Submission 201 – MVSA review Mazda Australia Pty Ltd Submission to the 2014 Review of the Motor Vehicle Standards Act 1989 Mazda Australia Pty Ltd (Mazda) welcomes the opportunity to provide comment on the Australian Government’s review of the Motor Vehicle Standards Act 1989 (MVSA) and, in particular, on the proposed option in the Discussion Paper to “reduce the barriers to personal importation of new cars and the importation of quality second-hand cars” (Option 7). About Mazda Mazda is a fully owned subsidiary of Mazda Motor Corporation, a Japanese automaker which exports its product worldwide. Mazda works under a franchise model. Vehicles are imported into Australia which are then ultimately distributed to franchises around the country who sell Mazda product. There are over 127 independent franchises around the country employing 4500 staff. Mazda franchises have strict quality and assurance standards they must meet in order to become and maintain their Mazda franchise dealership. Mazda is one of Australia’s most trusted leading and successful brands which comes from a strong commitment to provide customers with an exceptional product and the support they need for the life of the Mazda journey. Summary of Mazda’s position Mazda has been working with the Federal Chamber of Automotive Industries (FCAI) and supports the position taken by the FCAI in its submission responses to the Productivity Commission. The purpose of this submission is to demonstrate that: the current barriers to personal importation of cars and, in particular, second-hand cars provide appropriate and balanced protection for Australian consumers and vehicle suppliers alike; the reduction or removal of such barriers would not result in the claimed benefits; and
Transcript
Submission 201 – MVSA review
Mazda Australia Pty Ltd
Submission to the 2014 Review of the Motor Vehicle Standards Act 1989
Mazda Australia Pty Ltd (Mazda) welcomes the opportunity to provide comment on the Australian Government’s review of the Motor Vehicle Standards Act 1989 (MVSA) and, in particular, on the proposed option in the Discussion Paper to “reduce the barriers to personal importation of new cars and the importation of quality second-hand cars” (Option 7).
About Mazda
Mazda is a fully owned subsidiary of Mazda Motor Corporation, a Japanese automaker which exports its product worldwide. Mazda works under a franchise model. Vehicles are imported into Australia which are then ultimately distributed to franchises around the country who sell Mazda product. There are over 127 independent franchises around the country employing 4500 staff. Mazda franchises have strict quality and assurance standards they must meet in order to become and maintain their Mazda franchise dealership. Mazda is one of Australia’s most trusted leading and successful brands which comes from a strong commitment to provide customers with an exceptional product and the support they need for the life of the Mazda journey.
Summary of Mazda’s position
Mazda has been working with the Federal Chamber of Automotive Industries (FCAI) and supports the position taken by the FCAI in its submission responses to the Productivity Commission.
The purpose of this submission is to demonstrate that:
the current barriers to personal importation of cars and, in particular, second-hand cars provide appropriate and balanced protection for Australian consumers and vehicle suppliers alike;
the reduction or removal of such barriers would not result in the claimed benefits; and
the reduction or removal of the barriers would, in fact, have a deleterious impact on consumers (including, importantly from a safety perspective) and on participants in the retail market in Australia for motor cars, more generally.
In providing this submission Mazda has relied, wherever possible, on independently verifiable information but does provide some specific examples to show how removal of current protections, with particular emphasis on the issues faced with importation of second hand imports, would adversely affect the market for Mazda buyers.
Current barriers to personal importation of cars and, in particular, second hand cars should not be reduced or removed
It is Mazda’s principal submission that the current barriers to personal importation of cars, both new and second hand, but particularly for second hand cars, should not be reduced or removed.
1. The current barriers deliver appropriate and balanced protection for Australian consumers and the Australian car industry
An objective examination of the current state of the Australian car industry demonstrates that Australian consumers enjoy the benefits of one of the most competitive car industries in the world. Such competitiveness drives an increase in affordability of new, safer, more fuel efficient and environmentally friendly cars.
Pricing of new cars
Removing or reducing the current protections will not help improve competitiveness in the Australian car industry. Some key facts:
There are more new car brands active in the Australian market (about 65) than any other mature car market, including the United States and Europe.
