Speech to the Australian Automotive Dealer Association

I welcome the chance to speak to this important conference.

Australia’s automotive dealers are a familiar part of the landscape in just about every city and town across the nation.

Behind the familiar façade, though, your industry and your products are going through massive change.  Domestic manufacturing is ceasing; technology is transforming cars; and the industry is becoming ever more globalised.

With all of these changes, it is very important that Australia is not left behind – and this is the theme I want to explore in my remarks today.

I want to speak firstly about some of these changes – and why the Government is responding with the introduction of significant changes to the regulatory framework covering motor vehicles as first supplied the Australian market.

Next I will turn to speak about the Ministerial Emissions Forum – the work we have underway looking at three related issues, namely fuel quality standards, laws governing noxious emissions from vehicles, and the introduction of fuel efficiency standards.

In the final part of my remarks I want to touch on broader technological change – including electric vehicles, automated vehicles and smart infrastructure – and the Australian Government’s work to respond.

 

Changes to Your Sector – and to the Motor Vehicle Standards Act

So let me start by touching on how things are changing when it comes to one of the most important decisions a consumer makes: should I buy myself a new car?

Understandably, people in the car business might look at some of these changes with a degree of concern.  For example, we are seeing a drop-off in the distance people drive their cars each year. 

Average annual per capita vehicle kilometres travelled (VKT) peaked in 2009 and have been falling since then.[1] Australia’s experience is similar to that in other developed countries such as the UK, Japan and Germany.[2]

At the same time, younger Australians are not rushing to get their driver’s licence at the same rate as earlier generations.  In Victoria, the percentage of 15 to 24 year olds with licences went from 77 per cent to 66 per cent between 2000–01 and 2012–13.[3]

Yet another emerging trend is a perceptible move away from a personal ownership model to a shared model.  We have seen the rise of car sharing like GoGet in most Australian cities; ride sharing companies like Uber; and growing public transport use.

These changes suggest that – at least amongst younger Australians in our big cities – there is increasingly an attitude that you purchase ‘mobility as a service’ rather than buying yourself a set of wheels.

But despite all these factors, your sector has kept powering along, with upwards growth since 2009. Over one million new cars have been sold every year since 2009; in the year to July 2017 almost 1.18 million new cars were sold in Australia.[4]

The drivers for this continued growth include Australia’s steadily rising population and the ever-increasing affordability of cars. In February this year Commsec analysis of new car affordability found that it was at the best level ever recorded.[5]  

As well as getting more affordable, cars have more features than ever.  Twenty years ago air conditioning, keyless entry or power windows were optional extras or unavailable; today they are standard on even entry level level cars. 

In addition to global trends like people driving less each year, here in Australia  your sector is facing a specific change: the end of domestic car making.  From a customer point of view, that change is much less visible than it would have been even ten years ago.  In 2007 domestically-made cars made up 19 per cent of total car sales in Australia; last year it was 7 per cent.

Obviously it is important to understand the jobs impact of this change to the automotive supply chain in Australia.

But of course the bulk of employment in the automotive sector in Australia is downstream from manufacturing – for example, in the dealership businesses so well represented in this room, as well as mechanics, auto electricians and similar businesses.  

And while car assembly operations are ceasing, we will still have important centres of expertise in Australia, serving global automotive supply chains.  For example, Ford is expanding its Asia Pacific Product Development Centre in Melbourne, meaning that a significant automotive research and development capability will be based in Australia.[6] 

As this shows, the automotive market is becoming more globally integrated than ever before.  This trend has important implications for Australian consumers – and it is why we are making some significant changes to the Commonwealth laws which govern the first supply of motor vehicles to the market.

In just a few weeks, the Government plans to introduce a new Bill into the Parliament – the Road Vehicle Standards Act.  This will replace the existing Act, which has been in place for nearly thirty years.

If every light vehicle is imported, it makes compelling sense for Australia to  align our standards to global automotive supply chains – rather than requiring unnecessary differences which do not have a safety justification and which simply impose additional costs on the consumer.

The new Act will have stronger compliance and enforcement tools to make it more effective in ensuring that vehicles imported to Australia are as safe as possible.

Today we have an uneven playing field.  While most major manufacturers and importers  invest heavily in vehicle safety and compliance,  we need to make the law more effective to ensure, for example, that everybody usesquality assurance processes of sufficient rigour.

At the same time, the current legislation imposes unnecessary red tape on manufacturers – which adds costs that are ultimately passed on to consumers.  Under the new Act, there will be savings to industry of around $70 million a year, which in turn will benefit consumers.

