INDEPENDENT MOTOR VEHICLE DEALERS ASSOCIATION (INC).
Submission to the
New ZealandMinistry of Transport
on the
Discussion Document
Improving the fuel economy of vehicles entering the New Zealand fleet.
Prepared 25 March 2008
1. Background:
The Independent Motor Vehicle Dealers Association Incorporated (“IMVDA”) is the trade association that represents the interests of the wider trade involved in importing, preparing, wholesaling and retailing the majority of used vehicles imported from Japan, Singapore and other jurisdictions.
Our members include importers, wholesalers, Japanese auction companies and exporters, shipping companies, inspection agencies, TSDAs, ports companies, compliance shops and service providers to the trade.
We provide legal and technical advice to the trade, and liaise closely with the relevant government departments, including Land Transport NZ, Ministry of Transport, Customs, MAF, Ministry of Consumer Affairs, Commerce Commission, EECA, MfE etc.
2. Official Information Act 1982:
The IMVDA has no objection to the release of any part of this submission under the Official Information Act 1992
3. Privacy Act 1993:
The IMVDA has no objection to being identified as the submitter when the Ministry is preparing its summary of submissions.
4. Contact:
For further contact in relation to this submission:
David Vinsen
Chief Executive
Independent Motor Vehicle Dealers Association (Inc)
PO Box 14 143
Panmure
Auckland
Phone: 09 573 3058
Direct:09 573 3240
Mobile:021 840 520
Email:
Web:
1.General
Thank you for the opportunity to comment on this discussion document.
The IMVDA supports in principle the government’sintentions to improve the NZ vehicle fleet.
1.1 Fleet management strategy
We strongly believe, however, that the fleet should be improved as the result of a properly researched and carefully implemented overall fleet management strategy, rather than a series of ad hocinterventions. Among other elements, such as the age and composition of the fleet, such a vehicle management strategy would include ongoing education campaigns aimed at consumers and their purchasing and driving habits.
1.2 Supply and demand
The proposals contained in the discussion document “Improving the fuel economy of vehicles entering the New Zealand fleet” deal only with the supply side of the equation.
Of equal or more importance is the demand side; it does not matter what environmentally-friendly vehicles are imported and available for sale, the exercise will have been fruitless if the motoring public are not motivated to buy them.
1.3 Education and incentives
We believe that it is essential that the vehicle-buying public must be encouraged to purchase vehicles that are more fuel-efficient. The encouragement should be a combination of education, incentives and disincentives.
1.4 Fuel pricing
The price of fuel is the most important factor in changing consumer behaviour ie to persuade them to purchase fuel efficient vehicles, and use them more efficiently. Recent surveys have shown that people say they will “consider changing to public transport when the price of petrol reaches $2.50 per litre”; equally, there are signs and anecdotal evidence that the recent increases in fuel prices have already caused an increase in patronage of public transport and a consequent reduction in vehicle kilometres travelled.
We submit that the most effective way of reducing total fuel usage is to increase the price of fuel at the pump, and that this should be considered as the primary mechanism to achieve government’s aim of reducing transport-related greenhouse gases.
2. Answers to Discussion Document questions
2.1. What other options might exist that will influence the fuel economy of light vehicles entering NewZealand?
With reference to our comments in 1.2 and 1.3 above, and as the result of focus groups and surveys of the businesses responsible for importing the majority of used vehicles, we strongly recommend that:
Government maintains a “business as usual” approach with regard to limitations on the types of vehicles able to be imported, but implements differential fees for initial registration and ongoing annual licensing to effectively encourage the motoring public to purchase fuel-efficient vehicles.
(This proposal is a development of the original Option 3 referred to in the Discussion Document).
It also has reference to the NZ Business Council for Sustainable Development’s “Feebates” proposal.
Rationale:
The key determinant of the effectiveness of any measures to improve the fuel economy characteristics of the national vehicle fleet will be the level of public acceptance, which will only follow education and financial incentives and disincentives. This “feebate” proposal will be the most effective way to both educate and motivate the public to choose the most fuel-efficient vehicles suitable for their respective purposes when they are making vehicle purchasing decisions. Feebates deal directly with the demand side of the supply/demand equation, and once the public has an appetite for environmentally-friendly vehicles, the motor trade (new and used) will supply that demand.
Motor vehicle technology is constantly being developed and improved, particularly to achieve the increasing environmental requirements of all source countries and target markets. (see JAMA’s report, Appendix A).
New Zealand is too small a market to impose our own standards or to drive technological improvements, but it would make good sense as a nation to take advantage of improvements in technology by implementing a scheme that encourages vehicle purchasers to migrate as quickly as possible to newer technology vehicles.
Notes on fees and rebates:
a. Thisproposed feebate scheme should be revenue-neutral, with the revenue from
increased registration and licensing fees for uneconomical vehicles being used to
offset rebates for economical vehicles, and for public education on the issue.
b. The fees should be large enough to seriously influence consumer behaviour, eg:
- increased registration fees of $3000, ongoing licence fees of $1000 pa
- initial rebate of $3000, ongoing licensing at nominal cost (free?).