Largely due to the above competition, new car affordability is at the highest level ever, with deflation in new car costs over the past 20 years.
The average age of the Australian car parc (the total number of cars nationally) has decreased over 20 years, from 10.5 to 10 years, when in many countries, including the United States and New Zealand the average age has been increasing.
These impressive metrics, which demonstrate the high levels of competition in the Australian car industry, are the direct result of government policy including lower import tariffs, improved manufacturing productivity, increased competition and a stronger, more stable Australian dollar.
The Annexure provides a list of examples comparing prices of new Mazda cars between Australian and those in the United Kingdom and New Zealand. New car prices are cheaper in Australia because of the competitiveness of the market and the fact Australia has the current protections in place which prevent flooding of the market with old second hand cars.
Safety
An obvious corollary of more affordable new cars on the road is an increase in safety, fuel efficiency and positive environmental effects. This should be contrasted with the situation where, should the current barriers be removed or reduced, there will be more second hand cars on the road, with fewer safety technologies and poorer fuel economy/emissions.
2. Reducing or removing the current protections will adversely affect the competitiveness of the Australian car industry to the detriment of consumers and industry participants alike
Adoption of Option 7 will not increase competitiveness in the Australian car industry and will adversely affect Australian consumers and industry participants.
Should Option 7 be adopted, the main source of importation of second hand cars for brands like Mazda will likely be from Japan (being a manufacturer of right hand cars). Japan currently exports over one million second hand cars annually. Currently many end of life cars (8-9 years old) are exported to New Zealand and to third world nations that require cheap, used cars to meet their transport needs. These cars are exported because they have reached the end of their economic life and can no longer be registered in Japan (otherwise known as “junk cars”). For importing countries they represent a cheap transport solution well matched to average incomes and deliver a cost effective transport solution.
For new vehicle importers such as Mazda and its dealer network, the possibility of a flood of cheap second hand cars is likely to drive up prices for new, safer, more environmentally friendly cars, as demand for such cars decreases and the need to support existing investment and cover fixed costs continues.
Such imports would also result in further depreciation of consumers’ existing cars (as prices drop for second hand cars), further reducing the affordability of safer, more environmentally friendly new cars, as the effective changeover price for a new vehicle increases. A consumer will have less equity in their second hand car and the gap between second hand and new will increase.
The New Zealand car industry (where restrictions on used car imports have been reduced since the late 1980’s), provides clear evidence of these adverse effects which arise directly from the mass importation of second hand cars would have. In short, do we want to go down the NZ path when it clearly does not work or improve pricing affordability for the cars most in demand?
3. Reducing or removing the current protections will adversely affect the safety and environmental effects of cars on Australian roads to the detriment of consumers and industry participants alike
As touched upon, the average age of the vehicle parc in Australia is currently 10 years, which is similar to the United States and Europe. In New Zealand it is more than 13 years (11 for new cars versus 15 for second hand vehicle imports). Increasing the average parc age will reduce the proportion of cars on the road with the latest emission and safety technologies. You will see from the chart below– the average age of cars in Australia is significantly younger than the ageing trend in New Zealand.
In summary:
New Zealand cars are older than cars in Australia (above chart); and New Mazda cars are more expensive in New Zealand than comparable cars in Australia
(Annexure).
Millions of dollars have been spent at both the federal and state level to drive down the road toll and a key contributor to that success has been the steady improvement in safety technology in new cars. Advancements in new safety technology continue rapidly, which will be stalled by allowing the import of large quantities of used cars at least two generations behind in terms of safety.
There is also steady and significant improvement in new car fuel efficiency, resulting in lower carbon emissions, and again, there will be a reversal of this trend through the introduction of older, less efficient used cars.
Mazda considers that any reduction in the safety of the cars on Australian roads is a very serious issue which will have grave consequences for Australian consumers, brand importers and the future of the Australian car industry.
