The Australian auto industry - Where to now?

2012 will be remembered by Australian car people as the year the car sales market bounced back, but what about the locally made Australian cars? The surprising fact is that locally built car sales were up on 2011, however as a portion of the total sales they are down slightly. What's most worrying is the general sales trend.  Locally made cars as a percentage of total sales have been falling for years now, and the current range of locally made cars are not turning the tide. Add to this the fact that the federal and state governments are propping up some facilities with subsidies and you begin to see how pressurised the industry is at the moment.

What are the Australian Cars?

Below are the cars and ranges which are currently produced in Australia

  • Totyota Aurion
  • Toyota Camry (and Camry Hybrid)
  • Ford Territory
  • Ford Falcon
  • Holden Cruz
  • Holden Commodore

Frankly, the future is very uncertain for most of these vehicles. Sales are slipping for the Falcon and the Commodore and neither look like they have a long locally made future. Most put 2016 as the last year for the locally made commodore, with speculation rife about the sales starved Falcon. Government subsidies, which in many cases go into the billions, should see a medium term (10 years) future for the industry but what then?

So what are the problems and what can be done?

The problems facing the area are no secret. The high Australian dollar along with relatively high production costs are combining to make the cars less competitive than some of their imported competitors. Vehicles from Japan, South Korea, Thailand, Europe and more recently India and China are now eating into more of the market and it looks like this will only get worse. It can be tempting to look at the relative success of the US auto industry bailout and think that the same turnaround can apply here. The logic would be that for a few years the government will need to tough it out with the industry while demand, currency and production cost woes blow over. As tempting as this line of logic seems, it would be foolish to assume that the two environments are the same. Unfortunately for Australians the two situations are different on many levels including but not limited to; the currency outlook, wage inflation trajectories, foreign based parent companies and far lower volumes and expected demand.

Final thoughts

Manufacturing in Australia is in real danger and has been for years. The inconvenient truth is that the mining boom amongst other areas is driving the dollar and salaries up and making things ever more difficult. The picture becomes even bleaker when you consider that most of the vehicles made here are large sedans at a time when SUV’s and small cars are taking over. Just this month, the federal government appointed William Angove to encourage government and corporate fleets to buy locally made vehicles. Perhaps Mr Angove will succeed in picking the “low hanging fruit” as its been put, but with only a handful of cars to choose from he will have his work cut out for him.

What do you think of the Australian auto industry?

Do you think there is a future?

Please comment below.

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