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Corporate welfare for the car industry

#1 User is offline   Bam 

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Posted 12 January 2012 - 05:47 PM

It seems that there is a disagreement within the Coalition about the future of car subsidies.

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Two Liberal frontbenchers are urging the Coalition to rethink its plan to reduce federal subsidies worth more than $3 billion to Australia's car manufacturing industry.

But other opposition MPs are deeply uncomfortable with that, arguing the industry must be weaned off an addiction to taxpayer handouts.

The car industry receives about 3 billion dollars a year in subsidies to create about 50,000 jobs. The trouble with these subsidies is that they are given on very generous terms, with little accountability.

Why not just introduce a bit of quid pro quo into the subsidies, instead of just handing out the quid without any quo? If the car makers had to cough up 50 cents of equity such as shares into the Future Fund for every dollar of subsidy, what would happen? Would we end up with an Australian-owned car manufacturer rather than being beholden to foreign-owned interests?
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#2 User is offline   icey 

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Posted 12 January 2012 - 06:24 PM

View PostBam, on 12 January 2012 - 05:47 PM, said:

It seems that there is a disagreement within the Coalition about the future of car subsidies.

The car industry receives about 3 billion dollars a year in subsidies to create about 50,000 jobs. The trouble with these subsidies is that they are given on very generous terms, with little accountability.

Why not just introduce a bit of quid pro quo into the subsidies, instead of just handing out the quid without any quo? If the car makers had to cough up 50 cents of equity such as shares into the Future Fund for every dollar of subsidy, what would happen? Would we end up with an Australian-owned car manufacturer rather than being beholden to foreign-owned interests?


Don't know how to fully cost it (or try to cost it), but on the face of it, employment bangs for buck just don't seem to be there. Your future fund idea is in effect as simple to the company bottom line as cutting the subsidy in two with appeal for taxpayers rather than shareholders.

No one wants to see jobs lost, but in these apparently wise free market times, why pour money down the drain? Ditto with subsidising unviable eco-babble cars.
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#3 User is offline   HDMC 

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Posted 13 January 2012 - 07:01 AM

View Posticey, on 12 January 2012 - 06:24 PM, said:

Ditto with subsidising unviable eco-babble cars.


Could you be more specific, Icey?

If by eco-babble you mean environmentally friendly, I would have thought that's exactly where subsidies should be targetted.


And I'm sure your direct action hero would agree. (Depending on his audience on any given day, of course.)
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#4 User is offline   scotto 

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Posted 13 January 2012 - 07:29 AM

View PostBam, on 12 January 2012 - 05:47 PM, said:

The car industry receives about 3 billion dollars a year in subsidies to create about 50,000 jobs. The trouble with these subsidies is that they are given on very generous terms, with little accountability.

Apparently this level of subsidy, tariff protection, or "co-investment" is the norm in many countries - Russia, China and India have been cited as having tariff protections of up to 50% for their car industry. Seems like the old-world madness still prevails in many areas. If these tariffs didn't exist and we dropped our luxury car tax, we'd be able to drive around in thoroughly decent Audis, Mercs and so on at a much more reasonable cost.
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#5 User is offline   Amber Dekstris 

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Posted 13 January 2012 - 09:21 AM

I don't mind if any manufacturers in this country are given a little assistance if they genuinely need it -- secondary industry is very important. I do agree, though, that it shouldn't be carte blanche. I'd like to see something in return.
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#6 User is offline   Bam 

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Posted 13 January 2012 - 10:25 AM

View Posticey, on 12 January 2012 - 06:24 PM, said:

Ditto with subsidising unviable eco-babble cars.

Sooner or later, petrol-powered cars will be unviable in their current form because the cost of fuel will make them too expensive to run. We need to develop alternatives for the future where oil is no longer cheap and plentiful.
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#7 User is offline   icey 

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Posted 13 January 2012 - 11:34 AM

View PostBam, on 13 January 2012 - 10:25 AM, said:

Sooner or later, petrol-powered cars will be unviable in their current form because the cost of fuel will make them too expensive to run. We need to develop alternatives for the future where oil is no longer cheap and plentiful.


