EUROPE’S peak automotive manufacturing body has applauded this week’s signing of a free-trade agreement between Australia and the EU saying that it puts it on “equal footing” with other markets. 

Read last week’s story here: Canberra cuts import taxes in EU trade deal

The European Automobile Manufacturers’ Association (ACEA) said it welcomed the conclusion of negotiations for an FTA between the EU and Australia which it said “strongly reaffirms the EU’s commitment to open and fair-trading relationships and brings closer a market of almost 28 million consumers”.

It said that the removal of the 5 per cent tariffs on vehicles “will put EU exports on an equal footing with other major auto exporting countries, who already enjoy duty free access to the local market”.

“Automotive parts will also be fully liberalised. This will allow for enhanced access to an Australian passenger car and truck market of over 900,000 registrations per year,” it said. 

The ACEA also said it “welcomes the understanding that Australia will reform its luxury-car tax” but made no further comment after the federal government stalled on the subject.

The Luxury Car Tax raises between $1.1 billion and $1.2 billion a year. The 5 per cent import duty raises around $300 million.

“While the tax applied to the sales of all vehicles above a certain price-threshold, the vast majority of cars in the ‘luxury’ category were European,” ACEA said.

“The policy was effectively discriminatory towards EU vehicle exports. ACEA also welcomes the provisions on access to critical raw materials that are included in the agreement.”

It cautioned that although the European auto industry supports the EU/Australia FTA  “however our members cannot begin to benefit until the agreement comes into force”.

“We ask the European Commission and, in turn, EU member states and the European Parliament, to give their timely approval to allow for its implementation as soon as possible.”

In Australia, the Victorian Automotive Chamber of Commerce (VACC) said the FTA would deliver greater choice for Victorian and Tasmanian drivers, but warned outdated taxes risk undermining the benefits.

VACC CEO Peter Jones said the agreement is a positive step for the automotive sector, particularly for local dealers and the communities they support.

“This deal is good news for drivers, it means more choice and more accessible vehicle options across the market,” Mr Jones said.

VACC CEO Peter Jones

However, Mr Jones said the full benefit of the agreement would not be realised unless the Federal government addresses outdated tax settings, particularly the LCT.

“You can’t open up trade on one hand and maintain outdated taxes on the other,” he said.

“The LCT is a legacy tax from a different era. It no longer reflects today’s automotive market and it’s holding back consumer choice.

“If this agreement is about giving Australians better access to goods including vehicles, then removing the LCT needs to be part of the next step.”

The VACC will continue to advocate for practical policy settings that ensure the benefits of the agreement flow through to automotive businesses and the communities they serve.

The Motor Trades Association of NSW Group said the reduction of trade barriers, including changes to automotive tariffs, represents a positive step for consumers and the broader economy. 

However, it has expressed disappointment that the agreement did not go further to abolish the LCT and called it a “missed opportunity”.

MTA NSW CEO Stavros Yallouridis

“Eliminating the LCT would reduce the cost of vehicles for Australian households, improve access to newer and safer cars, and better support the transition to lower-emission technologies,” said MTA NSW CEO Stavros Yallouridis.

“MTA NSW Group will continue to work with industry and government to advocate for a fairer, more modern tax system that reflects today’s automotive market and delivers real benefits for consumers and small businesses.”

The nation’s peak motoring body, the AAA, also welcomed the FTA but criticised the lack of action on the LCT.

“Removing the 5 per cent tariff on EU-sourced vehicles will enhance affordability and competition in the Australian car market,” said AAA managing director Michael Bradley.

“But the luxury car tax should have been fully removed. Car buyers will value the abolition of the tariff but will not welcome the maintenance of the luxury car tax. The LCT covers many everyday vehicles, including models often used by household and small businesses that cannot be reasonably defined as luxury cars.

“Introducing a higher LCT threshold for zero-emission vehicles is a small improvement on a bad tax. It covers less than 1 per cent of vehicles sold and the LCT is otherwise unchanged.”

He said that the LCT was a distortionary tax that does not reflect Australia’s car market.

“Removing this tax would encourage more efficient vehicle choices,” Mr Bradley said.

“Many of the vehicles targeted by the LCT provide market-leading safety and environmental benefits. Removing this inefficient tax would put some downward pressure on new vehicle prices. 

“That would encourage more Australians to buy high-technology vehicles, which would assist the government’s road safety, air quality and greenhouse objectives.”

Read last week’s story here: Canberra cuts import taxes in EU trade deal