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Heading in the Wrong Direction

Australia should stop subsidising the building of cars that are inefficient and unprofitable.

by Dr Peter Pudney*

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*Peter Pudney is a Senior Research Fellow in the Institute for Sustainable Systems and Technologies at the University of South Australia. Peter has been the race strategist and solar array designer for the Aurora Vehicles solar racing team, and has helped design and build solar and electric cars at UniSA. He is currently working on a project investigating the impact that electric vehicles might have on CO2 emissions and electricity generation and distribution in Australia.

This article is an edited version of a personal submission made to the 2008 Review of Australia's Automotive Industry; the views expressed are not necessarily those of the University of South Australia.

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Passenger cars built in Australia by GMH, Ford and Toyota have CO2 emissions that are 1.4 to 2.4 times the industry’s fleet target for the year 2010. This means that each car built in Australia by these companies takes Australia and the world further from meeting critical CO2 emissions targets. These cars also have 1.4 to 2.4 times the emissions of the most efficient large cars sold in Australia.

Furthermore, cars built in Australia are not profitable without extensive support from Australian taxpayers, in the form of tariffs, the Automotive Competitiveness and Investment Scheme (ACIS), tax concessions, the Automotive CRC, Commercial Ready and other grants, and purchasing incentives for businesses and government.

On the other hand, the automotive industry employs 60,000 people in Australia, represents significant engineering and manufacturing expertise, and earns export income. If taxpayer support were to be withdrawn from the automotive industry, we would need to find some other endeavour for our engineering and manufacturing sector.

But surely we can find a worthwhile alternative to cars that can make a greater contribution to the economy, to society, and to the environment!

In this article I will argue that:

1. Australia should stop subsidising global automotive companies to build large, inefficient cars in Australia. Business and governments should not be given discounts on cars, fuels or emissions.

2. We should use Australia’s engineering and manufacturing capability to build renewable energy generation systems instead. Ultimately, these can be used to generate the clean electricity required for general use and to power the next generation of plug-in hybrid, battery electric, and hydrogen cars.

3. We should implement policies that encourage - or perhaps even compel - global automotive companies to sell a mix of cars that will help us stabilise CO2 emissions, and other pollutants, at a sustainable level.

We should be supporting the solution, not the problem.

Australia should stop subsidising inefficient and unprofitable cars

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In the past, the Federal Chamber of Automotive Industries (FCAI) has set voluntary fuel consumption targets for new cars sold in Australia. The target for 1983 was 9.0 L/100 km. The target for 1987 was 8.5 L/100 km. Both these targets were missed. The actual fuel consumption for new cars sold in Australia during 1987 was 9.5 L/100 km.

The FCAI has set a voluntary fuel consumption target for 2010 of 6.8 L/100 km, which corresponds to about 150 g/km of CO2. This target is high compared to European targets. Despite this, cars built in Australia are not even close to meeting this target. In 2007, fuel consumption and CO2 emissions from Australian-built vehicles were still well above the voluntary fleet targets set for 1987, twenty years earlier, and were 1.4 to 2.4 times the targets for 2010. Each Australian-built vehicle sold takes us further from the target.

The Australian Green Vehicle Guide (June 2007) gave the following CO2 emission ranges for Australian-made vehicles:


CO2 g/km



Ford Falcon



Ford Fairlane



Ford Fairmont



Ford Utility



Holden Calais



Holden Caprice



Holden Commodore



Holden Statesman



Holden Utility



HSV (all models)



Toyota Aurion



Toyota Camry



The Greenwheels web site (April 2007) lists passenger vehicles available in Australia that are within 25% of the best in class. None of these are Australian-built.

The best in each class are:


CO2 g/km




smart fortwo 52kW Coupe



Fiat 500 Sedan



Toyota Prius Hatch



Skoda Octavia Sedan



Suzuki Jimny with VVT Wagon

ute or light truck


Proton Jumbuck Utility

6+ seats


Citroen C4 Picasso Wagon



Renault Kangoo Van

All of the large global automotive companies build cars that can meet the 2010 emissions target, but they do not build them in Australia. For Australian-built models to meet the 2010 target, the CO2 emissions would have to be decreased by 40-70%.