All in good time as I've said elsewhere. Compare the typical fuel consumption of today's cars with 20 or 30 years ago. Without subsidies, fuel efficient vehicles are naturally more popular as fuel prices rise.

Manufacturer's have a natural incentive to offer the discerning public more cars with excellent fuel efficiency. Or lie to the public about excellent fuel efficiency of their hybrid cars.

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Peters claimed the car never came close to the 50 miles per gallon (21.26 kilometers per liter) promised and that it got no more than 30 miles per gallon (12.75 kilometers per liter) when the battery began deteriorating. She still owns the car and wants to be compensated for money lost on gas, as well as punitive damages, amounting to $10,000. Peters, a former lawyer, took the unique action of opting out of the class-action lawsuit involving thousands of hybrid Honda owners. She has said that if all owners of the problem cars won in small-claims court, it could cost Honda $2 billion.


Update: Los Angeles Court Seeks More Info in Honda Hybrid Suit

January 25 could be interesting.
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#8 User is offline   scotto 

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Posted 13 January 2012 - 02:28 PM

View PostAmber Dekstris, on 13 January 2012 - 09:21 AM, said:

I don't mind if any manufacturers in this country are given a little assistance if they genuinely need it -- secondary industry is very important. I do agree, though, that it shouldn't be carte blanche. I'd like to see something in return.

There's an interesting bachgrounder about this on the ABC Drum site this afternoon. Settle, Icey.

It seems that perhaps the world collectively is not paying the real price for cars - or rather, our governments are paying the price while we merrily keep buying the cars. Consider also the subsidies to the car industry in the form of roadbuilding in cities - without these cars would be a much less attractive proposition.
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#9 User is offline   icey 

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Posted 13 January 2012 - 03:00 PM

View Postscotto, on 13 January 2012 - 02:28 PM, said:

There's an interesting bachgrounder about this on the ABC Drum site this afternoon. Settle, Icey.

It seems that perhaps the world collectively is not paying the real price for cars - or rather, our governments are paying the price while we merrily keep buying the cars. Consider also the subsidies to the car industry in the form of roadbuilding in cities - without these cars would be a much less attractive proposition.


Road building is a subsidy for car manufacturers? As are hospitals for doctors, or coal-fired power stations for the manufacturers of TV's.

Look up symbiotic and the pull the other one scotto!
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#10 User is offline   Bam 

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Posted 14 January 2012 - 09:15 AM

View Posticey, on 13 January 2012 - 03:00 PM, said:

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Consider also the subsidies to the car industry in the form of roadbuilding in cities - without these cars would be a much less attractive proposition.

Road building is a subsidy for car manufacturers? As are hospitals for doctors, or coal-fired power stations for the manufacturers of TV's.

Look up symbiotic and the pull the other one scotto!

Your examples don't really give Scotto's point much consideration. While Scotto's point is a bit of a long bow to draw, it's not without merit. Many of our suburbs are designed around car-centric 1950's ideals where car ownership was desirable and petrol was cheap. It's not the 1950's anymore and we are paying the price in suburban sprawl, lengthy commutes and constant traffic congestion.

It doesn't have to be this way.

It is not difficult to design new suburbs with good access to public transport, bicycle paths and pedestrian access. Such design makes it unnecessary to own a car, or makes it possible to make fewer trips in a car thus prolonging its life and necessitating fewer replacements for that vehicle.

Right now, you're probably indulging in your usual skepticism on anything remotely green-tinged, mumbling something about greenie experiments doomed to failure. So you may want to find out how the residents of Vauban, Germany feel about their almost totally carless suburb. While it's not necessary to go to the extremes of the Vauban design, it's not hard to design suburbs where car ownership is not a necessity.
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#11 User is offline   Trogdor 

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Posted 15 January 2012 - 02:18 PM

View PostBam, on 12 January 2012 - 05:47 PM, said:

It seems that there is a disagreement within the Coalition about the future of car subsidies.

