Secondhand Australian Auto Imports Raise Red Flags

Australia faces the prospect of imports of secondhand cars if a federal Competition Policy Review recommendation is accepted, but it is an idea that has the new-vehicle industry alarmed.

The review says parallel-imports restrictions should be removed unless it can be shown the restrictions’ overall benefits to the community outweigh the costs.

“Consistent with the recommendations of recent Productivity Commission reviews, parallel-import restrictions on books and secondhand cars should be removed, subject to transitional arrangements as recommended by the Productivity Commission,” the review says.

If applied, Australia would join neighboring New Zealand, where used vehicles can be imported if they meet specified safety and environmental standards.

The Australian review, headed by economist Ian Harper, calls the restrictions an implicit tax on Australian consumers and businesses. “Parallel-import restrictions are similar to other import restrictions (such as tariffs) in that they benefit local producers by shielding them from international competition,” it says.

It says removing the remaining restrictions would promote competition and potentially lower prices for consumers.

“Many of the concerns raised in submissions around relaxing parallel-import restrictions, including concerns about consumer safety, counterfeit products and inadequate enforcement, could be addressed directly through regulation and information,” it says. “The threat of parallel imports may also induce international suppliers to rethink their regional arrangements.”

Not surprisingly, the new-vehicle industry is aghast at the idea of so-called gray imports.

Geoff Gwilym, executive director-Victoria Automotive Chamber of Commerce, says the review fails to understand the likely negative effects of relaxing regulations on the importation of secondhand cars and light-commercial vehicles from overseas.

“More worrying is the degree to which spare parts will be available in a market that may be flooded with exotic cars that looked great on a car-sales website but have limited capacity for repair at a local level,” he says in a statement.

“VACC is disappointed with the panel’s recommendation to relax regulations on secondhand imports...(it) challenges the Federal Government’s stance that it has no intention of allowing Australia to become the dumping ground for other countries’ old secondhand vehicles.”

He doubts regulatory or enforcement regimes would be able to identify whether a vehicle has been subject to any tampering or fraudulent activity, such as manipulation of vehicle odometers prior to export. Just because a car or light truck is only a few years old there is no guarantee it hasn’t been in a serious crash, he adds.

Ford Australia tells the panel there is a risk of significant reputation damage to brands and dealers operating in Australia from consumers who personally import new vehicles not sold in Australia but expect them to service and repair these vehicles.

“A lack of replacement parts, suitable diagnostic equipment, specialized tools and trained technicians may lead to significant dissatisfaction when consumers have the expectation that their vehicle will be maintained and supported by the dealers and brand of their vehicle operating in Australia,” the automaker’s submission states.