The latest Free Trade Agreement (FTA) between the Australian and Japanese government will see consumers benefit from cheaper Japanese cars as prices on new cars are forecast to fall by $1000 to $2000 on a $30,000 car, according to the AAA.
The drop in price was one of the main selling points of the Japanese-Australian FTA, which will see import tariffs on cars fall from 5% to 0.
It is not yet known if the tariff will fall in one hit, or if it will be reduced gradually.
Last year alone Australians purchased more than 360,000 vehicles from Japan worth more than $6.8 billion.
Road and Track director, Ross Pendergast told AutoTalk: “Any deal that makes vehicles more affordable to Australian consumers, whilst maintaining our high levels of safety in vehicles, can be only a good thing for consumers and vehicle sales overall.”
Andrew McKellar from the Australian Automobile Association (AAA) told the ABC: “It’s worth billions and billions of dollars; it’s a truly massive trade.
“We’ve seen from past experience, when there has been a tariff reduction, it has been passed through in prices to consumers fully and quite quickly. Currently, about a third of all new cars sold in Australia come from Japan, and there’s a 5% tariff,” he adds.
“If we see that eliminated, we would expect that would mean those new car prices should fall by somewhere between $1000 and $2000 on average.”
Japan is the largest exporter of cars to Australia, followed by Thailand and then South Korea. Since 2000, Australia has reduced import tariffs on motor vehicles from 15% to 5%.
It is expected the fall in the price of a new car could also see falls across the used car market.
“The safest and the best performing vehicles are going to be the new vehicles, so I think we need to encourage continued reduction in the average age of the Australian car fleet,” McKellar notes.
“There may be some impact on the used car market but at the end of the day, you’re paying less for a new car.
Peter Mace, general manager of the Australian Institute of Export, told SmartCompany the agreement is overall positive news for Australian exporters.
Mace says some details of the deal will still need to be ratified by the Australian parliament – but the agreement does include a ‘most favoured nation’ clause, which means if Japan negotiates better trading terms with another country, such as the US, it will then have to match those terms with Australia.
“Overall it’s a positive agreement and I don’t see much in terms of downsides. There may be some who would have liked to have seen more but we can’t expect all tariffs to be dropped down to 0%. If we can get some tariffs down, then that’s a good thing,” he says.
Mace says the price for Japanese electronics and cars will be reduced, but he says Australia no longer has a big tariff regime on these types of products. “And it’s probably a bit late to try to save car manufacturers like Holden and Ford,” he adds.
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