The car industry receives about 3 billion dollars a year in subsidies to create about 50,000 jobs. The trouble with these subsidies is that they are given on very generous terms, with little accountability.


Bam, it isn't 3 billion over 1 year - it's 3 billion over TEN years

In other words, a whole lot less than subsidies to the mining industry, farmers, child care centres, developers and real estate agents, just to name a few.

And unlike much of those I noted, the car subsidy requires co-investment, and in many cases (like Mitsubishi) can be forcibly refunded if conditions aren't met.
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#12 User is offline   Trogdor 

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Posted 15 January 2012 - 02:27 PM

View Posticey, on 13 January 2012 - 11:34 AM, said:

Manufacturer's have a natural incentive to offer the discerning public more cars with excellent fuel efficiency. Or lie to the public about excellent fuel efficiency of their hybrid cars.

Update: Los Angeles Court Seeks More Info in Honda Hybrid Suit


That's because governments have a madatory fuel efficiency measure to allow comparison between cars, and some cars do better in those tests (relatively speaking) than others. Some cars do very badly in stop-start running but well on freeway runs. Some economy cars rely partially on their drivers being sensible to meet their economy figures.

It's these variations that allowed Holden to win a fuel economy race with a 6.2L V8 in the UK, and led Top Gear to proclaim that a BMW M3 sports car was more fuel efficient than a Prius.
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#13 User is offline   Trogdor 

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Posted 15 January 2012 - 02:35 PM

View Postscotto, on 13 January 2012 - 07:29 AM, said:

If these tariffs didn't exist and we dropped our luxury car tax, we'd be able to drive around in thoroughly decent Audis, Mercs and so on at a much more reasonable cost.


FIFY

Shutting down the Australian car industry won't decrease prices. Getting rid of the car envy tax would.

The botton end of the market here isn't much different to other countries (US excepted). Luxury prices are high here because of the envy tax and because people (to some extent) are happy to pay them. Having no Commodores won't make an E-Class cheaper.
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#14 User is offline   GeorgeParsons 

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Posted 15 January 2012 - 03:42 PM

Trog: This is a small market in which it is impossible to get economies of scale. The size of the market limits division of labour and technological innovation. Forget governments this is about the primacy of economics.
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#15 User is offline   scotto 

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Posted 16 January 2012 - 07:32 AM

View PostTrogdor, on 15 January 2012 - 02:35 PM, said:

The botton end of the market here isn't much different to other countries (US excepted). Luxury prices are high here because of the envy tax and because people (to some extent) are happy to pay them. Having no Commodores won't make an E-Class cheaper.

Well, I wasn't stating we should 'shut down' the industry. I was saying perhaps we, as in the whole world, perhaps should rethink the massive subsidies and protections given to car manufacturing.

In Austalia the 'co-investment' cold re rerouted towards reneable energy and other basic research. Perhaps this should be seen as part of the move towards lessing carbon emissions?

I was saying we whould can the luxury tax, which would indeed drop the price of a lot of cars.

So, I guess we might see lower end prices rise [analogous to a ETS effect], and upper end prices fall, in some cases dramaticallly.
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#16 User is offline   Bam 

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Posted 16 January 2012 - 07:41 AM

View PostTrogdor, on 15 January 2012 - 02:18 PM, said:

Bam, it isn't 3 billion over 1 year - it's 3 billion over TEN years

Thanks for the clarification. It didn't sound right to me.

Quote

In other words, a whole lot less than subsidies to the mining industry, farmers, child care centres, developers and real estate agents, just to name a few.

And unlike much of those I noted, the car subsidy requires co-investment, and in many cases (like Mitsubishi) can be forcibly refunded if conditions aren't met.

It's still free money tho. Money given away to foreign-owned corporations with no equity received in return. With the money given to GM Holden over the years, we could have bought the whole company several times by now.

