Australia's $5.6 billion car industry must become greener and more economically efficient by 2020, a key review has told the Rudd Government.
Former Victorian premier Steve Bracks's review recommends halving tariffs to 5 per cent in 2010, doubling Labor's Green Car Innovation Fund to $1 billion and bringing it forward to next year.
It also calls for a Global Automotive Transition Scheme, funded by $2.5 billion from 2010 to 2020, to support research and development and to help produce more environmentally-friendly cars.
The 190-page review, the first of the industry since 2002, found Australia's automotive market to be one of the most open and competitive in the world, with among the lowest levels of tariff protection.
While the cost of vehicles had fallen in the past six years, the industry had been hit by rising fuel costs, a strong Australian dollar, climate change and increasing demand for more fuel-efficient cars.
The review also recommended harmonising stamp duties, car registration and comprehensive insurance across the states and territories.
Australia's three car makers, Ford, Holden and Toyota yesterday welcomed the review but both Holden and Ford chiefs expressed concern over the proposed tariff cut as did the Australian Manufacturing Workers' Union.
Launching the review with Mr Bracks yesterday, Industry Minister Kim Carr said the industry should continue to embrace global competition while facing up to challenges including climate change.
''A range of new technologies is being developed to meet demand for low-emission, fuel-efficient vehicles, and no-one can say which technologies will succeed,'' Senator Carr said.
''This can be seen as a threat to the Australian industry or as an opportunity to carve out a new niches in the international production system and secure critical export sales.''
Senator Carr said the Government would announce its response shortly.
Opposition Leader Brendan Nelson said he strongly supported a tariff cut but had reservations about how the extra green innovation fund money would be used after the Government allocated $35 million from the fund to Toyota to build 10,000 hybrid fuel-efficient cars.
''Now if that's the kind of thing the money is going to be used for, basically to give the Government photo opportunities, then clearly well have great concerns about it. But we'll look at the detail,'' Dr Nelson said.
But manufacturing groups were supportive with the Federation of Automotive Products Manufacturers saying changes were needed urgently to create a more sustainable industry able to produce one million cars a year by 2020, mainly for export.
Australian Industry Group chief executive Heather Ridout said the recommendations would provide important support for rationalisation, globalisation and innovation in the industry.
Holden chairman Mark Reuss questioned whether the proposals would offset the tariff cut.
AMWU national secretary Dave Oliver warned the tariff cuts made no sense particularly with the recent collapse of the Doha round of world trade talks after the review was handed to the government.
Chief executive of the Federal Chamber of Automotive Industries Andrew McKellar also sounded a note of caution on the Doha collapse and said the Government needed to consider the impact of the recommendations very carefully.