It is not necessary that every car sold in Australia meet the target, but every car sold that is over the target makes achieving the target more difficult. Australia will not meet the 2010 target of 150 g/km CO2, which is not as stringent as European targets, without either an unprecedented decrease in the emissions of Australian-built cars, or a large decrease in the use of Australian-built cars.

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As well as being inefficient, Australian-built cars are also unprofitable. The Australian automotive industry is currently supported by tariffs, the Automotive Competitiveness and Investment Scheme (ACIS), tax concessions, the Automotive CRC, Commercial Ready and other grants, and government purchasing preferences.

Over 75% of Australian-made cars sold in Australia are bought by business and government fleet purchasers. Some fleet purchasers have policies that require them to buy Australian-made vehicles. All are given incentives through the taxation system and other rebates that offset the true costs of buying and operating inefficient cars.

Why are we supporting an industry that is building cars that are unprofitable, cars for which there is decreasing market demand, and cars that are hindering our progress towards achieving important CO2 emissions reductions?

The Australian Government should withdraw support for the manufacturing of inefficient cars in Australia, including discounts on cars, fuels and emissions for business and government. We should find something beneficial to do instead.

Redeploying Australia’s expertise

Kevin Rudd has said that he does not want to be Prime Minister of a country where we don’t make things anymore. Does he want to be the Prime Minister of a country that makes some of the most inefficient cars in the world?

Abandoning support for the building of inefficient and unprofitable cars does not necessarily mean abandoning the Australian automotive industry. If it is possible to manufacture cars with whole-of-life emissions less than those of imported cars, this should be supported. Alternatively, perhaps our focus should shift from complete vehicles to innovative vehicle systems. In particular, reducing the mass of vehicles and vehicle systems can have a significant impact on vehicle energy use.

Ultimately, however, Australia may be too small to compete in the manufacture of efficient cars or vehicle systems. We need to find something else to be good at - something that has greater benefits for the economy, for society, and for the environment.

An obvious candidate is renewable energy.

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It is almost certain that future, cleaner vehicles will have electric drive systems. Plug-in hybrid cars and battery electric cars will be recharged from the electricity grid. To achieve significant reductions in transport emissions, the extra electricity required to recharge these cars will have to be generated from new renewable energy sources, such as wind, photovoltaic and geothermal energy. Should hydrogen ever become a viable automotive fuel, clean energy sources will be required to generate the hydrogen.

If we are to stabilise CO2 emissions at an acceptable level, the world will require a lot of renewable energy. Germany has already established a thriving renewable energy sector. Australia could also be a major contributor to a global renewable energy industry.

Meeting transport emissions targets

Ideally, Australia’s transport emissions target should be expressed as an overall emissions rate, in tonnes per year. The emission rate for each new vehicle is only one factor that effects overall emissions. The other important factor is the total number of vehicle-kilometres driven each year. Reducing the emissions rate for each new vehicle will be particularly important if the total number of vehicle-kilometres travelled in Australia continues to increase each year. Of course, reducing the overall distance travelled by cars will also help reduce overall emissions.

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Past voluntary fuel consumption targets set by the Federal Chamber of Automotive Industries (FCAI) have not been met. To have any hope of meeting future vehicle emissions targets, we need to make drastic reductions to the number of inefficient cars being used in Australia. Removing subsidies and other incentives that externalise the true costs of buying and operating inefficient cars will help us meet critical emissions targets.

Removing subsidies and other incentives that encourage the use of inefficient cars may not be enough. We should also implement policies that encourage or perhaps even compel global automotive companies to sell a mix of cars that will help us stabilise emissions at a sustainable level. Requiring vehicles sold in Australia to have emissions within, for example, 25% of the ‘best in class’ could result in significant improvements to fleet emissions and significant pressure on manufacturers to reduce the emissions of the vehicles they build. The Greenwheels web site lists such ‘low emission vehicles’.

Other issues

  • Consumer demand for smaller vehicles

The interim Discussion Paper of the Review of Australia’s Automotive Industry 2008 says:

Will the steady consumer drift towards smaller vehicles, evident over recent years, continue or even accelerate?

