Paul Fletcher MP

Switch to desktop

Address to Federal Chamber of Automotive Industries AGM Annual Dinner

Portfolio Speeches Tuesday, 06 June 2017

I am very pleased to have the opportunity to speak to you tonight about your industry, which is undergoing extraordinary change.

The automotive sector is a very large part of our economy and culture. There are dealerships in every suburb and town across the nation.

The great majority of Australians own cars - there are more than 18 million registered motor vehicles in Australia, which constitutes almost 800 vehicles per 1,000 people. [1]

The automotive industry also employs large numbers, with more than 400,000 people employed directly and indirectly throughout Australia.[2]

However, the sector is undergoing extraordinary change. Domestic manufacturing will be winding up by the end of this year. The industry faces profound technological change, changes in business models and increasing environmental pressures.

These will have major implications for your sector, for our consumers, for our economy and society.

Today I want to touch on some of the major drivers of change, particularly technology-driven change.

I would also like to talk about what this change might mean for the consumer.

Finally, I will discuss some of the Turnbull Government’s policy responses to these forces of change.

 

Technology-driven change

There is currently a great deal of debate about the emergence of autonomous vehicles. Already many of the companies here tonight are selling cars in Australia with features like self-parking, traffic jam assist and lane change assist.

I had the opportunity to experience such technologies when I drove the very impressive new E-Class Mercedes two weeks ago at the Transport Infrastructure Council meeting in Brisbane.

It’s not hard to understand how the use of fully autonomous vehicles will rise strongly in closed, off-road environments, such as mining sites, campuses and private property.

Already, Australia is a leader in the use of automated vehicles on mining sites.

I saw another example recently on a visit to the Patricks stevedoring facility at Port Botany, where fully automated ‘autostrad’ devices move containers around the yard.

The software which controls them, was developed by the Australian Centre for Field Robotics at Sydney University.

Similarly, on a recent visit to Heathrow Airport, I was told that all airside vehicles would be automated by 2020.

When it comes to mass market vehicles operating on public roads, by 2020 several manufacturers expect to offer vehicles that can undertake all necessary driving functions under certain on-road conditions, but will need to hand back control to a human driver as soon as these conditions no longer apply.

Highly automated vehicles, which do not require human intervention when performing some types of driving, are expected by many analysts to be made commercially available in the period 2020-2030.

Reaching true ‘driverless’ capability, where the automated system is in control at all times and in all road environments, is a much more complex engineering problem -

especially because other vehicles on the road will still be human controlled. It is much less clear when such vehicles will become commercially available.

Let me dare to suggest that there has been a degree of ‘hype’ about automated vehicles: the 2016 Gartner Research Hype Cycle listed automated vehicles to be one of several technologies with ‘inflated expectations’.

What is clear is that even when the technology is perfected, it will take time for automated driving technology to penetrate throughout the vehicle fleet. One view comes from modelling commissioned by the Queensland Department of Transport and Main Roads: saturation of highly automated vehicles in the Australian fleet could occur roughly between 2050 and 2060.[3] Of course, other views see much more aggressive take up.

 

Growth of electric vehicles

A related trend is the growth of electric vehicles, which have an increasing presence in the Australian market.

Just last week the Electric Vehicle Council (EVC) was launched by Josh Frydenberg and me. The EVC’s website lists 13 electric vehicle models presently on sale in Australia, including the Nissan Leaf, the Mitsubishi Outlander PHEV, two models of Tesla, and several models from BMW, Mercedes and Volvo. There are also models available from other manufacturers, including several Toyota hybrid models.

Today electric vehicles make up approximately 0.1 per cent of Australia’s new vehicle sales[4], but according to consulting firm Advisian by 2035 there could be 4 million electric vehicles in Australia. [5]

 

A networked system

A third big trend is vehicles being networked, communicating wirelessly with each other, and with roadside infrastructure, and potentially with a centralised network control centre.

In turn this will create opportunities for the transport system to be more coordinated and controlled.

Just today, I met with GM Holden, who were telling me about their OnStar telematics product and I know that other manufacturers are delivering similar products.

If all vehicles are constantly communicating their location, then the options to manage the flow of traffic more efficiently are very substantial. Of course this requires a lot of processing power as well as a lot of communications technology. But it is another illustration of the way the motor car is changing fundamentally.