The new Act is designed to improve consumer choice by increasing the range and types of vehicles that can be supplied in Australia without compromising the level of safety the community expects.

The new Act will offer more options and more choice for car enthusiasts including variants of performance vehicles; environmentally friendly hybrid and electric vehicles; and vehicles that cater for people with disabilities.  We are doing this through changes to the ‘specialist and enthusiast vehicle’ provisions.

Also, if you want to buy a rare car – defined as one made by a manufacturer which has a global production run of less than 3000 a year, or less than 1000 a year of the particular model -  you will now have the opportunity to import it under the specialist and enthusiast vehicle provisions.

If  you want to import a classic car, the law will now be that if it is over twenty five years old you can bring it in.  Importantly, rather than being linked to a specific year, currently 1989, the threshold year will now roll forward automatically every year.  So if you have been hankering for a 1992 Ford Mustang or Toyota Celica, once the new Act comes into play you are in luck.

These changes have been developed very carefully after a thorough review process – and I thank everybody in this room who has participated, including your peak body the Australian Automotive Dealers’ Association.

They are vital if we are to ensure that the Australian consumer can access the widest possible selection of models at very competitive prices.

We cannot have Australian consumers being left behind the rest of the world.

 

Vehicle Emissions

This is also an important principle when it comes to the work I am doing with my colleague Josh Frydenberg, Minister for Environment and Energy, to look at emissions from vehicles.

In 2015, we announced the establishment of a Ministerial Forum on Vehicle Emissions, to look at three related issues.  One is the regulatory framework covering noxious emissions from vehicles — such as carbon monoxide, nitrogen oxide, sulphur dioxide and particulate matter.  Currently, Australia uses the Euro 5 standard, but in Europe the more advanced Euro 6 standard is now in place, and the US also has more advanced standards than Australia.

The second issue is fuel efficiency standards – how many kilometres do vehicles travel for a given amount of fuel?  Eightly per cent of the global passenger car fleet is subject to fuel efficiency standards – including the US, Europe, Canada, Japan, China and India – but today there are no such standards applicable in Australia.

This is important for several reasons.  One is the impact on car running costs.  If Australia aligned to current international standards, that would produce an annual fuel saving on each new car sold in Australia of up to $500 per year compared to the status quo. 

In addition, the less fuel is used per kilometre, the less carbon dioxide and equivalent gases are emitted per kilometre. 

Fuel efficiency standards can influence the range of vehicles manufacturers choose to offer to consumers. For example, hybrid versions of many popular passenger vehicle models are more widely available in the US, Europe and Japan than Australia.  Today, the most fuel-efficient Toyota Corolla sold in Australia uses around twenty per cent more fuel per kilometre than the most fuel-efficient Corolla sold in the UK.

In July 2017 my Department released a proposed model for a fuel efficiency standard for light vehicles, and the Department is presently working through consultation on that model. Josh Frydenberg and I will consider the results of that consultation as we move forward with the Ministerial Forum and develop the recommendations we take to Cabinet.

The third issue is the fuel quality standards we have in Australia. Australia has the lowest fuel quality standards in the OECD, and we rank 70th in the world. There is also a linkage between fuel standards and the adoption of Euro 6 emissions standards.[7]

We are working very carefully through these issues and consulting widely with your industry and other affected industries like the fuel sector. 

It is important that the changes we make in this space deliver real benefits for Australian consumers and the Australian community – and they are benefits which exceed the costs of these changes.  We must also arrive at a timetable to implement the changes which is practicable and workable for the affected industries.

At the same time we need to ensure that Australia is not falling behind the rest of the world.  As we move to being a country that imports all of our light vehicles, it would not be acceptable for Australia to become a dumping ground for cars with older technology and poorer fuel efficiency than the global manufacturers are selling in other markets.

 

Automated Vehicles

Vehicle technology to control emissions is changing rapidly – but that is only part of a much broader technological transformation of the motor vehicle.

Recently I had the chance to take a new Mercedes E class for a spin.  This caused me to reflect on a few things – such as whether I should have stayed in the private sector so I could afford to buy such a magnificent machine.

But the real reason Mercedes Australia arranged for this experience was so I could try some of the driver assist technologies built into the vehicle.  It was a powerful demonstration that the journey towards fully automated vehicles is already underway, with technologies like parking assist, lane keeping and adaptive cruise control  already a feature of top end vehicles and increasingly permeating through the rest of the fleet.

It was a useful complement to other experiences I have had in the last eighteen months or so – including riding in a Google automated vehicle in Mountain View, California; visiting the Tesla factory in Fremont, California; and visiting Bosch in Clayton, Victoria to see the work they are doing on automated vehicle technology.