4. Reducing or removing the current protections will adversely affect consumers driving and vehicle service experience
While low cost second hand cars provide an initially attractive option, such cars are likely to detrimentally affect the driving and service experience of consumers. Reasons for this include:
(a) Fit for Purpose: Imported cars manufactured to suit the driving conditions of other countries will not suit Australian driving conditions. We already know the majority of vehicles will come from Japan as a right hand driving nation – and this is where the money will be made for
commercial importers wanting to sell significant volumes. Irrespective of Australian design rule requirements, imported vehicles will not be fit for purpose for Australia standards.
Some key examples:
Safety features differ.
Electronic Stability Control (ESC) was mandated in Australia from January 2011; Japan did not mandate ESC until October 2014.
Towing requirements are not tailored to Australian conditions.
Japanese cars are set up for cold climate, with smaller interior air conditioners and different powertrain cooling requirements. This will cause consumers issues, especially when towing in Australia in hot conditions.
Radios will not work. Japanese Radio frequency is 76-90MHz. Australia is 88-108MHz.
TV is common and allowed in front of cars in Japan, but it is forbidden under current Australian design rules.
Door Keys work on different frequency.
These issues are not confined to importation of Japanese cars, despite this being the primary source for car importers like Mazda. For example, many cars sourced from the United Kingdom will have odometers based on miles rather than kilometres. Leaving aside safety concerns, at a bare minimum, this presents consumers with an uncomfortable and costly imposition.
(b) Spare Parts and limited knowledge of the vehicle: Availability of spare parts and technical support will be limited , which, in turn, reduces the relative cheapness of the cars when the support infrastructure that exists for cars imported as new, which is there to keep the car running safely and effectively is missing.
Some examples of the issues a car buyer will face buying an imported Mazda include:
Mazda does not stock parts of overseas models which are different to local models. If a customer wishes to get a unique part from Mazda, this may have a long lead time and extra costs compared to parts for cars imported by Mazda that are readily available.
Servicing –technicians are trained specifically on the products available. Diagnostic information and unique special tools needed to adequately service imported cars may not be available.
Stolen cars - this has been a big concern in areas which have relaxed protections. How will a car buyer know the seller is legitimate?
Odometer fraud – this has been a big issue in New Zealand and is discussed in-depth in the FCAI’s submission.
History of the vehicle – there are real difficulties in ascertaining what you are buying. Mazda will not hold records of independent imported cars.
(c) Warranty Support: The cost of repairing second hand cars not suitable for Australian conditions will mean manufacturers like Mazda, will be forced to pass on this cost to the consumer.
Like other new vehicle importers, Mazda has in place rigorous processes to ensure that its franchisees/dealers selling Mazda cars comply with the most stringent of standards in terms of the pre-sale, sale and post-sale process. Dealers represent key network areas and have strong reputational ties to the community they represent and support.
Currently, Mazda Dealer networks have the highest level of training and support services of anywhere in the world. What happens if consumers are not happy with their Mazda, or other branded product purchased from an unknown importer and a car that has been localised to conditions different to Australia? If a consumer buys a Mazda product from a Mazda dealer, he or she will be assured of a certain level of standard of care, service and quality. This guarantee cannot and will not exist if cars are purchased from an importing party who has no interest in the brand.
5. Reducing or removing the current protections is inconsistent with Australia’s focus on consumer protection
The situation regarding warranties and other consumer protections currently available to Australian purchasers of second hand cars, including under the Australian Consumer Law (ACL) and how they will apply to second hand cars imported into Australia is, at best, unsatisfactory.
Currently Mazda and its dealers honour their obligations under such consumer protection laws to consumers who have purchased Mazda cars in Australia. Where consumers purchase imported second hand Mazda cars manufactured for conditions outside Australia , the application of those protections and, importantly, the identification of those responsible for honouring them becomes problematic.
While commercial importers based in Australia which supply such cars to consumers would be subject to the provisions of the ACL, questions may arise about the ability of such parties to meet their obligations. Where consumers import such cars directly, no such protections will be available and, consequently, it can be expected that such consumers will look to the Australian representative of the relevant brand for a remedy. As many car models in Japan are not sold here, there will be limited knowledge of the parts and details of these cars, especially given most imported cars will be at least 8 years old.