 

Implications for Consumers

What are the implications of these changes for consumers?

Better, safer transport outcomes

These changes promise better, safer transport outcomes for consumers. Today congestion is a growing problem on our roads: the social and economic costs of congestion are estimated to reach around $30 billion a year by 2030.[6]

Smart infrastructure, real-time travel information, new vehicle technologies and better use of data for planning and operations have the potential to make more efficient use of existing infrastructure.

According to some projections, driverless cars will free up substantial road capacity, for example by eliminating the 30 per cent of traffic in CBDs estimated to be circling looking for a parking space, and freeing up lanes presently used for parking.

Of course, other projections say demand for road capacity will rise, as vehicles will go from being used for one-hour every day to ten or more hours per day. At this stage, we do not really know.

The capacity of technology to make cars safer is even more profound. In Australia, the cost of road crashes to society has been estimated to be $27 billion annually, or 1.8 per cent of GDP (based on a willingness-to-pay methodology of valuing human life).[7]

International evidence indicates that human error may be a factor in more than 90 per cent of crashes, and that road user distraction or inattention is a contributory factor in around 10-30 per cent of road accidents.[8]

If more advanced automated technology reduces or eliminates human errors, as is generally expected, then benefits for road safety may be substantial. Real world data is already available on the safety impacts of lower levels of automation. For example, Electronic Stability Control can reduce crashes by typically 20 per cent. [9]

Australian research indicates that collision warnings from connected vehicle technology (known as Cooperative Intelligent Transport Systems or C-ITS) could prevent 25-35 per cent of serious crashes in Australia. [10]

More choice

Another implication of the forces of change sweeping across your sector is that consumers are getting even more choice.

Australians already have lots of choice when purchasing a new vehicle – some 67 brands sell over 350 models in Australia[11], a very large number given the size of our economy.

But the rapid rate of change is creating many new choices – electric versus internal combustion motors for example, increasing choices about the range of driver assist technology, and also increasing choices about the financial model under which consumers purchase personal transportation services.

Changes in ownership models

Today the model is well understood – the preferred way to obtain personal transportation services is to purchase a car.

But even today there is extensive use of other types of personal transportation services.

3.8 million Australians use taxi services; 54 per cent now use ride sharing services such as Uber, GoGet, GoCatch, and others; and 28 per cent prefer ride sharing services almost exclusively. [12]

But some predict there is big change coming. On some predictions, in the future many of us will not choose to own a vehicle; instead we will order a driverless vehicle up on our smart phone to take us where we want to go, we will pay for the single trip, and once the trip is completed it will move off to service someone else.

Interestingly when I met with GoGet recently – a fascinating and impressive Australian business – their view is that these predictions underestimate the challenges in providing mobility on this basis. While they see plenty of growth for their model, they do not see it replacing individual car ownership any time soon.

But clearly one scenario is that existing ride-sharing and taxi models adopt automated vehicles as the technology becomes viable, and potentially their market share increases if consumers find the experience to be smooth and efficient.

Now another scenario is that automated vehicles offer private owners options they do not have today: taking your children to school for example without you having to drive them. Alternatively a two hour commute might seem much more feasible if you can use the time to read, or sleep, or work, rather than having to concentrate on the road.

Around the world many different business models are being trialled. General Motors has invested $500 million in the ride sharing company Lyft. The stated goal is to experiment in autonomous on-demand vehicles and position General Motors as the preferred vehicle provider for Lyft drivers and integrate connectivity tools like OnStar.[13]

Car2go, owned by Daimler, is a point-to-point car sharing service operating in 15 North American cities, charged at a rate of 41 cents a minute.

BMW’s ReachNow operates in Seattle, Portland and Brooklyn. ReachNow has a fleet of 700 vehicles in Seattle, 360 in Portland and 260 in Brooklyn. A pilot ride sharing program called Ride, was launched in Seattle on 8 December 2016 as an alternative to Uber and Lyft.

Volvo has operated its car sharing service, Sunfleet, in Sweden since 1998. It currently operates in 50 Swedish cities with 50,000 subscribers and a fleet of 1,200. On 12 January 2017 Volvo announced it will create a car sharing business unit with the aim of expanding Sunfleet globally.

