Car makers respond to carbon pricing

Industry divided on full impact, but agree costs will rise, imports get another free kick

Australia's three local car  games makers – Toyota, Holden and Ford – have had mixed reactions to the Federal Government's carbon pricing scheme, but agree costs will rise and imported vehicles will be even more competitive.

The industry estimates carbon pricing will add at least $30 million to the operational costs of Australia's three local car makers, adding $112 to $200 per vehicle produced.

While this may sound like a nominal amount on a $30,000 car, it is worth noting automakers routinely overhaul manufacturing processes and vehicle content if it can save them as little as 20 cents per car.

Components with a manufacturer cost of $200 would typically calculate out to about $1000 at retail level, one industry insider revealed.

The carbon pricing announcement comes at a sensitive time for local car makers.

They are struggling to compete against imported vehicles aided by the strong Australian dollar, had $800 million of Federal funding promised to them over the next 10 years withdrawn, and are all in the midst of deciding whether or not to build cars here five years from now – or switch to import-only operations.

A statement from Toyota Australia president and CEO Max Yasuda said in part:

"A high start price of $23 [per tonne of carbon emissions] places Australian manufacturing at a disadvantage compared to imports and is a significant challenge for business.

"The local automotive industry is currently facing difficult business conditions including the high Australian dollar, increased overseas competition and a fragile local supply chain.

"In light of these conditions and in the absence of transitional assistance for trade-exposed non-energy-intensive industries, such as the automotive industry, Toyota Australia would have preferred a lower starting price ($10 - $15) to ease the transition process and free up capital to invest in low emissions technologies."

Holden believes the car industry may be able to access compensation under the Clean Technology Program, although it is awaiting clarification.

A statement from Holden said in part:

"While Holden designs, engineers and manufactures vehicles in Australia for the domestic and overseas market, it does not fit the Government's criteria as an 'emissions-intensive, trade-exposed industry'.

"Consequently, Holden and many other major manufacturers will only be potentially eligible to apply for compensation to partly off-set the impact on Australian manufacturing under the Clean Technology Program.

"Specifically Holden believes it will be able to apply for co-investment funding for its R&D and manufacturing initiatives to help reduce emissions and improve vehicle efficiency through the … Clean Technology Investment Program Investment Program, Clean Technologies Food and Foundries Investment Program, and
 Clean Technology Innovation Program."

Toyota Australia said the company will "evaluate the suitability of the Clean Technology Investment Program to assist in reducing manufacturing-related CO2 emissions".

"However," Toyota said, "this program does not address the need for a co-investment program, critical for securing investment in automotive manufacturing, as was available under the Green Car Innovation Fund.

"The ongoing sustainability of advanced manufacturing is dependent upon strong long term automotive industry policy settings and continued parent company investment."

Holden also took the opportunity to remind the Federal Government of its other broken promise, the Green Car Innovation Fund, the $1.3 billion assistance program that was cut short by 10 years and $800 million earlier this year.

"Over the coming days we will be reviewing the details of the scheme to better understand how the package will be implemented. In particular Holden will be discussing with the Government the issues affecting Australia's ability to compete globally for foreign investment."

Federal Chamber of Automotive Industries chief executive, Andrew McKellar, told Motoring.com.au: "The inescapable conclusion is that costs will increase to local vehicle manufacturers. And that $30 million a year figure, possibly more, will go up over time as the [carbon] price increases."

He said the FCAI put forward three suggestions to government before carbon pricing was announced.

"We said there needed to be compensation, we said the starting price should be a nominal or low figure such as $10 a tonne or less … until there is clear progress towards a binding international framework. And we said there needed to be encouragement or support for low emission technology in secondary industries."

The car industry believes it will be eligible to apply for compensation under a technology investment fund, but it must "scrap away" with other industries for its share of financial support.

"At this stage it's not possible to say how much will go to the automotive industry," McKellar said.

"A year ago the automotive industry had access to [the now defunct Green Car Innovation Fund], but yesterday the Federal Government announced a general $800 million technology investment fund which applies to all manufacturing. You've got to scrap away with everyone to get a piece of that.

"While that's a positive measure the reality is [the car industry] is behind the eight ball compared to where we were 12 months earlier."

Concerned that any comment could be misconstrued as Ford winding up its local manufacturing operations (Ford has the smallest output of Australia's three local makers following seven years of sales decline) the company issued a short statement:

"Ford is currently reviewing the anticipated impact of the Federal Government's proposed carbon pricing scheme. Once this is finished Ford will express its views through the Australian Federal Chamber of Automotive Industries."

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