Car industry drives up pressure n minister to settle Europe-Australia free-trade deal

The nation’s automotive industry is urging Trade Minister Don Farrell to finalise an EU-Australia free-trade deal to bolster the Australian manufacturing sector and encourage imports of European vehicles.

Trade and Tourism Minister Don Farrell gives a keynote speech at the The Global Food Forum 2025 in Melbourne in March. Picture: Luis Enrique Ascui

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The nation’s automotive industry is urging Trade Minister Don Farrell to finalise an EU-Australia free-trade deal to bolster the Australian manufacturing sector and encourage imports of European vehicles.

Three major groups representing vehicle dealers and automotive part manufacturers have urged Senator Farrell to land an agreement that would remove tariffs on imported European vehicles and scrap the luxury car tax, in a major boost for the sector.

As negotiations for a free-trade agreement with the EU resume, the Australian Automotive Dealer Association, Australian Automotive Aftermarket Association and Motor Traders Association of Australia have written to Senator Farrell to push for a breakthrough.

In a letter sent on Wednesday, the groups said Australian car dealerships sold more than $5.2bn worth of new vehicles from the EU each year, and manufacturers had exported $150m worth of product, including automotive parts and accessories, to Europe.

“With the cessation of passenger vehicle manufacturing in 2017, there is no rationale for a tariff on imported vehicles,” the groups said.

“In fact, these tariffs and outdated taxes like the luxury car tax only serve to put up barriers to trade for Australian businesses involved in both the import and export of automotive products.”

After he met with European Commissioner for Trade Maros Sefcovic in Paris last week to discuss a deal, Senator Farrell signalled the talks had progressed positively as both sides sought relief from Donald Trump’s tariffs agenda. 

“I met with my European counterpart in Paris last week and made it clear that we want to get this deal done but only if it is in our national interest,” Senator Farrell said.

“There are a few outstanding issues left to be resolved before we can agree but I’m confident we can get it done.

“Diversifying our trading relationships has been a key aim of the Albanese government, and a deal with the EU would open up significant opportunities for Australian industry and agriculture.”

The Australian revealed last month that Labor was prepared to axe the luxury car tax in return for better access for agricultural exports to Europe, which was a major sticking point when negotiations collapsed in late 2023.

Labor has also considered progressively lowering the 33 per cent tax, rather than removing it in one hit.

The proposal has sparked fears that suddenly removing the tax could cause the resale value of luxury cars to collapse.

The automotive industry has thrown its support behind the free-trade push, calling for removal of barriers between Australia and the 27-country EU bloc of 450 million consumers.

“Australian new car dealers have been selling imported European vehicles to Australian consumers for over 100 years, while Australian Aftermarket auto part businesses have been exporting word-leading parts to Europe for over 30 years,” the industry representatives said.

“These trading relationships have been longstanding and have been subjected to reciprocal tariffs for many decades.”

The letter, signed by AADA chief executive James Voortman, AAAA chief executive Stuart Charity and MTAA chief executive Rod Camm, said the industry contributes $40bn to the national economy and employs almost 40,000 people.

“Securing an FTA with the EU will increase the local automotive industry’s confidence to invest and employ more Australians,” they said.

“Each year Australian new car dealers sell more than 100,000 new vehicles sourced from the EU, with a total value of more than $5.2bn, and in the process their customers

are responsible for the overwhelming majority of the roughly $380m collected in passenger vehicle tariffs.”

EU ambassador to Australia Gab­riele Visentin said on Wednesday the same “sticky issues” in negotiating a FTA remain, but the Trump administration’s tariff threat had created a “willingness and the readiness” to strike a deal.