As automotive dealers you have a lot of expertise on what informs purchase decisions by consumers.  Some of the commentary about both electric vehicles and automated vehicles seems to me to overlook one very important factor – price.

No doubt everybody in this room has their own views about what it would take for electric vehicles to increase their market share – which today in Australia stands at around 0.1 per cent of new vehicle sales.

Of course there are a number of measures to increase electric vehicle take up in Australia, including the announcement recently by Enviroment Minister Josh Frydenberg that the Clean Energy Finance Corporation (CEFC), is supporting a new $100 million asset finance program to encourage Australians to switch to electric and low emission vehicles.[8]

The Government, through the Australian Renewable Energy Agency has also provided funding to ClimateWorks Australia to support research, education and engagement on electric vehicles in Australia.

 As for automated vehicles, we are clearly not yet at a point where the technology has advanced sufficiently to deliver genuine automated vehicles, capable of being operated without human supervision on roads also being used by human-driven vehicles.  There are many views about when that point will be reached – and no shortage of hype. 

Some of the hype seems to assume that the moment the technology reaches that point, then the market will flip extremely quickly and almost every vehicle will be automated in a short time.  More sober projections are based on the assumption that it will take time for automated driving technology to penetrate throughout the vehicle fleet. Again, price is going to be a significant factor in my view.

One example is modelling commissioned by the Queensland Department of Transport and Main Roads, which suggests that saturation of highly automated vehicles in the Australian fleet could occur roughly between 2050 and 2060.[9]

 Research by the Australian Driverless Vehicle Initiative shows that only 38% of Australians would currently pay more for a fully automated vehicle.  Those surveyed would pay an additional $9,000 on average, which may or may not be sufficient given the large research and development costs for this technology.[10]

For governments – federal, state and territory – it is important that we have work underway to prepare for the arrival of automated vehicles.  When it is deployed at scale, this technology will require extensive changes to almost every aspect of the existing transport system, particularly the supporting infrastructure, the control systems and the regulatory and legal environments.

There is a lot of work being done, under the auspices of the Transport and Infrastructure Council, which is made up of federal, state and territory transport ministers. 

Last year, the Transport and Infrastructure Council agreed to the National Policy Framework for Land Transport Technology, which lays out a three-year work plan to facilitate the uptake of transport technology across Australia.

In almost every Australian state and territory, trials of automated vehicles and connected intelligent transport systems are underway. The vehicles being tested have a significant degree of autonomy, and are either testing prototypes or are commercially available.

Automated or not, vehicles will increasingly be connected to a central network, as the take up of telematics continues.  One of the best known such services today is GM’s OnStar system.  Its services include turn-by-turn navigation, vehicle diagnostics, anti-theft security, roadside assistance and automatic crash notification.[11]

Many other manufacturers have developed similar telematics systems such as Ford, Mercedes-Benz, BMW and Toyota,[12] while third party applications for in-vehicle telematics include managing pay-as-you-drive insurance, fleet management and vehicle and driver performance data.[13]

Vehicle-to-Everything (V2X), also know as Cooperative Intelligent Transport Sytems (C-ITS), is the next stage of technological development – which will link automated vehicles and smart infrastructure.

Using V2X technologies, automated vehicles will be able to communicate with each other and the wayside infrastructure to share real-time messages for applications such as advanced collision warnings, vehicle platooning, or ‘green wave’ priority at traffic signals.

Work by Austroads predicts that the full deployment of connected vehicles with forward collision warnings could prevent 25 to 35 per cent of serious road crashes. [14] The first connected vehicles could be available in Australia from around 2018 onwards.[15]

To facilitate this technology in Australia, the Australian Communications Management Authority (ACMA) is currently in the process of allocating the 5.9GHz band for C-ITS.[16]

Australian firms are playing their part in this emerging technology.  Codha Wireless, based in Adelaide, is developing world-leading hardware and software to support integration between automated vehicles and infrastructure and improve safety, fuel efficiency and network performance.[17]

A company based at CSIRO in Lindfield in my electorate of Bradfield, Baraja, has developed a 3D LIDAR system with no moving parts. LIDAR is a critical technology for automated vehicles – it helps the vehicle navigate by using pulsed laser light to measure distances.[18]

 

Conclusion

Let me conclude, then, by returning to the observation with which I started – your sector is undergoing extraordinary change.

That has implications for the people who work in your sector – and the millions of Australians who buy new and used cars each year.

For the Turnbull Government, a guiding principle of our approach to the automotive sector is that we do not want Australians to be left behind. 

