Submission to the Senate Enquiry a Positive Plan For
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SUBMISSION TO THE SENATE ENQUIRY A POSITIVE PLAN FOR THE MOTOR INDUSTRY This policy initiative presents a positive plan for rebuilding the motor vehicle industry industry via removal of the present strangling red tape leading to growth in small-medium business training and employment, with significant associated administrative savings in the Department. The Industry will grow naturally, be internationally competitive, be able to grow exports and no longer rely on government handouts. This plan involves consideration of both the Productivity Commission Report and the Motor Vehicle Standards Act and both matters are reviewed herein. Robert Bryden October 2015 Background This policy recommendation arises during a time of upheaval in the Australian motor vehicle industry. Despite years of heavy tax payer support, the three local manufacturers are withdrawing from large scale manufacturing in Australia for a variety of factors including the expense of local manufacturing, an unfavourable AUD, a small market and in the case of Holden and Ford, their building models [ large sedans ] no longer sought in the marketplace. Other hidden problems include the very heavy expense of complying with unnecessary legislative burdens, principally the localised Australian Design Rules which are interpreted in a ‘’ Can’t Do’’ manner by the Department and the hidden trade barriers to Australian exports imposed by other countries. There is a very simple solution and one with which great success has been achieved in the UK where a small-medium business based high value specialist motor vehicle building and aftermarket component industry has been developed, with tens of thousands trained and employed in that industry. It is recommended this UK model be followed, a simple model with minimal red tape and Regulations framed to encourage rather than to prevent this model emerging here. The writer and the research The writers’ background is in Law, having run a large and successful legal practise over some 30 years. A family background in the motor industry in the UK has however provided a great grounding in the industry, with the family motor business started in 1910 before being sold in the late 1990’s. More recently the writer has been involved in Road Safety Policy development in conjunction with the NSW Government and also as an investor in the motor vehicle industry where the failings in policy and red tape obstructions to growth in the industry have become abundantly clear. I have experience on Corporate and Government Boards and was for some ten years an elected representative on my Professional Board. This policy development involved significant research including visits to the UK to meet with low volume specialist vehicle manufacturers and aftermarket component manufacturers, inspection of a leading Formula 1 Team facilities, a visit to Germany to inspect similar facilities, interviews with numerous business owners in the space locally as well as affected staff, interviews with a critical witness to the Productivity Commission, review of the Submissions to that body, thorough review of the Report, thorough review of the Motor Vehicle Standards Act [ADRs], review of the terms of enquiry into that Act and interviews with parties affected by that Act as well as personal experience dealing with the Regulator of the ADRs. It also involved acquiring knowledge of the history and functioning of the NZ scheme reported on by the Commission as well as the European regulatory scheme, the Japanese and American schemes and the unique and highly successful approach taken in the UK that has encouraged development of the world leading specialist and enthusiast vehicle and aftermarket component industry. An earlier announcement by Minister McFarlane, that the Productivity Commission report and the enquiry into the Motor Vehicle Standards Act must be considered together, is fully supported and the correct approach. The two are inseparable. The policy proposed is based on common-sense and the already proven and highly successful UK model. It relies on significant reduction of local red tape to build an independent self-sufficient industry, not on tax payer handouts to multinational corporations to support overpriced labour rates, as under the previous model. A very positive political message can emerge through adoption of these proposals with the price of cars being reduced, encouragement of growth and training in what is otherwise a dying industry, significant reduction of administrative costs in the Department along with the attraction of increasing the variety of specialist cars available to enthusiasts, increasing and allowing development of export markets in both fully built specialist and enthusiast motor vehicles and also aftermarket components, areas where Australia can compete on the world stage through innovation and engineering rather than trying to compete on labour and other costs bases. An eyes wide open review of the NZ Scheme The recent Productivity Commission report highlights the NZ Scheme. It allows virtually unrestricted imports of ‘’ used cars’’. The report did not however deal with the significant downsides discovered during the research process for this paper, which involved close liaison with a leading NZ witness to the Commission and others with experience in the NZ system. The NZ experience is not all roses and skittles. A quote from the leading witness provided in my interview ‘’ it’s taken us 25 years to get it right ‘’. The downsides discovered in investigating this scheme were numerous and ran against the aims of protecting the consumer and reducing red tape and administrative costs. The adverse consequences and risks are significant and were not adequately dealt with by the Commission 1] The administration costs of the NZ scheme are significant A whole Government department is dedicated to the Regulation of used imports which are effectively ‘dumped’ into New Zealand every year. Further, the Regulator there has to appoint a number of private agencies to do the secondary checking work, creating two levels of administration. This is a significant hidden cost to the Government and consumer. 2] The unscrupulous operator As seen in the ‘Pink Batts’ disaster in Australia, sudden massive change in import regulation of used cars from other countries will lead to fly by nighters and backyarders entering the industry and acting with dishonesty. Indeed, an interview with a salesman at an importer of used Japanese cars under the present more limited and well scrutinised scheme led to the admission ‘’ my boss makes us wind back the speedos ‘’ . If this happens under the present heavily regulated import scheme at a Licenced Motor Dealer on Parramatta Road, what will happen in a market flooded by used imported cars? This is behind the NZ expert referred to above saying ‘’ it’s taken us 25 years to get it right’’. 3] When a ‘used car ‘isn’t a ‘used car’ What defines a ‘used car? In NZ, backyarders without overhead are able to import ‘used’ cars which are effectively ‘new’. Another example provided during interview involved a new BMW with delivery kilometres recorded [ approx. 500 ] being imported into NZ as a new vehicle then undercutting the local market price by tens of thousands of dollars. The consumer is then left with a car not covered by manufacturer’s warranty [unless they repatriate the car to its point of origin in Europe, Asia or the Middle East], no access to software updates or recalls [unless of course they repatriate the car to its point of origin in Asia, the Middle East or Europe] 4] New car prices in NZ are significantly higher model for model, than in Australia The NZ scheme has done nothing to reduce the price of new cars. In fact it has caused them to increase. As new car volumes reduced due to the dumping of used cars into the marketplace, these reduced new car volumes has led to price increases for new vehicles as importers and dealers struggle to make a return from a much reduced volume whilst still having to provide high standard showroom and workshop facilities, technical expertise and training to keep up with technological advances, apprentice training, warranties and spare parts availability. The NZ grey import scheme also affects Road Safety in a negative way and insidious way. The price effect described above leads to consumers being less able to purchase a new car and to purchase of dumped used imports with a consequent aging of the vehicle fleet. As new cars have greatly evolved in safety terms, an aged vehicle fleet reduces availability of the latest safety developments and causes significant damage to fleet road safety. This is well known in road safety circles. This leads to the following observations overlooked by the Commission 5] The major ‘type approval’ importers are good for the Australian economy a] The Commission overlooked the huge investment made by current type approval importers / new car dealers in their premises. Typically, sums of many millions if not tens of millions are spent by major motor dealers on their premises, In line with requirements made by the Manufacturer. This investment brings significant benefits to the economy, providing jobs throughout the building industry. These investments are continual with upgrades being required over time. If a NZ scheme were introduced here, these large investments in building, renovation and repair would cease as dealers were threatened by backyarders with no overhead or need for premises. b] The large type approval authorised dealerships provide the most fertile training ground for Apprentices in the automotive field. The back yard importers of ‘used’ vehicles that would pop up if a NZ style scheme were introduced do not. Again, this significant but hidden benefit of the present system has not been properly identified by the Commission. The only significant work undertaken under this scheme, aside from Departmental paperwork, relates to low value, low skilled inspections of vehicles before resale.