Australia: an auto backwater

Labor’s review of auto industry assistance is timely: Mitsubishi is closing in South Australia, Ford is downsizing in Geelong, and there is an urgent need to position Australia’s car manufacturing to meet the imperatives of global warming and peak oil.

Mitsubishi’s closure is in part due to market demand that has gone in oddly opposite directions. Fifty-six per cent of new car buyers now choose light and small cars for cost and greenhouse reasons instead of the traditional Aussie family car like the Mitsubishi 380. The rest have either ramped up to roomy SUVs because they don’t care about such things or are sticking with big sedans, mainly because their employer provides these cars as part of their salary packages.

Passenger cars last, on average, 9.7 years so a car bought tomorrow will be using the same amount of petrol or diesel in 2017, just three years short of the date by which Australia will have to reach total cuts of about 20 per cent in CO2 emissions.

Australia lags behind other countries in not requiring industry, by regulation or conditional handouts, to be responsive to these imperatives. If car makers are not pushed in this direction, the local industry will slowly die at great expense to workers, taxpayers and the economy.

First, Labor should set targets for emission cuts from passenger vehicles by 2020 and design the emissions trading scheme, new vehicle emissions standards and tax reforms to support that.

Second, governments have to start telling motorists the truth because the auto and petroleum industries won’t. There are limits to the amount of fossil fuel we can burn and the number of vehicles we can add to the road every year. People should be warned that gas guzzlers bought now will be prohibitively expensive to run and have a nil resale value in just a few years. The UK’s successful Travel Wise: don’t choke Britain style ad campaign could do this.

The Howard Government was eventually forced to admit to the crisis of climate change but denied peak oil to the end. Labor must not make this mistake. Even petroleum executives now confess that demand is exceeding discovery and production and that for this reason the cost of oil will at least double within a year and continue to climb.

Third, the 38c/litre freeze on excise in 2001 has kept petrol prices artificially low. It should be lifted and the money spent on public transport.

Drivers and car makers also need carrots. If prominent Green Vehicle Guide ratings were required in all car advertising and state governments adjusted registration fees to reward the efficient, the message would soon hit home.

Japan subsidises low emission car production and refuelling. The US now manufactures the electric Kurrent with sales encouraged by tax deductions for clean fuel cars and it charges the worst gas guzzlers more than $US7,000. The UK discriminates against big fuel users with excise duty and company car tax.

Our antiquated fringe benefits tax system actually encourages car use by linking benefits to a minimum distance travelled so employees often drive for no purpose other than to clock up the necessary kilometres.

But what to do with the industry? There is no doubt these initiatives would wipe out the local market for big old-fashioned cars so a major overhaul will be necessary.