Coalition’s car price hike claims questioned as pollution caps loom

Coalition and carmakers’ claims that fuel pollution limits will significantly lift the cost of new vehicles have been contradicted by independent modelling that suggests the average increase will be just 1 per cent – or $500.

The government remains in talks over its plan to cap the average emissions of a carmaker’s overall fleet of vehicles sold each year, which it says will cut motor vehicle pollution by 60 per cent over five years and bring Australia into line with the rest of the developed world.

The limits are designed to encourage manufacturers to sell either more efficient combustion-engine cars or more electric vehicles.Credit: Bloomberg

The limits, to apply only to new cars, are designed to encourage manufacturers to sell either more efficient combustion engine cars, or more electric vehicles. Car companies would pay a penalty of $100 for each gram of carbon dioxide per kilometre that their fleet exceeded the caps.

Opposition Leader Peter Dutton and the Federal Chamber of Automotive Industries, which represents major vehicle makers, have criticised the speed and extent of the proposed reforms and have warned of massive price increases for new cars.

In a submission to the government on Monday, experts at the independent Grattan Institute rejected these claims, citing their analysis showing the average new car price would rise by as little as 1 per cent.

The Melbourne-based think tank also said imported cars that met the new standard would save the average motorist about $1000 in fuel and maintenance over five years.

“The government’s announcement has revived some criticisms that a fuel efficiency standard will ‘end the weekend’ ... it will not, particularly since the targets are in line with those in the US and almost certainly achievable without major negative impacts on consumers,” the Grattan Institute’s Tony Wood, Alison Reeve and Richard Yan said in the submission.

“Lower fuel and maintenance costs mean that consumers will quickly be better off than they otherwise would be – and will be far better off in the long term.”

Australia is the only developed country apart from Russia that does not impose mandatory pollution caps.

The Federal Chamber of Automotive Industries has estimated carmakers could be up for $38 billion in fines between 2023 and 2029 if current sales patterns continued, and implied these costs would be added to the sale price of new vehicles.

However, the Grattan Institute said this scenario was implausible because it was based on the false assumption that neither carmakers nor car buyers would change their behaviour.

“This assertion is precisely the opposite of the intent of the policy and of the experience in other countries. When vehicle efficiency standards are introduced, manufacturers do make more efficient cars, and consumers do buy them,” it said.

Opposition climate change and energy spokesman Ted O’Brien said the government was imposing “a great big tax on the family car and utes”.

“While the Grattan Institute and the industry differ on the extent to which Labor’s new family car tax will hurt consumers, they at least agree on one thing – the price of Australians’ favourite vehicles will go up,” O’Brien said.

Climate Change and Energy Minister Chris Bowen said the fuel efficiency standard would bring more efficient cars into the country and deliver significant fuel bill savings for motorists.

“Mr Dutton should explain why he’s spending more time spreading disinformation for the sake of it rather than finding tangible and practical solutions for long-term cost-of-living relief,” Bowen said.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.