FEDERAL CHAMBER OF AUTOMOTIVE INDUSTRIES

Tm Reardon: Director Government PolicyGlobal Fuel Economy Initiative2 March 2011

BAD DATA = BAD POLICY

GOOD DATA = GOOD POLICY

SOURCE: SAPERE RESEARCH GROUP

FLAWED INTERNATIONAL COMPARISONS

INTERNATIONAL COMPARISONS2009 CO2 Outcomes:

• UK= 149 Grams of CO2/km

• Australia 219 Grams of CO2/km

• Adjusted for:• Market Segment: 199 Grams CO2• Fuel Type: 175 Grams of CO2• Vehicle Size: 156 Grams of CO2• Other factors:

• Auto Transmissions• Fuel Quality

AUSTRALIAN POLICY FRAMEWORK24 July 2010, Election Commitment:

• Mandatory CO2 Target.

27 January 2011, PM announced:• Abolition of the CCR.• Capping of the LPG Vehicle Scheme.• Abolition of the GCIF.

24 February 2011, PM announced:• A carbon price from 1 July 2012.• Transportation fuels incorporated.

Reducing CO2 Emissions from Motor

Vehicles

Vehicle CO2 Emissions Standard

Green Car Innovation Fund

Fuel Excise

Luxury Car Tax

Congestion Pricing

Fringe Benefits Tax

MOTOR VEHICLE CO2 EMISSIONS: POLICY ELEMENTS

Carbon Price (ETS, Carbon tax)

BELT OR BRACES

Carbon Price Vs Carbon Standard:

• A carbon price can efficiently determine the least cost method of emissions abatement.

• Secondary emission strategies, such as Mandatory Standards, assume that a reduction of one tonne of C02 from a passenger motor vehicle is more important than a reduction of one tonne of C02 from any other sector of the economy.

NEW VEHICLE FUEL EFFICIENCY

1. History of PMV CO2 Emissions2. Forecast CO2 Emissions3. CO2 Price and/or CO2 Standard4. Design Options for a Standard5. Taxation Issues

NAFC/NACE TARGETS

1983 = 9.5 Litres/100km1990 = 9.0 Litres/100km2000 = 8.2 Litres/100km20?? = 6.8 Litres/100km2010 = 222 Grams of CO2

FUEL CONSUMPTION TARGETS AND RESULTS (PETROL PASSENGER ONLY

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

6

6.5

7

7.5

8

8.5

9

9.5

10

10.5

11

Litre

s pe

r 100

km

8.2 l/100km

9.0 l/100km

9.5 l/100km

NATIONAL AVERAGE FUEL CONSUMPTION 2010 TARGET

2010 Target = 222 grams of CO2• All Fuel Types.• All vehicles under 3.5 tonne.• 2010 outcome = 212.6 grams

of CO2.

HISTORICAL FUEL CONSUMPTION AND CO2 EMISSIONS

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

20106

7

8

9

10

11

12

200

220

240

260

280

300

320

340

Average Fuel Consumption: Petrol Passenger

Average CO2: All Fuel Types

Litr

es/1

00km

Gra

ms

CO2/

km

CHANGE IN NACE: SEGMENT CHANGE VS VEHICLE TECHNOLOGY (INCLUDING FUEL)

2007 2008 2009 20100.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0G

ram

s CO

2/KM

MARKET SEGMENTS BY MARKET SHARE

Total Passenger Total SUV Total LCV0%

10%

20%

30%

40%

50%

60%

70%

2006 2007 2008 2009 2010

VEHICLE TYPE BY MARKET SHARE

Light

Small

Medium Lar

ge

Upper

Large

People

Movers

Sports

SUV Com

pact

SUV Med

ium

SUV La

rge

SUV Lu

xury

0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010

FUEL TYPES BY MARKET SHARE

Petrol Diesel Hybrid0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2006 2007 2008 2009 2010

TARGET ACHIEVED, WHAT NEXT?