- This would make the import of “K Class” cars (referred to in Japan as “mini size vehicles”) economically viable;these vehicles have been specifically designed to meet Japan’s environmental regulations, with fuel-efficient engine capacities of 650cc or less, and once again it would make good sense for us to take advantage of the benefits of this class of vehicle.
d. Other benefits to encourage the purchase and use of economical vehicles
could also be introduced, eg:
- free/reduced parking charges in all metropolitan areas.
- access to transit or high-occupancy vehicle lanes for qualifying vehicles
- A shipping company has already indicated that they will carry K Class vehicles at a reduced rate.
e. The rationale in the discussion document for not pursuing this option does not make
sense; it is consumer demand that does need to be influenced in order for any such
proposal to be effective. Vehicle importers and the motor trade do not make the
market; they only cater to the demand.
2.2 Our preferred approach, option six, is a regulated vehicle fuel economy standard. Are there anyfactors we may not be aware of that might influence this preference?
- The “point of import” needs to be precisely defined.
Is it at the time of Customs Entry, at time of Entry Certification, or at the time of first registration?
This definition is critical, because it will determine who is responsible for paying any penalties (or receiving any rebates).
- This option is an indirect mechanism, affecting only the supply of vehicles; it does not directly address, educate or motivate the end user, but would still have the eventual flow-on effect of affecting vehicle prices and availability. Consumers would be equally affected as by the Feebate proposal, but without understanding the reason for the reduced choices and increased prices.
- If Option 6 (Fuel Economy Standard) is to be effected using a Vehicle Levy scheme, (Implementation Option 2), the addition of rebates for vehicles that have fuel consumption characteristics better than the target would significantly improve this proposal, by reducing the costs and sending a clear message to purchasers that of such vehicles are environmentally preferable.
- The costs (and savings, if rebates provided for) would inevitably be passed on to the consumer, and would affect the price of vehicles; in this respect, despite its not being aimed directly at the consumer, this scheme would have little real difference from the Differential Registration scheme originally considered and not proceeded with.
- Any scheme that increases the cost of environmentally undesirable vehicles will inevitably cause pricing distortions in the fleet, asthey will be more expensive than similar vehicles already here.
2.3 The NZEECS sets a target for the average fuel economy of light vehicles entering the New Zealandfleet by 2015 to be 170g of CO2/km. We are proposing to base our standard on this target. Bearingin mind the current fleet average, for both new and used vehicles, is approximately 210g of CO2/km,is 170g of CO2/km by 2015 an appropriate level to be aiming for? If not, why not?
The IMVDA does not have technical expertise in this area, nor have we completed research into this issue, so we are not able to comment on the target that has already been set in the NZEECS.
We do, however, have the following questions:
- What data and statistics have been used to determine a current average of 210g of CO2/km?
- How was the target figure of 170g of CO2/km selected?
- What consideration has been given to the effectiveness of a “business as usual” approach, taking into account the technological improvements that will inevitably occur during the period?
2.4. The proposed standard for the years 2009 to 2011 is proposed to be 214g of CO2/km for vehicleswith a European test value, and 180g of CO2/km for vehicles with only a Japanese test value. Thisis based on the current average fuel economy for vehicles entering the fleet and estimating theaverage in 2009. What do you think is the most appropriate standard for the years 2009 to 2011?Why?
Once again, we have not conducted research into this issue, but based on our experience and knowledge of the vehicles that are likely to be imported during this period, we make the following comment:
Imported used vehicles should be able to achieve this target, as a result of:
- the modified product and model mix that will result from this proposal
- known technological improvements of the vehicles being imported (Appendix A),
provided thatany initiative is combined with public education and demand-side incentives.
2.5. We are proposing that the standard starts at the estimated actual average vehicle fuel economy in2009 and that it steps down three times to a standard of 170g of CO2/km by 2015. Are the proposed steps to 2015 set at reasonable and fair intervals? If not, why not?
We do not have the technical expertise or knowledge to be able to answer this question, but refer you to our comments in 2.4 above.
2.6. We are proposing that the standard should apply to all light vehicles i.e. vehicles of a gross vehiclemass of 3.5 tonnes or less, except for cycles, mopeds and motorcycles. What sorts of vehicles doyou believe the standard should apply to?
We recommend using specific vehicle classes rather than gross vehicle mass.
The vehicle classes should be the classes for Light Vehicles as defined in Land Transport’s Vehicle Compliance Rule, eg MA, MB, MC etc
Rationale: Vehicle classes would:
- provide a clear definition of vehicles that the standard applies to
- use already established class definitions
- eliminate confusion resulting from inaccuracies and discrepancies in vehicles’ gross masses
- eliminate the opportunity to game the system by adjusting the gross mass of vehicles to just over the gross mass limit (see article in appendix B)
2.7. What exemptions, if any, should apply?
We recommend that the following vehicles should be exempt from the requirements of the Rule:
- Special interest vehicles (as provided for in the Frontal impact Rule& amendments)
- Motorsport, specialist and military vehicles (as defined in the Exhaust Emissions Rule)
- Vehicles that are “VIN-exempt” (as defined in the Compliance Rule)
2.8. How do you suggest that we deal with vehicles that cannot provide a European or Japanese fueleconomy test value?
We recommend that the Rule provide default values or penalties, with the provision that an independent test be allowed to establish actual values.