Consumer decisions will be key

The key point to make here is that ultimately the take up of new technology will depend on consumer choices.

One interesting comparison point is the way that mobile phones were taken up in Australia and around the world. In June 1996 there were 2.6 million mobile services[14], while today there are well over 30 million mobile services in operation[15] - a ten-fold increase in twenty years – and today many people do not have a fixed line phone.

If we see the same rate of take up of automated vehicles, for example, then the predictions from the Queensland Department of Transport and Main Roads I cited earlier could be far too conservative.

The same point applies to the rate of take up of electric vehicles. There is one other point, which is obvious to people who sell cars for a living but is not always so obvious to governments. That is the importance of price.

While electric vehicles and automated vehicles cost a lot more than conventional cars, that will constrain their take up. But if the technology can be proven and the price drops, then we could see take up surge.

 

Turnbull Government’s Policy Agenda

The Turnbull Government has an extensive policy agenda in response to many of these forces of change.

Reforms to MVSA

An important part of our agenda are changes to the Motor Vehicle Standards Act 1989. These will bring lower regulatory compliance costs, by aligning Australian rules more closely with international vehicle standards. This will reduce regulatory costs for manufacturers while maintaining high standards for vehicle safety and environmental performance.

The proposed changes follow an extensive consultation process undertaken as part of the review announced in 2014.  Legislation to implement the changes will be introduced into Parliament later this year.

Automated vehicle agenda

The government is also preparing for the emergence of autonomous vehicles. In late 2016, the Transport and Infrastructure Council tasked the National Transport Commission (NTC) with delivering a phased automated vehicle regulatory reform program. This work followed a 12-month investigation into potential regulatory barriers.

Current NTC projects include:

  1. developing national guidelines for trialling automated vehicles
  2. clarifying legal issues around control of automated vehicles
  3. developing a performance-based safety assurance regime for the commercial deployment of automated vehicles.

Austroads, the peak organisation of Australasian road transport and traffic agencies, has established a Connected and Automated Vehicle Program focusing on the operational impacts of automated vehicles.

This includes projects on vehicle registration, driver licencing and third party insurance issues, physical and digital infrastructure requirements such as signs and lines, communications infrastructure and operational implications.

A key issue for Australia is how we can take advantage of the opportunities presented by the emergence of autonomous technologies on the production side of the sector.

There are certainly some impressive companies and organisations at work in this space.

I recently had the opportunity to visit Cohda Wireless, an Adelaide-based firm that specialises in
vehicle communication technology, which is essential for autonomous vehicles.

The Turnbull Government, through the Department of Industry, Innovation and Science, has also provided $55 million over 10 years to the iMove Cooperative Research Centre, which will explore digital and evolving vehicle technologies.

Another impressive business is Baraja, based in West Linfield in my electorate. They recently secured a $1 million Accelerating Commercialisation grant in order to assist in developing an improved LIDAR sensing device. This is a critical component in automated vehicles.

Ministerial Emissions Taskforce

The Government has established a Ministerial Forum, to coordinate a whole-of-government approach to reducing emissions from the road transport sector.

This work is exploring three interrelated issues:

  1. Noxious emissions, and whether we should move to the more stringent Euro 6 standard
  2. Fuel quality standards
  3. CO2 Emissions from light vehicles.

In 2015-16, domestic transport was the third largest energy user in Australia and contributed to around 18 per cent of Australia’s CO2 emissions.

The Forum will make recommendations to Government later this year on whether to adopt fuel efficiency standards.

Many transport technologies that provide efficiency benefits also have flow on environmental benefits because shorter trips and free flowing traffic imply fuel savings and emission reductions.

Driver assistance systems can be programmed to provide information on environmental performance, for example on optimal gear selection.

Greater uptake of low and zero emission vehicles, shared mobility and active travel options would also have significant environmental benefits.

Road Funding

Lastly, I want to touch on the question of how we fund and pay for our roads.

Total government road related expenditure has risen from $15.2 billion in 2005-06 to $24.8 billion in 2013-14 (adjusted by CPI, constant 2013-14 prices). 