If you want to discuss subsidies to "the mining industry, farmers, child care centres, developers and real estate agents", perhaps you may want to create a separate thread to discuss these?
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#17 User is offline   Bam 

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Posted 16 January 2012 - 07:55 AM

View PostTrogdor, on 15 January 2012 - 02:27 PM, said:

That's because governments have a madatory fuel efficiency measure to allow comparison between cars, and some cars do better in those tests (relatively speaking) than others. Some cars do very badly in stop-start running but well on freeway runs.

Pretty much anything that uses a petrol or diesel engine in a standard (non-hybrid) configuration is going to do badly in stop-start running. It's wasteful to burn fuel just so an engine can idle.

I might be going out on a limb a bit here, but I think a hybrid vehicle with a steam engine instead of a petrol engine would work surprisingly well. Steam-powered cars provided quite decent competition for petrol-engined cars until the early 1930's when the self-starter was invented. However, it's unlikely that such a vehicle would receive subsidies because a vehicle that can run on anything that burns is not likely to be popular with governments. It can run on untaxed fuels!

Electric cars are another option that will start being viable in about five years when certain electric car patents expire that are currently being held and suppressed by the oil industry.
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#18 User is offline   scotto 

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Posted 16 January 2012 - 10:20 AM

View PostBam, on 16 January 2012 - 07:55 AM, said:

I might be going out on a limb a bit here, but I think a hybrid vehicle with a steam engine instead of a petrol engine would work surprisingly well.


you might be on to something here... of course the fuel source is the key question.... but maybe recycled paper briquettes? Cheap to make and easily available.... but then of course the question in one of efficiency adn emissions, as always.
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#19 User is offline   Bam 

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Posted 16 January 2012 - 10:48 AM

View Postscotto, on 16 January 2012 - 10:20 AM, said:

you might be on to something here... of course the fuel source is the key question.... but maybe recycled paper briquettes? Cheap to make and easily available.... but then of course the question in one of efficiency adn emissions, as always.

I think you're assuming that steam engines must use solid fuel. If so, that is incorrect. Steam engines can use any fuel source that provides heat - petrol, diesel, biodiesel, natural gas, alcohol, etc. Nuclear power plants are essentially giant steam engines using the heat from nuclear fission to drive a steam turbine.

Most potential sources of fuel for an automotive steam engine are not taxed. The inability to tax all possible fuels is an impediment to the reintroduction of any kind of steam-powered car to the market. Governments all over the world are addicted to fuel taxes and many jurisdictions have laws that make it an offence to run a vehicle using fuel that has not been taxed. In Australia, if you make your own fuel for an automotive application, you are supposed to pay 38.145 cents a litre in excise.

It's why an odometer tax may be considered in the future as a replacement for fuel taxes. Maybe ten to twenty years from now foreign jurisdictions may start considering it as a way to overcome the challenge of a more diverse range of automotive fuels including homemade fuels made from waste products.

As for steam-powered vehicles, a steam-powered truck or bus would be an interesting alternative to the diesel engines that are currently the propulsion of choice. Imagine a heavy truck that has three positions on the gear selector: forward, neutral and reverse, instead of the dozen or more gears that are currently the norm. Steam-powered vehicles do not need a gearbox.
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#20 User is offline   icey 

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Posted 16 January 2012 - 11:08 AM

View PostBam, on 16 January 2012 - 10:48 AM, said:

As for steam-powered vehicles, a steam-powered truck or bus would be an interesting alternative to the diesel engines that are currently the propulsion of choice. Imagine a heavy truck that has three positions on the gear selector: forward, neutral and reverse, instead of the dozen or more gears that are currently the norm. Steam-powered vehicles do not need a gearbox.


Forget dealing with emissions, how's it going to comply with ADR's and their overseas equivalent? I remember reading an account of Howard Hugh's attempt to build a ludicrously expensive and highly spec'd steam car. The story went that it performed magnificently until Howard heard what would happen in a collision.
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