This issue becomes all the more stark when a safety defect requires a recall of a vehicle.
If such a recall is initiated, the ability of an Australian brand representative such as Mazda to support owners of privately imported cars is limited. In the event of a recall, the brand is only able to notify the known owners of cars bought through the brand and its authorised dealers in Australia. An example of this system working effectively is Mazda’s 2013 product recall for its Mazda6 due to a potential fault with the DC/DC convertor located under the passenger’s seat that, in a worst case scenario could overheat and cause a fire. Using its established systems Mazda was able to very quickly contact all owners of the Mazda 6 and replace the DC/DC convertor in their cars and minimise any risk to safety. This recall is considered by some to be industry best-practice, with the brand quickly and efficiently resolving the problem, to the
consumer’s benefit. Mazda Australia was able to undertake this recall because it had exposure to all first-supplied owners of the affected model.
In summary, in the event of significant safety concerns, Mazda will have no record or understanding of the vehicle which has been imported. The commercial importer will rarely be on the ground - they will have little concern about the Mazda product they have sold (or any other product for that matter). The commercial importer will not be experienced, skilled or invested in protecting consumers and the brand. Purchasing a car is not the same as buying a television or clothing, cars represent the highest risk consumer good a consumer will purchase. Defective cars can kill drivers and other road users.
6. Reducing or removing the current protections will have an adverse effect on the broader Australian economy
The Australian new car industry supports more than 2000 mainly independent new car dealers that range in size from small to medium businesses up to listed groups, employing some 92,000 staff in total. If the New Zealand experience is duplicated, many of these businesses will suffer loss of profit and volume, causing retrenchments and some closures that will not be offset.
As at 30 June 2014, Mazda had 127 dealers in Australia, employing 4500 staff. All Mazda dealers are Australian owned. 86 of these dealers are in regional areas and employ 2200 staff.
A 30% reduction in new car sales due to second hand cars imports (as occurred in New Zealand) could result in 1350 job losses in the Mazda dealer network alone. This could equate to more than 15,000 across all brands.
Most commercial importers will be located overseas and will have no interest in the employment of Australians. The New Zealand example shows us that commercial importers do not build up networks locally to support the brand. That is why New Zealand had to involve the brand importer to fixing problems left by allowing commercial importers to sell without regard to the support that a brand importer has.
Conclusion – the arguments for reducing or removing the current protections are misguided and not supported by the facts
Mazda submits that the arguments for reducing or removing the current protections are based on a number of perceptions that, when viewed objectively, do not support the removal or reduction of the current protections. They are:
(1) The perception that Australians are paying too much for their cars
The large perception of high prices may be driven more by the relative price positions for premium models in the price bands well above the Luxury Car Tax (LCT) threshold. In many cases the LCT itself is a contributory factor, but also the relatively small volumes sold at these high price bands where consumers demand higher levels of customer experience and options that require additional margin. However, opening the market to used imports will do very little to combat the situation for premium new car pricing as these buyers will not really be attracted by used car imports.
Commsec and ABS have produced many statistics that show that Motor Vehicle CPI has been deflationary at a time when wages and general prices have been steadily climbing over the same period. The chart below shows the relative movement of new car prices to overall CPI.
It would be inappropriate to relax the current protections just to satisfy limited case examples of private importation of a particular car desired by a private individual which is not available in Australia or is a cheaper luxury model car, where this encompasses approximately 1% of the car sale market in Australia. Moreover, used car tariffs really only operate effectively on large scale import of used cars – which is a good thing. That tariff can already be avoided for special vehicle imports or with appropriate licences. The legislation that really controls the import of second hand cars is the MVSA as it sets minimum standards and design rules that must be met by large scale importers of used cars and includes standards related to safety, carbon dioxide and other emissions, as well as meeting minimum quality standards.
