Hyundai Australia says FBT changes are a 'hand grenade'
by: JOSHUA DOWLING NATIONAL MOTORING EDITOR From: News Limited Network August 20, 2013 9:19AM
ONE of Australia's biggest car companies has accused the Rudd Government of lobbing a "hand grenade" with changes to the Fringe Benefits Tax, amid revelations fleet orders have slumped by 37 per cent in the past fortnight. Hyundai - the second-highest seller of passenger cars in Australia - has slammed the decision and the government's lack of consultation.
"The lack of consultation and throwing a hand grenade into the market just isn't a fantastic thing when you're trying to manage a business," said Hyundai Australia's chief operating officer, John Elsworth.
"There is no doubt the shock of the government announcement has impacted buyer confidence. It is difficult to see how it will be a positive move."
Mr Elsworth said the sudden and sweeping change announced by the Rudd Government on July 16 "simply doesn't recognise that automotive product investments are extremely long term".
"Ordering lead times can be up to six months ... and customers need absolute confidence when making significant purchase decisions like a new car," Mr Elsworth, a former high-ranking Holden executive, said.
The Australian Fleet Lessors Association - which represents companies that manage 550,000 fleet cars on Australian roads - revealed to News Corp Australia that forward orders dropped by 20 per cent in the fortnight immediately after the July 16 announcement by the Rudd Government.
But there was a greater decline in new orders in the first two weeks of August - now down by 37 per cent, AFLA says.
"In the first half of July, before the FBT changes were announced, our members held orders for almost 5000 vehicles," said the executive officer for AFLA, John Bills.
"In the first half of August the same fleet companies held orders for just 3000 vehicles, a drop of 37 per cent."
The data was drawn from nine of the biggest fleet companies in Australia, which typically write close to 10,000 fleet orders per month.
"This data shows us we should start to see the impact in the sales figures in the coming months," said Bills.
The nation's biggest independent car fleet management company Fleetcare responded to the Government's overhaul of FBT by axing a quarter of its staff - and other fleet companies followed suit with job cuts.
AFLA has joined the long list of motor industry groups lobbying for the FBT changes - which will increase the tax on personal use of company cars - to be reversed.
The Coalition Opposition has vowed to scrap the FBT reform.
A spokeswoman for Federal Treasurer Chris Bowen confirmed to News Corp last night there were no plans to change the policy.
Federal Industry Minister, Senator Kim Carr, announced a $200 million assistance package for local car manufacturers - but it covers only a fraction of the increased cost of the new FBT rules.
"We don't care if there is a change of government or not, we just hope the new FBT regulations won't be legislated," said Bills.
The average cost of a lease car in the AFLA survey was $36,000 and fewer than 4 per cent were over the Luxury Car Tax threshold - and 50 per cent of are a Toyota, Holden or Ford.
Orders for Australian manufactured vehicles were down by 35 per cent while orders of imported cars were down by 38 per cent, according to the AFLA data in the first fortnight in August.
"This alarming reduction in business is entirely attributable to the removal of the statutory formula (FBT) option," said Bills.
"It has had a serious immediate impact on business in this industry sector with devastating consequences for those suffering loss of employment. Further job losses are inevitable if this measure proceeds."