Oil is a finite resource. It is becoming harder to find and more expensive to extract. World demand for oil is also increasing. It is almost certain that oil prices will continue to increase, and at an increasing rate, which will increase the demand for more efficient vehicles.

Until now, we have not paid for our CO2 emissions. This is going to change, further increasing the demand for more efficient vehicles. Current alternative fuels are not much cheaper or cleaner than petrol. Vehicles are going to have to become lighter and more efficient.

  • Petrol guzzling

The interim Discussion Paper of the Review of Australia’s Automotive Industry 2008 says:

. . . increasing concern over CO2 emissions and fuel economy have shaped consumer tastes and led to increasing demand for alternative fuel or hybrid vehicles, and a drop-off in demand for what are perceived as ‘petrol-guzzling’ larger cars.

The problem is not one of perception. Large cars - particularly the locally-built large cars - really do use significantly more fuel than small cars and cars with advanced drive technologies.

  • Rear-wheel drive

The interim Discussion Paper of the Review of Australia’s Automotive Industry 2008 says:

Australia has become a centre of excellence for the design and engineering of some global platforms, such as rear wheel drive architecture.

Who cares? Rear wheel drive has some advantages for towing, racing and for ‘drifting’, but whether a car is front wheel drive or rear wheel drive is irrelevant for most driving. Front wheel drive is safer for drivers of average ability, and performs better on slippery roads.

  • Green Car Innovation Fund

The Green Car Innovation Fund will be wasted if it produces vehicles that are cleaner than current Australian-built vehicles but still well behind best practice.

  • Australian Design Rules

The interim Discussion Paper of the Review of Australia’s Automotive Industry 2008 says:

Do Australia’s fuel standards and the Australian Design Rules inhibit imports of fuel efficient vehicles?

Brazil has been running cars on ethanol for 30 years, and has over four million cars running on 100% anhydrous ethanol. In Australia, the proportion of ethanol allowed in fuels is limited to 10%.

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Australia did not allow the pictured Reva electric car to be imported. In much of the world, vehicles like the Reva electric car are classed as ‘heavy quadricycles’, and not subjected to the more stringent standards applied to full-size, high-speed passenger vehicles.

Australian road-worthiness requirements prohibit the import of small efficient vehicles such as the Reva, Twike, CityEL and Open Street, all of which are used in Europe. Many small electric scooters are prohibited, and the standards for electric-assist bicycles are not compatible with those in other parts of the world (USA, Europe, Japan). However, slow mopeds and cyclists over the age of twelve are expected to mix with other traffic.

  • Vehicle safety

Safety features can lead to weight increases, which increase energy use. However, heavier vehicles also contribute more energy in a crash - you are more likely to be killed or injured if you are hit by a heavy car than if you are hit by a light car.

Many small European cars have higher safety ratings than the larger locally built cars.

In general, larger vehicles are safer in a crash because they allow deceleration to occur at a lower rate over a greater distance. But there several studies that have shown that smaller, lighter cars are less likely to be involved in crashes, and contribute less to the overall road fatality:

  • Sparrow (1985) shows that the small Japanese ‘Kei’ cars had a slightly lower accident rate and caused fewer accidents;

  • Wasielewski (1983) found that drivers of small cars take fewer risks;

  • Tay (2002) concluded that non-agressiveness is more important than crashworthiness in determining the overall road fatality.


Most of the information used in this article is from the interim Discussion Paper and Background Paper from the Review of Australia’s Automotive Industry 2008:’sAutomotiveIndustry.aspx

Information on the emissions of vehicles sold in Australia is from the Australian Green Vehicle Guide and the Greenwheels web sites:

Information on the German renewable energy sector can be found here:

References on the merits of front wheel drive can be found on Wikipedia: wheel drive

Sparrow, F. T. 1985, ‘Accident involvement and injury rates for small cars in Japan’, Accident Analysis and Prevention, vol. 17, no. 5, pp. 409–418.

Tay, R. 2002, ‘Tin cans or assault vehicles’, Journal of the International Association of Traffic Safety Sciences, vol. 26, no. 2, pp. 92–97.

Wasielewski, P. 1983, Do drivers of small cars take less risk in everyday driving?, General Motors Research Laboratories.

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