Motor vehicle tariff

The tariff rate on imported motor vehicles is projected to remain at 5.0% through 2026. Tariffs are set through government legislation and are typically determined several years in advance, limiting short-term policy volatility. The 5.0% rate applies only to imports from countries without a free trade agreement (FTA) with Australia. In contrast, FTAs with major trading partners, including Japan, South Korea, Thailand, the United States, India and the United Kingdom, reduce tariffs on many passenger vehicle imports to zero. As Australia's primary vehicle import sources are heavily covered by FTAs, the effective average tariff paid across all vehicle imports is well below the headline 5.0% rate. This has reduced landed vehicle costs for wholesalers and retailers, intensifying price competition in the domestic market. Tariff exposure has declined over recent years due to concessions for low-emission vehicles. Customs duty on electric vehicles, hydrogen fuel cell vehicles and eligible plug-in hybrid vehicles priced below the fuel-efficient luxury car tax threshold was abolished as of 1 July 2022. However, from 1 April 2025, plug-in hybrid vehicles no longer qualify for this exemption, modestly increasing tariff incidence on parts of the electrified vehicle segment while leaving battery electric vehicles unaffected.

The motor vehicle tariff has fallen sharply from 57.5% in the early 1980s, reflecting successive competition reforms and a broader shift towards market liberalisation. After remaining steady at 10.0% between 2005 and 2009, the tariff was reduced to 5.0% in 2010, aligning motor vehicle import taxation with the general tariff rate applied across the manufacturing sector. The long-term erosion of tariff protection materially weakened the competitiveness of Australia's domestic vehicle manufacturing industry. Manufacturers in countries like Japan, South Korea and Thailand benefit from substantially larger economies of scale by supplying high volumes to global markets, enabling lower unit costs and more competitive pricing than Australian-based producers could sustain. These disadvantages contributed to the exit of domestic manufacturers, with Ford ceasing Australian production in October 2016, followed by Toyota and GM Holden closing local manufacturing operations in October 2017.