(2) The current protections only protect car importers like Mazda
It is simple for people to argue that the current regime only protects car importers like Mazda. The regime protects consumers and the safety and quality of cars on Australian roads generally. Removing or relaxing the current protections to accommodate particular case examples only allows the floodgates to open to main commercial importers for the sale of junk cars.
The impact from the proposed changes is that commercial importers stand to gain. This is where the real money is. If the current protections are relaxed, they will be able to leverage the brand and sell junk cars which are generally no less than 8 years old. These are the cars which will dominate our shores, as has been the case in New Zealand.
The temptation to buy these junk cars will be strong. Consumers will consider the car to be a bargain, often forgetting that the long term costs and resale value of the car will make it a bad
buy. The compliance systems in these cars differs from those manufactured for Australian conditions.
Commercial importers have no concern for the quality of the car or maintaining a relationship with the customer. And, as noted, the profit for such importers is not in the sale of particular luxury cars or models not located in Australia, rather, their profit is selling the cars that Japan does not want. The middle of the road, cheap cars which have ended their life cycle. This is because the margins are greater here than anywhere else.
Customers needing the most protection will get the least. Buying a cheap old car from an importer with no investment in the brand, means customers will have cars that are not suitable for the Australian market. If and when they seek Mazda support, this will be more costly to the consumer. Mazda dealers and personnel are trained to support cars purchased for this market, not the Japanese market. Many models imported will be models which are not available in Australia.
Buyer beware claims are simple and ill founded. A car is a significant and technical investment. It is not the same as buying clothes online. Protections are there for a reason.
At the forefront of this, is the overriding obligation to protect its consumers. It is negligent to argue consumers already have access to second hand junk cars and that relaxation of protections simply expands on this and a buyer beware culture. This discussion is not about ordinary consumer goods, it is about cars on the road that need the most stringent safety protections in place in order to protect and save lives. If things go wrong, there will be no protection on any level.
In conclusion, Mazda submits that there is no problem with the current system of protections and that they should be retained in their current form.
Yours Sincerely,
signed
Martin Benders Managing Director Mazda Australia Pty Ltd
Annexure (Price Comparisons for New Mazda Cars)
AUS vs UK
AUS UK UK UK - spec adjusted to AUS spec
AUS vs UK
Manufacturer's List Price
Manufacturer's List Price
£/$ Manufacturer's List Price
Manufacturer's List Price
Spec adjusted -discount/premium
AUD GBP AUD AUD AUD %1. AUS - Mazda3 Neo
5HB I4 2.0L Petrol 114kW 6MT
$20,490 UK - Mazda3 SE 5HB I4 2.0L Petrol 100PS (74kW) 6MT
£17,480 0.5488 $31,851 $30,271 -$9,781 -32%
2. AUS - Mazda3 Neo 5HB I4 2.0L Petrol 114kW 6MT
$20,490 UK - Mazda3 SE 5HB I4 2.0L Petrol 120PS (88kW) 6MT
£17,780 0.5488 $32,398 $30,608 -$10,118 -33%
3. AUS - Mazda3 Maxx 5HB I4 2.0L Petrol 114kW 6MT
$22,990 UK - Mazda3 SE Nav 5HB I4 2.0L Petrol 120PS (88kW) 6MT
£18,380 0.5488 $33,491 $33,301 -$10,311 -31%
4. AUS - Mazda6 Sport 4SDN I4 2.5L Petrol 138kW 6AT
$33,460 UK - Mazda6 SE Nav 4SDN I4 2.0L Petrol 145PS (107kW) 6MT
£20,780 0.5488 $37,864 $43,059 -$9,599 -22%
5. AUS - Mazda6 GT 4SDN I4 2.5L Petrol 138kW 6AT
$43,220 UK - Mazda3 Sport Nav 4SDN I4 2.0L Petrol 165PS (121kW) 6MT
£24,450 0.5488 $44,552 $50,077 -$6,857 -14%
6. AUS - CX-5 FWD Maxx Sport 5WGN I4 2.0L Petrol 114kW 6AT
$33,620 UK - CX-5 FWD SE-L Nav 5WGN I4 2.0L Petrol 165PS (114kW) 6MT
