Australian car and parts manufacturers - namely Holden, Ford and Toyota, and their components suppliers - have a battle ahead, facing a confluence of internal and external pressures that are deflating sales and reducing profitability.
The industry is facing four major challenges:
- local manufacturers are battling the effects of a high Australian dollar that (despite settling in recent weeks) has made imported cars cheaper, while exported Australian cars are more expensive overseas
- motorists and the industry are experiencing a "fuel-price shock" of a magnitude not seen since the first oil shock of the early 1970s
- the shift away from the large Aussie sedan was under way before fuel prices began rocketing skyward
- the current economic uncertainty, combined with fears about falling property prices and rising mortgage and cost-of-living expenses, has sapped the market of confidence, prompting consumers to delay or change their car-buying intentions.
These factors are having the biggest impact on local vehicle manufacturers, and are reflected in a declining market share and a loss of sales.
Official research reports year-to-date Falcon sales down 7.7%, Commodore down 19.8%, Aurion down 3.3% and the now-ageing Camry down 9.3%.
The effectiveness of the Rudd Government's response to the Bracks findings (read more about the Brack's review here, at
GoAuto) will be critical to the industry's future.
According to David Purchase, CEO of Victorian Automobile Chamber of Commerce (VACC), Victoria is disappointed with the report's recommendation to decrease tariff protection from 10% to 5% by 2010, as had previously been proposed.
But the state welcomes the recommendation to increase research and development assistance for both motor vehicle manufacturers and suppliers, and the cascading of this assistance down the supply chain. Victoria also thinks highly of the proposal that the $2000 LPG rebate apply to vehicles fitted with LPG systems in manufacture.
Australia has abundant supplies of LPG, producing around three million tonnes per year. It is projected to grow to five million tonnes by 2020, with supply outstripping demand until at least 2030. Gas has been as low as a third of the cost of diesel at the pump.
Australian manufacturers also face 'green' challenges in the near future - after all, until Ford Australia begins production of the Ford Focus, and Toyota the Camry Hybrid, all of our local vehicle manufacturing is dedicated to larger 'family' cars.
Says Mr Purchase, "Some question whether Australia is making the 'right' cars - that, perhaps, we should be building smaller cars."
"But," Mr Purchase asks, "who would we sell them to?"
He believes that with the right support, such as the recommendation of the Bracks Report for a doubling of the Green Car Innovation Fund, Australia can continue to live up to its strong reputation in automotive design and engineering, while also working to integrate new 'green' technologies into these vehicles.
As the Bracks Report (see link in top right corner of this page) notes, increased emphasis on research and on developing innovative new technologies will be the key to retaining a competitive and viable local manufacturing sector.
As Australia's largest manufacturing sector, and a fertile ground for skills and capabilities that flow through to other sectors of the economy, automotive and component manufacturers are crucial.
The nation's automotive manufacturing sector is a ground-breaking industry, making world-class products with growing export success.
Mr Purchase concluded with "The message for government in responding to the Bracks Review is that while things are tough, it is not yet time to start ringing the bells to 'bring out the dead' for our car industry."
Source: Melbourne Herald Sun, August 18 2008
