How an emissions crackdown could save the Australian car industry

Australia’s car industry is floundering because it does not make fuel-efficient cars that people will buy. If it’s going to be saved, something has to give.

The federal government’s approval for a summit mapping out the future of the car industry is not just a matter of more financial support, or a response to a call by South Australian MP Nick Champion to “impose tariffs”. The government knows that unless the local car industry implements global standards and practices, Ford’s closure will be the beginning of the end.

Most countries that build cars have mandated fuel efficiency and carbon emission targets for the purpose of making the car industry invest in fuel-efficient and alternative vehicles. This has created a global shift in the future of the car industry. Tony Weber of the Federal Chamber of Automotive Industry told The Australian Financial Review:

“Australia needs to beat down non tariff barriers across South-East Asia for the domestic car manufacturing to remain viable.”

But such charges are not “tariffs”. Countries like Thailand are imposing high excise taxes to discourage the acquisition of high-emitting vehicles. As a result, petrol guzzlers like the Ford Territory had a “retail price of $99,000, twice the Australian price”. But for a vehicle with emissions of no more than 120g of CO2/km, Thailand’s excise taxes would have been cut from 30% to 17%.

Opposition Leader Tony Abbott wants the Australian car industry to server the export market. To reach this target, it has no choice but to meet international global emissions or fuel efficiency standards.

The government will need to kick in some more cash to incentivise the industry. Industry Minister Greg Combet has pointed out Australia’s subsidies to its auto industry are among the lowest in the world: $18 per capita compared with $90 in Germany, $265 in the US and $334 in Sweden. This is true, but all those countries are investing in the most technologically advanced fuel efficient or alternative fuelled vehicles that will meet stringent mandatory emission targets.

Many of them are now competing to manufacture the most fuel-efficient car. Ford knows it, and is making great strides in efficiency?—?in other countries. For example, the Ford Focus was rated as the world’s best-selling car in 2012, and the multinational company is advertising that it offers “more choices of fuel efficient vehicles that any other car manufacturer, such as the 2013 Focus electric, 2013 Fusion hybrid, and the fully electric C-MAX Energi”.

GM Holden is also facing decline in new vehicle sales. In 2012, VFACTS recorded a decline of 7%, but in the month of December 2012 it recorded a fall of 25.3%, mostly from a 24.8% decline in Holden Commodore sales. Holden Cruze sales also fell 13.6%.

It is definitely time to call a “car summit”.  If Australia is serious about manufacturing a car that can be exported overseas, it must raise its car emission and fuel efficiency standards to international levels or be left behind.

Anna Mortimer is a lecturer in revenue law, income tax law and taxation planning at the Griffith Business School. This article first appeared on Crikey.

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