2.9. We are proposing that full electric and plug-in hybrid vehicles be attributed a fuel economy value of75g of CO2/km. Given that full electric vehicles do not produce carbon emissions, other than from theelectricity generation, what do you consider is the appropriate fuel economy rating, in grams ofCO2/km, which we should attribute to these vehicles?
We have no technical knowledge or expertise in this area, but suggest that a nominal value based on electricity generation emissions values be ascribed.
2.10. Given that plug-in hybrid electric vehicles can be powered solely from a battery, what is theappropriate fuel economy rating (in grams of CO2/km) that we should attribute to these vehicles?
Once again, we have no specific expertise in this area, but we suggest that:
a nominal value, based on electricity generation emissions values, be ascribed, as for full electric vehicles. Although there is no way of knowing or controlling what mode the vehicle will be driven in, ascribing such a nominal value may provide an additional incentive for the purchase of such vehicles.
2.11. Given that biofuels produce less CO2 per kilometre than fossil fuels, and that the Government wishesto encourage biofuel compatibility, how should we treat publicly stated biofuel-compatible vehiclesfor the purposes of the proposed fuel economy standard?
Bio-fuel compatible vehicles should be treated the same as their non-compatible counterparts; the incentive for the use of biofuels should be incorporated into the pricing of the fuel itself.
Rationale:
- There is no way of knowing what fuel the vehicle will be operated on.
- Later generation biofuels will in all probability be compatible with the majority of vehicles, and there will be no need to differentiate between different vehicles’ respective biofuels compatibilities for fuel economy standard purposes.
- Appropriate pricing at the pump will be the factor that influences consumer choice of fuels.
2.12. What other implementation options should we consider?
See 2.1 above
2.13. What is your preferred implementation option and why?
See 2.1 above.
We do not support any of the proposed implementation options, but of them all, Option 2 (Vehicle Levy Scheme) is the least unacceptable.
Rationale:
a. Option 1 (Tradable Credits) would be unwieldy, difficult and expensive to administer, and could provide opportunities for gaming thesystem, without effectively providing the benefits expected.
b. Option 2(Vehicle Levy) is the most transparent and direct, and easily understandable. While not being aimed directly at the consumer, it would lead to large increases in the prices of some vehicles, and in effect would be similar to our Feebate proposal. This option could be materially improved by including rebates and financial incentives for better-than-target vehicles.
c. Option 3 (Industry Code of compliance) could be difficult to manage, with an uncertain outcome, depending on the number and sort of importers and distributors who were prepared to participate. If this option were to be implemented, there would still need to be another regulatory option as a default position for those importers who chose to not participate.
2.14. Under the tradable credit option, vehicles that fail to meet the standard would be banned from importunless the importer can show a requisite number of vehicles that meet the standard. Do you preferthis scenario or the penalty option? Why?
This scenario (of banning vehicles without the requisite number of credits) would be unworkable; it would require an unrealistic degree of accuracy and planning about the timing of shipments, orders, model mix management etc.
If it is intended that the credits be genuinely tradable, then importers need to be able to buy and sell credits on a secondary market, as well as have the option of paying a penalty if they are unable to purchase the necessary credits.
2.15. Do you believe the penalties or charges for each option are likely to be effective? If not, why? Whatwould an appropriate penalty or charge level be?
No comment.
We have not seen any research into the levels of penalty or charge that are needed to be able to change behaviour, and have no experience or expertise in this area.
2.16. If any additional Crown revenue does result from the implementation of any of the outlined schemes,how should this beused?
See our response in 2.1.a above;“any scheme should be revenue-neutral”.
Any Crown revenue resulting fromtheimplementationof any of the schemes should be redirected to accelerate the effectiveness of the scheme, in particular public education and information, and financial incentives to purchase environmentally desirable vehicles.
2.17. Some suggestions have been made that an additional incentive, rather than a penalty or charge,should apply in the vehicle fuel economy standard scheme. How could such an incentive workeffectively?
See our Feebate proposal in 2.1 above.
Any vehicle levy scheme should also provide rewards and incentives for those vehicles that are better than the stated target.
To quote John Ashton, the UK Foreign Secretary’s climate change spokesman:
“If you can make this into a politics of opportunity, you are winning; if it’s a politics of cost and burden sharing, you’re not”
2.18. Do you believe the industry compliance code is a workable option? If not, why not?
Unsure.
It may be workable, but in a limited fashion and with difficulty. See our answer in 2.13.c
2.19. How well do you think the proposed schemes will contribute to CO2 reductions?
We believe that none of the proposed schemes will have a significant effect on CO2 emissions unless the public is directly motivated to choose vehicles that are fuel efficient.
2.20. What other benefits, costs and influencing factors should we consider?
See our comments in 2.1.d above.
2.21. What would be the implications of the proposed schemes for you? Please state whether you are animporter, consumer or motor trader etc.