This year (2016) will hallmark more or less the beginning and end of Australian car manufacturing. In 2016 the shut down of the manufacturing industry will begin with Ford closing its Geelong production line in October in around a year later Holden will close and then Toyota.
By the end of 2017, Australia will therefore become solely a motor vehicle importer which is not been seen in many many years and ending an industry that had employed tens of thousands of Australians.
Despite attempts to save the Australian car manufacturing industry by using, or attempting to use government a taxpayer funded money, there’s been no turning in the direction of the demise of Australian car manufacturing.
A large part of this demise has been Australia’s high labour costs, but of course there is a lot more to just that, that saw an impact on the industry.
To the north and the Asia-Pacific region labour costs are significantly cheaper, generally one fifth of the cost of labour in Australia for production line workers in the car industry. The governments are keen to lure carmakers with tax incentives and setup cost incentives.
Many of the modern style factories and cost efficient vehicle production factories output at least 200,000 vehicles per year. For example say, in 2015 the three factories that were in Australia sold a combined number of vehicles just under 100,000 locally. This was the first time in 50 years that the tally had dipped under the 100,000 figure.
The three vehicle brands in Australia all lost combined total of more than $1.5 billion in their local manufacturing operations over the past 10 years alone and this was in spite of receiving more than twice that in taxpayer funding during the same period.
The current federal government isn’t giving anymore to the car industry in terms of money on both sides of politics had contributed to the demise of the car industry over the last decades. Over this time, vehicle taxation measures were removed such as import duties and that opened up a wider variety of vehicles coming into the Australian car market. If you look at say 10 years ago, you would pick a Holden Commodore as the top selling car with more than 8000 deliveries each month. In 2016 the top selling cars in Australia go to the likes of Toyota Corolla or Mazda3, both of which are small cars and that there are so many more models to choose from vehicles that have been delivered from overseas manufacturing plants.
The car market in Australia is wide and significantly with many brands on offer, much more than buyers in USA, Japan or UK or Europe would have to choose from when buying a new car. It was these imports that no doubt contributed to the local factories not having a chance to compete.
Some say what about the Australian car factories exporting their way out of this situation, but again as mentioned the overheads to run local assembly production lines to produce vehicles is much greater than the costs of producing in our neighbouring countries. There is also the fluctuations of the exchange rate which has seen the Australian dollar fall dramatically from what was once parity i.e. dollar for dollar with the US down to just under $.70 USD at the time of writing. This fluctuation in currency exchange rates is generally killed off any profitability in manufacturing deals.
The dealers, what will happen to them? Holden, Ford, Toyota will continue to sell cars in Australia after these companies auto production factories close from this year on. When the factories close and the machines are stopped, the country will be left with specialist designers and engineers who will continue to design vehicles but not have facilities locally in Australia to produce them. Ford for example will employ around 1200 vehicle designers and engineers to develop cars which will end up being built overseas in countries such as China or other Asian production line clients. The biggest loss will go to the Ford, Holden and Toyota blue-collar workers who tirelessly worked at the factories as well as the chain of suppliers, supply factories who supplied production line with parts. No doubt this will swell the ranks of the people looking for employment in the employment market.
Cover photo – Ford Vehicle assembly factory. Photo source – Wikipedia.