July 2010: • Mandatory NACE Target• 2015 = 190 grams of CO2• 2024 = 155 grams of CO2

TECHNOLOGY DERIVED EMISSIONS SAVINGS

2.9%

1.3%

0.5%

2.5%

0.8%

2.0%

1.0%

1.7%

1.0%

0.8%0.8%

1.3%

0.8%

2.0%

1.0%

0.4%

1.7%

0.1%

0.3%

0.0%

1.0%

0.0%0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2008-2015 2008-2020

MARKET SEGMENT CHANGES

0.0%

11.5%

5.7%3.7%

1.4%

6.8%

14.2%

56.7%

0.0%0.5%

10.8%

6.1%

13.8%

1.3%3.0%

6.0%

13.2%

45.3%

3.0%

11.2%

6.4%

14.4%

1.3%

7.0%

11.8%

39.3%

5.6%

0%

10%

20%

30%

40%

50%

60%

2008 2015 2020

EFFICIENCY GAINS V MASS INCREASES

1%

-0.7%

Technology improvements:• Lightweighting• Aerodynamics• Reduced mechanical friction• Low friction tyres

Weight gains• Safety• Emissions• Noise• Quality• Comfort

PROJECTED CO2 EMISSIONS: NACE

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020150

160

170

180

190

200

210

220

230

202.1 (9.1%)

189.4 (14.8%)

222.4

194.6 (12.5%)

176.1 (20.8%)

No change in market segments Applying market segment projections

CO2 TARGETS: ECONOMY WIDE TARGETSAustralian Government target of 5% to 25% reduction in CO2 emissions by 2020 based on 2000 levels.

• 2000 = 260 g/CO2

25% reduction

• 2020 = 195 g/CO2

CO2 EMISSIONS COMPARISON: EUROPE AND AUSTRALIA

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201670

75

80

85

90

95

100

105

European % CO2 Reduction

Australian % CO2 Reduction

FLEXIBILITIES

• Credits for:1. Low emission vehicles2. Eco-technologies3. Alternative fuels

• Phase-In from 2015

• Averaging and Pooling

• Make Good Provision (Banking/Borrowing)

OPTIONS FOR BURDEN SHARING

1. Industry Target.

2. Vehicle based approach: Standard set which vehicle must achieve in order to enter the Australian market.

3. Corporate Average: Each brand provided a target CACE:• All brands to achieve 195 grams.• Uniform Percentage Reduction.• Parameter based target.

UNIFORM PERCENTAGE REDUCTION

0.5 1 1.5 2 2.5 3 3.5180

200

220

240

260

280

300

2005200620092015 (2005 base)2015 (2006 base)

Gra

ms

CO2

Ford

Jaguar

Kia

CORPORATE SPECIFIC MASS TARGET

800 1300 1800 2300 2800 330080

130

180

230

280

330

380

430

480

Mass Kgs

CO2

gram

s/km

29

Reducing CO2 emissions – – integrated approach

An integrated approach

Delivering majority of new car CO2 reductions

Sustainable productionReducing congestion

Influencing demand in a harmonised way

FBT: KILOMETRES TRAVELED

FBT: REVENUE ESTIMATES

LUXURY CAR TAX: INCREASING INCIDENCE

1979 2003 2007 2010

2.5

6.58 9

16.518.5 19

27

2.5

911

14

Passenger Cars SUV's Total PMV & SUV

AUSTRALIA’S TOP SELLING LUXURY CARS

Rank Model Group Sales 1 Toyota Prado 15,4232 Toyota Landcruiser Wagon 7,2733 Holden Commodore 6,7494 Mercedes-Benz C-Class 6,6585 Mitsubishi Pajero 5,0656 BMW 3 Series 4,9437 BMW X5 3,1058 Toyota Kluger 2,7319 Audi A4 2,65210 Mercedes-Benz M-Class 2,589

CORPORATE SPECIFIC MASS TARGET

800 1300 1800 2300 2800 330080

130

180

230

280

330

380

430

480

Mass Kgs

CO2

gram

s/km

CO2 STANDARD : SUMMARY

1. Developed Co-operatively with Industry.2. Based on reliable data.3. Recognition of Non-test cycle

technologies:• Alternative Fuels.• GSI, TPM, Air-con gases, Etc.• Incentives for emerging technologies.

4. Realistic target consistent with economy wide objectives.

FEDERAL CHAMBER OF AUTOMOTIVE INDUSTRIES

Global Fuel Economy Initiative2 March 2011