We rely heavily on fuel excise revenues to contribute towards this expenditure, but this revenue stream is under increasing pressure, as vehicles become more fuel-efficient and as electric vehicles increase their presence in the fleet.

However, many complex issues need to be explored and worked through before governments – Commonwealth, state and territory – could make a decision to introduce a direct road user charging system.

Late last year the Turnbull Government, as part of our response to the 15-year Infrastructure Australia Plan, said that we would appoint an eminent Australian to conduct a study into the benefits and impacts of road user charging for light vehicles.

We’ll have more to say on this in coming months.

As I have said before, any move to direct road user charging would be a ten to fifteen-year journey, and would only go ahead if governments were satisfied that such a system would deliver better roads and a fairer system.

 

Conclusion

Yours is a vital sector and one that is facing a high degree of change and disruption. Private companies are adapting - dynamically offering products and services that have potential benefits for consumers. I look forward to working with your sector as we advance the policy measures the Turnbull Government is pursuing.

 


[1] ABS Motor Vehicle Census 2016 http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/9309.0Main+Features131%20Jan%202016?OpenDocument

[2] FCAI https://www.fcai.com.au/library/publication/fcai6049_full_version_final_(2).pdf

[3] TransPosition. (2016). Conceptual sensitivity modelling and analysis on the introduction of autonomous vehicles, prepared for Department of Transport and Main Roads, unpublished, cited with permission.

[4]  FCAI 2015. FCAI Response to the Independent Review of the Fuel Quality Standards Act 2000 Issues Paper. Canberra, Australia: Federal Chamber of Automotive Industries

[5] http://www.adelaidenow.com.au/news/south-australia/owners-of-electric-cars-should-rely-on-household-solar-systems-to-power-their-vehicles/news-story/49535cad4b01e79e5ef7207b1321edf8

[6] (BITRE 2015). Traffic and congestion cost trends for Australian capital cities, Information Sheet 74. Canberra. Retrieved from https://bitre.gov.au/publications/2015/files/is_074.pdf

[7] National Road Safety Strategy 2011-2020 Implementation status report. http://roadsafety.gov.au/performance/files/NRSS_Implementation_report_Nov2016.pdf and

Impact of road trauma and measures to improve outcomes (Report 140)https://bitre.gov.au/publications/2014/files/report_140.pdf. P28

[8] Singh, S. (2015). Critical Reasons for Crashes Investigated in the National Motor Vehicle Crash Causation Survey. Washington DC: National Center for Statistics and Analysis. https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/812115 and Transport Research Laboratory, the Netherlands Organisation for applied scientific research (TNO) and Rapp Trans. (2015). Study on good practices for reducing road safety risks caused by road user distractions. Brussels: European Commission.

[9] Thomas, P. (2014). Driverless vehicles: from technology to policy. London: PACTS Conference Report, Parliamentary Advisory Council for Transport Safety. http://www.pacts.org.uk/wp-content/uploads/sites/2/Pete-Thomas-Conference-Report.pdf and

Bureau of Infrastructure, Transport and Regional Economics. (2014b). Impact of road trauma and measures to improve outcomes (Report 140). Canberra. Retrieved from https://bitre.gov.au/publications/2014/files/report_140.pdf

[10] Austroads. (2011). Evaluation of the Potential Safety Benefits of Collision Avoidance Technologies Through Vehicle to Vehicle Dedicated Short Range Communications (DSRC) in Australia. Reference number: AP-R375-11 https://www.onlinepublications.austroads.com.au/items/AP-R375-11

[11] FCAI https://www.fcai.com.au/specification

[12] http://www.nielsen.com/nz/en/insights/news/2016/sharing-economy-alive-and-well.html

[13] https://www.bloomberg.com/news/articles/2016-01-04/gm-invests-500-million-in-lyft-to-bolster-alliance-against-uber

[14] AMTA, ‘Ten Years of GSM in Australia’

[15] ACMA Communications Report 2012-13 - http://www.acma.gov.au/~/media/Research%20and%20Analysis/Publication/Comms%20Report%202012%2013/PDF/ACMA%20Communications%20report%20201213_WEB%20pdf.pdf

Authorised by Paul Fletcher MP, Level 2, 280 Pacific Highway Lindfield NSW 2070.

Top Desktop version