In 15 years of economic reform, one of the world's smallest markets has exchanged a dozen tariff-protected car plants for some of the cheapest cars in the world. Dave Moore reports from New Zealand.

With the same land area as Britain, a 20th of its population, petrol and diesel at $NZ1.15 ($US0.46) and NZ84 cents a litre ($US0.33), and meaningful public transport found only in its capital Wellington, New Zealand relies upon and loves the motor car.

Successive governments' free-market policies have given new and used cars some of the lowest prices anywhere, and New Zealand is consequently fast becoming the world's most motorised country.

It's a sea-change. Once, securing a new car required overseas funds, friends in the industry, independent wealth - or all three. Tariff removal, deregulation of vehicle imports and the factoring of vehicles previously owned overseas, principally Japan, into annual sales, has meant a threefold increase in annual registrations.

However, against world trends, despite bargain prices and a small gain for 1999, New Zealand's new car market has stagnated. When faced with the choice of a new family car, a used SUV or a three year old luxury car for the same price, buyers have tended to go for bulk rather than practicality. Thus small car sales in particular have abated, while big car and 4X4 sales have burgeoned.

Holden's Commodore - a top seller in New Zealand in 1999

New car sales show this size preference too. The top performers for 1999 were Ford's Falcon and Holden's Commodore - much bigger vehicles than those US sedan favourites the Toyota Camry, Honda Accord and Ford Taurus.

Of vehicles freshly registered in New Zealand, the 1999 sales split of 139,400 used imports against 72,232 new vehicles continued a well-established two to one trend.

Well-equipped used imports have affected the aspirations of all car buyers. To compete, new car distributors have bolstered specification levels. Air conditioning (almost unheard of 15 years ago despite the country's warm summers), airbags, ABS and hefty warranties are now expected.

A subsidised completely knocked-down (CKD) industry built most of New Zealand's new cars 15 years ago. In the face of tariff reductions and used imports, 12 plants have now closed and every car sold in New Zealand is imported built-up.

The Ford, Honda, Mazda, Mitsubishi, Nissan and Toyota CKD assembly plants all stopped production in 1998. Each appeared to be holding its own, until the government decision that year to cut remaining tariffs overnight.

In a development unheard of in any other similar market, Toyota New Zealand became the first new car distributor to join the used Japanese import phenomenon.

Toyota re-fettles its used imports in a factory once used to assemble its new cars and sells them with a factory warranty. Its used operation has become so successful that, if regarded as a franchise in its own right, it would be in New Zealand's top six. Honda has done the same. Its plant is now employed to restore approved used Japanese Hondas for New Zealand distribution.

"New Zealand is consequently fast becoming the world's most motorised country"

The initiative was long overdue. For the first few years of used imports, franchise dealers turned their backs on owners bringing in 'orphans' (i.e. car models never sold new in New Zealand) for spares, repairs and servicing, leaving them to the people who sold the car.

New car distributors aren't all matching Toyota and Honda, but they are at least offering service and back-up, realising that the public at large paints all Hondas, Mitsubishis or Toyotas with the same brush, whether or not they were originally intended for export from Japan.

European cars are also imported used from Japan (including Nissan-built Volkswagen Santanas), along with an increasing number from Singapore and Hong Kong. Audi, BMW, Mercedes-Benz, Rover, Land Rover, Saab and Volvo cars punctuate the legions of Japanese cars first owned overseas on New Zealand dealer forecourts. Even BMW has set up its own import corridor for overseas-sourced used models, ensuring it too has a slice of the action.

The country's used import market is set to continue. Over the years the New Zealand dollar's volatile performance against the yen has caused shiploads of used imports to lose millions of dollars of value in transit. It's hurt and even removed some players and consolidated others.

But well-backed and intuitive importers remain strong. Grasping electronic trading with gusto and maintaining teams of vehicle stock buyers in Japan to keep ahead of the market, they also secure grey-import new cars, though some find that franchised distributors can be just as aggressive and often severely undercut their prices.

Ireland, Pakistan, Russia and Britain all engage in grey and used car importation from Japan and elsewhere. But the New Zealand experience is unique - to achieve the same level of saturation in the UK, for instance, used imports would have to land at the rate of 2.6 million units a year. Even large-scale manufacturing and franchise sales operations would feel the squeeze against that kind of pressure.

While the New Zealand used import phenomenon has fulfilled the pent-up automotive aspirations of every generation of driver in New Zealand during its 15 years of existence, the current Labour government is the first to recognise the more sinister hidden costs of such vehicles.

The Ford Falcon - another top performer in 1999

Most imports have already had a lifetime's worth of wear in their country of origin and pollute from the day they first turn a wheel in New Zealand. And, by slowing-down new car sales, they have aged the New Zealand car fleet in general to the extent that, while most developed nations' fleets are gradually becoming cleaner and safer thanks to the fresh technologies being built into them, New Zealand's is instead becoming dirtier, more crowded and less safe.

The country's Land Transport Safety Authority has made the suggestion that used imports be restricted to seven years old or younger, while at the same time, each car should be individually tested for emissions - preferably before it leaves Japan or any other country of origin.

This has generated mixed responses from dealers and used vehicle importers, the most negative of which asks the question - 'Where will our cheap stock come from?'

The answer, of course is from trade-ins. Just as it was 15 years ago - before the modern New Zealand phenomenon of merely selling used cars and topping-up stock from 'the boat'. And not from the buying, selling and dealing skills that were so much part of the car industry's coal face in the 'bad old days'.

Author: Dave Moore is motoring editor of the Press, a regional daily newspaper published in Christchurch, New Zealand