We are updating the regulatory framework so it is better suited to an automotive industry which is much more globally integrated than twenty years ago – and so that Australian consumers can enjoy the benefits of that integration.

We are reviewing the regulation of vehicle emissions so that, again, Australia is not left behind with outdated vehicles provided by global manufacturers who provide the best stuff to other markets with more up-to-date emissions and fuel efficiency requirements.

And with a profound transformation in the technology of motor vehicles – with new communications technologies, new powertrain technologies and new control technologies – we again want to make sure Australia is not left behind.

But there is one thing I can say with confidence.  Whatever the motor vehicle of the future looks like, it is not going to get into the customer’s hands without someone to market, sell and service that vehicle.

Indeed as the motor vehicle continues to change,  having a friendly local dealer who can explain the new features and benefits to the customer could well become more important than ever.

Automotive dealers have done a pretty good job of coping with extraordinary change over the last few decades – and I am confident you will continue to do so.

 

[1] BITRE (2015), Traffic Growth in Australia, Research Report 127, Canberra, p. 2.

[2] Tuttle, B (2012), ‘What happens when we reach ‘Peak Car’, Time, 25 Sep 2012: http://business.time.com/2012/09/25/what-happens-when-we-reach-peak-car/

[3] Delbosc, A (2015), ‘Why are young Australians turning their back on the car’? https://theconversation.com/why-are-young-australians-turning-their-back-on-the-car-35468

[4] ABS (2017), 9314.0 – Sales of New Motor Vehicles, Australia http://www.abs.gov.au/ausstats/[email protected]/mf/9314.0

[5] Sebastian, S (2017), ‘Car affordability at best levels on record’, Commsec Insights, https://www.commsec.com.au/content/dam/EN/ResearchNews/ECO_Insights150217-car-affordability-at-best-ever-levels.pdf

[6] Ford (2016), ‘Media release: Ford readies product development centre to drive innovation’,  https://www.at.ford.com/en/homepage/news-and-clipsheet/news/2016/12/ford-readies-product-development-centre-to-drive-innovation--exp.html

[7] Frydenberg, J (2017), ‘Clean air and cars can be a much healthier mix’, The Australian, 4 Aug 2017, http://www.joshfrydenberg.com.au/guest/opinionDetails.aspx?id=246

[8] Frydenberg, J (2017), ‘Media release: Driving finance for electric vehicles’, http://www.joshfrydenberg.com.au/guest/mediaReleasesDetails.aspx?id=421

[9] TransPosition. (2016), Conceptual sensitivity modelling and analysis on the introduction of autonomous vehicles, prepared for Department of Transport and Main Roads, unpublished, cited with permission.

[10] Australian Driverless Vehicle Iniviative (2017), Submission in response to the Inquiry into the Social Issues relating to land-based driverless vehicles in Australia, available at http://www.aph.gov.au/Parliamentary_Business/Committees/House/Industry_Innovation_Science_and_Resources/Driverless_vehicles/Submissions

[11] OnStar (2017), https://www.onstar.com/us/en/home.html

[12] Edmunds (2017), ‘OnStar and Beyond: The Next Generation of Telematics’, https://www.edmunds.com/car-technology/onstar-and-beyond-the-next-generation-of-telematics.html

[13] Gartner (2017), ‘IT Glossary’, http://www.gartner.com/it-glossary/telematics/

[14] Austroads (2011), Evaluation of the Potential Safety Benefits of Collision Avoidance Technologies Through Vehicle to Vehicle Dedicated Short Range Communications (DSRC) in Australia (Report AP-R375/11): https://www.onlinepublications.austroads.com.au/items/AP-R375-11

[15] Federal Chamber of Automotive Industries (2016), ‘Submission to the ACMA: Proposed regulatory measures for the introduction of C-ITS in Australia’, https://www.acma.gov.au/-/media/Spectrum-Transformation-and-Government/Issue-for-comment/IFC-20-2016/FCAI-submission-pdf.pdf

[16] ACMA (2016), ‘Proposed regulatory measures for the introduction of C-ITS in Australia’, https://www.acma.gov.au/theACMA/proposed-regulatory-measures-for-the-introduction-of-c-its-in-australia

[17] Codha Wireless (n.d.) ‘Autonomous Driving’,  http://cohdawireless.com/ConnectedCars/Autonomousdriving.aspx

[18] Smith, P (2016), ‘Australian start-ups bag $7.6 million in federal commercialisation grants’, Australian Financial Review, 14 Nov 2016, http://www.afr.com/technology/australian-startups-bag-76-million-in-federal-commercialisation-grants-20161111-gsnaw9