Imagine having a regulation that allows foreign companies to dictate what Australians can and can't buy, even when those companies don't make anything in Australia.
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Sound crazy? That's because it is.
Welcome to Australia's regulations that ban the parallel importation of electric vehicles. They are the key reason why so many Australians can't afford an electric vehicle and why we will struggle to reduce our carbon emissions.
The regulations were established back when Australia made cars. They stopped people from importing car models that were made in Australia to protect the car manufacturers that operated here.
It was blatant protectionism which, like all protectionism, only made sense to those who directly benefited from it or who didn't understand basic economics.
But at least we were protecting someone. Today, you can't even make that argument. We don't have an Australian car manufacturing industry anymore. We've kept the protectionism despite having nobody to protect.
By allowing foreign car manufacturers to stop Australians from importing electric vehicles that they sell in Australia we are doing four things, all of which are equally bizarre.
First, we are forcing Australian consumers to pay billions of dollars each year to foreign car manufacturers. By constricting the supply of electric vehicles on sale in Australia, we are pushing up the price considerably. This is great for foreign manufacturers who get higher prices but terrible for the average Australian who pays more. It's a direct wealth transfer from Australian consumers to foreign car manufacturers.
Second, we are making it harder for the private sector to help fight climate change, meaning the government has to tax and spend and do more of the heavy lifting. The amount of investment required to stop a global 1.5 degree increase in temperatures will be huge - more than $30 trillion over the next decade, according to the IPCC. Governments simply cannot afford it. Private sector investment will be critical.
Third, we are driving up the price of cars and fuelling inflation through a regressive policy that hurts people on low incomes the most. People on low incomes can afford electric vehicles in other countries, such as New Zealand. It's only in Australia that they are out of reach. The rising price of cars has been a major source of inflation after the pandemic. If there was ever a good time to make cars cheaper, it's now.
Fourth, we are hurting Australia's mechanics, car repairers and parts suppliers who would otherwise be making lots of money servicing these vehicles. This is a problem today, but it's an even bigger problem in the future. Because EVs last so much longer, most of the money in the future will be made in repairs and maintenance, not at the point of sale. Your car will be updated and serviced online rather than by your local mechanic.
We are seeing this already. Car companies have been moving down the value chain for decades, cutting local producers out of the market. Car manufacturers are increasingly making car dealers their agents, rather than separate businesses in their own right.
By giving full control of Australia's car market to foreign manufacturers, these regulations are stopping Australia from grabbing our share of this fast-growing market. They are helping foreign manufacturers to price discriminate against Australian businesses and consumers.
Scrapping these regulations would take profits from overseas and put them back into Australian workshops. Nearly all cars in Australia are sold through manufacturer networks thanks to these regulations rather than independent car dealers. In New Zealand, it's less than 50 percent. Consumers and businesses in Singapore and the United Kingdom similarly have more choice and cheaper cars than what we get in Australia.
It's no wonder we are struggling to increase the supply of electric vehicles in Australia, and the ones that do come here are high priced. Teslas are an increasingly common sight in Australia, but only in the wealthier suburbs. We are deliberately restricting the size of Australia's market and limiting the market to the cars with the highest price tag.
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Those who oppose this reform will argue that car safety is the reason we need these regulations by stopping people from importing dangerous cars from overseas or cars for which there are no parts in Australia. Neither argument stacks up.
New Zealand's experience shows that car safety is not a realistic justification for banning parallel imports. After all, local safety standards still apply. Cars can only be imported if they satisfy these safety standards.
Information sharing between jurisdictions similarly makes it easy to identify consumers impacted by product recalls. Policies requiring distributors to support partnership-based replacement of parts mean necessary spare parts will be available, too, as shown by the Grattan Institute.
Provided they meet our safety standards, Australians should be allowed to buy their car from wherever they want. It's a common sense position which supported by the Productivity Commission.
When he released the National Electric Vehicle consultation paper last month, Minister Chris Bowen said 'affordability and choice' were at the heart of the government's electric vehicle policy. If we're serious about reducing inflation, reducing emissions and reducing the price of electric vehicles, we need to scrap these crazy regulations.
It's time to take the handbrake off Australia's electric vehicle market.
- Adam Triggs is senior research manager at the e61 Institute, a non-resident fellow at the Brookings Institution and a visiting fellow at the Crawford School at the Australian National University
Adam Triggs
Adam Triggs is a partner at the economics advisory firm, Mandala, a visiting fellow at the ANU Crawford School and a non-resident fellow at the Brookings Institution.
Adam Triggs is a partner at the economics advisory firm, Mandala, a visiting fellow at the ANU Crawford School and a non-resident fellow at the Brookings Institution.
