Industry Says Price War Undercuts Weakened Oz Auto Sector

Australia’s turbocharged new-car market sees its 67 brands struggling to make a profit, but consumers ultimately winning in the bare-knuckle competition.

The Federal Chamber of Automotive Industries says a vast majority of the 350 models sold in the country transact at a lower price than in other right-hand-drive markets.

That makes for a buyer’s market and may speed the death of the local car-manufacturing industry.

After peaking at 475,000 units in 1970, domestic output has fallen steadily without import tariff free-trade agreements and against 5% import tariffs elsewhere. A strong Australian dollar also hurts vehicle producers there.

GM Holden, Ford and Toyota each are slashing output. They built a combined 210,538 vehicles last year and in the first half of this year the total was down to 86,807 units. All three are in the process of winding down their vehicle-production facilities by 2017.

FCAI CEO Tony Weber makes the pricing claim on the heels of an FCAI-commissioned IHS Automotive study comparing new-car prices in the Australian, the U.K. and New Zealand markets.

“Using IHS Automotive’s market comparison report, the FCAI undertook further analysis to compare ‘like-for-like’ models, in terms of specifications,” Weber says in a statement.

The FCAI says the vehicles chosen for the analysis represent a range of models across different market segments. The analysis compares the manufacturer’s list price, but not other costs such as stamp duty, registration and other taxes. The research includes Australia’s luxury-car tax, which can vary considerably by model.

The result is that for the most of the Australian new-car market, a model of like specifications is less costly in Australia.

The lower prices also are reflected in investment house CommSec’s car affordability index, which shows prices in Australia are at their lowest since the index began in 1976.

Among the comparisons, the Ford Focus Trend hatchback is listed in Australia at A$22,290 ($20,755), but in the U.K. the price is A$32,325 ($30,099). At the other end of the scale, it also costs less to buy a Mercedes-Benz in Australia. The ML350 BlueTec Diesel has an A$92,303 ($85,947) sticker price Down Under, but costs A$100,410 ($93,496) in the U.K.

The relative affordability of vehicles in different markets is sensitive to a number of factors, including exchange rate and tariffs. To ensure the analysis reflected the current market, the FCAI used an exchange representing the average rate for the British pound against the Australian dollar during the first half of 2014.

Weber calls the lower prices great news for Australian consumers, “especially when you also consider the ongoing benefits included in the cost of buying a new car in Australia.”

That includes the level of support provided by a brand, such as servicing and the inclusion of features specifically designed for the Australian landscape, and lifestyle items like Australian GPS map systems, appropriate towing capacities, reversing cameras, cruise control and high-temperature air-conditioning systems.

Weber says manufacturers continuously are working to improve the safety, security and environmental features consumers now demand.

“This competition means that Australians are getting world-class cars at globally competitive prices,” he says.