Our Apples Are Cheaper

The FCAI has compared ‘apples with apples’ in a study that examines the price of new cars sold in Oz compared with those in other right-hand drive markets.

The recent price benchmarking project facilitated by the Federal Chamber of Automotive Industries (FCAI) has caused quite a stir in the auto community and beyond.

The results of the project, which was undertaken by IHS Automotive, clearly demonstrate that Australian consumers pay less for new cars than those in the UK and New Zealand in almost all cases.

Like Australia, the UK and NZ are right-hand drive markets and for this reason were selected as a fair choice for comparison. Despite the protests of some industry commentators, you cannot compare prices in the huge US left-hand drive market to Australia.

As part of its comprehensive results, the FCAI highlights the competitiveness of Australia’s new car market, noting the 67 brands on offer with over 350 light car models competing for consumer attention. These figures are amplified when compared to bigger markets like the US and Canada, which sell substantially less brands – just 51 and 49 respectively.

Whilst the FCAI was not able to compare all 350 models sold in Australia with their overseas equivalents, a number of models were selected, representing a diverse cross-section of mainstream and premium brands.

From the popular Mazda3, Ford Focus and Toyota Corolla – to the BMW 3 series and Range Rover Sport, models were compared based on equivalent specification levels – making for a more fair and accurate analysis.

The comparison did not include additional costs such as stamp duty, registration and other taxes, which vary considerably between markets. Instead the FCAI drew on the manufacturer’s list price, or estimates from the manufacturer where specification levels conflicted.

The study was by no means a quick or unsophisticated comparison however; instead it’s the result of intense research and thorough analysis, as pointed out by FCAI CEO Tony Weber:
‘In no way is [the study] overly simplistic, this has not been a simplistic exercise at all. What we’ve done is compare apples with apples.

I think this is the most honest way to do it and this is the only meaningful comparison of the two markets. The taxation regime is not really at play.’

The table (below) shows price data collected on models sold in Australia and the UK based on equivalent specification.

aus-uk-carprice-comparison

FCAI Findings Reinforce AADA Stance On Grey Imports And LCT Policy

The FCAI’s comparison of new car prices in Australia with the UK and NZ reinforces much about the AADA’s position on grey imports and the Luxury Car Tax (LCT).

The results of the study contend that ‘for around 99 per cent of the market new cars are less expensive in Australia than overseas.’

It goes on to highlight that Australia’s oversaturated and competitive market, along with our comparatively low consumption of cars ‘give Australian consumers a better deal’.

Indeed, it’s a far better deal than what they may get if the large scale importation of overseas used cars, or ‘grey imports’ are allowed into the country.

In past issues of Automotive Dealer we’ve highlighted the risks of importing unwanted and comparatively inferior overseas vehicles into the country – ranging from tampered odometers, to uncertainty over recalls and servicing. We do not want Australia to become a dumping ground for sub-standard vehicles of questionable history.

We’ve also consistently highlighted that the Australian market is already amongst the most competitive in the world – a point emphasised in this latest study and by FCAI CEO Tony Weber:

‘The reality is that most people do not realise what a wonderful scenario [it is]. The CommSec Car Price Affordability Index shows that car prices are cheaper in Australia today than they’ve ever been. The other thing is you’ve never had the safety features and you’ve never had the environmental features as well, and the security.’

But is this data at odds with AADA’s stance on abolishing the Luxury Car Tax?

While data gathered by the FCAI (in conjunction with IHS Automotive) demonstrates that Australian cars are generally cheaper, the substantial increase in price caused by the LCT wasn’t included in the data.

As demonstrated in the table on page 10, the LCT, which affects vehicles priced above $61,884, causes a substantial price increase.

On the Range Rover Sport HSE model compared, the price of the vehicle in Australia climbs a further $15,541 (before on road costs) when the LCT is added. This makes the vehicle approximately $22k more expensive to purchase in Australia than in the UK, all considered. (Source: FCAI Act 2014)

‘We’re very happy to have the elimination of the luxury car tax in this country, very happy for that’ said Weber, who concedes that the apparent price advantage in Australia becomes less tangible as the cost of cars being compared increases.

‘[It’s] obviously a very big issue for the purchase of a car because the luxury car tax cuts in at a very hefty rate.’

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