufacturing base that will no longer exist soon. And its effects on the industry – both locally and for imported marques – have essentially lined government pockets without achieving its stated goals. Malcolm Turnbull himself was a vocal opponent of the tax when it appeared in the 2008 federal budget.
The FCAI believes it needs to be canned as soon as possible.
As I’ve said many times before, no one supports the luxury car tax because it has no credibility whatsoever, says Weber.
It has no economic credibility, and it fails most of the important tests behind the design of taxation systems. And that’s not just Malcolm Turnbull’s view, or the FCAI’s view, or the Henry Review of taxation. There’s nobody that I know of with any credibility in this country that actually supports the luxury car tax from a theoretical perspective.
We think to drive a stronger and a better economy, we should be eliminating inefficient taxes like the luxury car tax as soon as fiscally possible.
Prendegast agrees: We would love to see the end of the LCT as it is a disproportionate and discriminatory tax, he says. It was introduced as way to subsidise the local manufacturing industry and with the end of manufacturing upon us, there is no reason to keep supporting the application of LCT. There is also a great burden and cost on industry and the ATO to collect LCT revenue and it would be unlikely that LCT is contributing a net financial benefit to society.
Australian Automobile Association’s chief executive Michael Bradley says LCT is now an irrelevant tax.
With no domestic vehicle manufacturing industry beyond 2017 there is no policy rationale to support the maintenance of protectionist and inefficient taxes, such as the Luxury Car Tax and Customs Duty on imported vehicles, he says.
The LCT is an inefficient tax which targets vehicles which embrace new safety and environmental technologies. Vehicles subject to the tax are generally the leaders in introducing technologies which enhance safety and environmental outcomes, and the LCT only serves to constrain the development and utilisation of such features.
Stuart Charity isn’t optimistic on the demise of LCT, for the moment, anyway: We anticipate that this issue will now be linked to tax reform more broadly. We may see the end of LCT, but not in the short term.
Bruce McDonald hopes to see some sensible thought around LCT.
The LCT remains attractive to the Government as it is estimated to raise approximately $500 million this financial year, he says.
The LCT flies in the face of what this Government says it is about “ removal of trade barriers including tariffs, trade liberalisation policies and free trade agreements like the Trans-Pacific Partnership agreement. In effect, the LCT is a thinly disguised tariff.
If the Government were true to its values then LCT should go.
The LCT also flies in the face of accepted tax principles “ equity, efficiency and simplicity. It is also discriminatory and is not imposed on other luxury goods such as yachts, watches or pieces of art. Australia is the only developed country with a luxury car tax.
CarSales boss Roebuck agrees: LCT is a ridiculous tax and needs to be scrapped sooner rather than later “ it’s always been simply a money grab when you realise there’s no private jet tax or luxury boat tax! Turnbull has been a vocal opponent of the LCT in the past and his Government has halted the current tax review and embarked on a fuller review of the tax system. That said, I suspect an emissions or fuel economy based tax will be a likely replacement.
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