The Australian government’s proposed carbon-trading scheme will damage the domestic auto industry by giving an edge to vehicle importers, Ford Motor Co. of Australia Ltd. says.

In a written submission to the Senate Select Committee on Climate Policy, the auto maker says the proposal will affect Australia's vehicle-manufacturing sector on more than one front.

“It will impact energy use in the industry's extensive production facilities; it will impact the cost of input materials like metals and plastics; and it will significantly impact the way people perceive, purchase and use motor vehicles,” says the report prepared by Ford Australia Government Liaison Manager Elly Haug.

Ford Australia questions the proposed approach to defining trade-exposed, emissions intensive industries as part of the government’s Carbon Pollution Reduction Scheme.

“By focusing on emissions and revenue, we believe the proposed scheme has overlooked the fine margins to which globally exposed industries like automotive actually work,” the submission says.

“These margins mean a relatively small cost movement in a particular input can have a significant impact on the relative competitiveness of the local product as a whole. In addition, local manufacturers will be disadvantaged over time in the distribution of their vehicles.”

Locally manufactured Ford vehicles mainly are distributed to dealerships throughout Australia by road transporters.

“Following a 12-month transition, these transporters will most likely incur a trading scheme liability on their fuel use,” the report says.

“Imported vehicles, however, are delivered to capital cities by international shipping with very limited subsequent road transporter use. The international shipping will not incur trading-scheme liability just as the manufacturing of many of these vehicles will not incur liability.”

The impact could potentially equate to millions of dollars annually, via increased energy costs covering direct and indirect emissions from company and supplier facilities, the auto maker says.

“There will be extremely limited opportunity for domestic manufacturers to offset these increased costs with higher prices, particularly as the proposed introduction of the scheme in 2010 will coincide with a drop in the passenger-car import tariff from 10% to 5%,” the report says.

Ford Australia says the appropriate amount of time should be allowed to design and implement the very best quality and most efficient climate change policy.

It also says prevailing economic conditions are an important consideration in the timing of new abatement initiatives, particularly when similar initiatives are not being introduced at this time by key trading partners.

The auto maker says there are 59 brands offering more than 350 models from 26 source countries in the Australian market.

“This relative openness effectively characterizes the Australian automotive industry as one that is very trade-exposed,” the report says.

“In light of this and the prevailing economic conditions, Ford Australia has therefore supported the concept of emissions trading, but has urged a cautious approach be taken in introducing any such scheme, with the emphasis placed on designing the lowest-cost, highest-quality scheme.”