Holden’s Battle against Cheap Import Cars

The trend against locally made cars in Australia has been strong for quite some time, with buyers looking more favourably at cheaper imported models and there appears to be no sign of this abating.

Australia’s strongest local car brand Holden, owned by General Motors, is finding it increasingly hard to compete with competitors, especially overseas manufacturers.  According to released this year, Australians bought more Hyundai vehicles than Holden in March 2013; something that’s never happened before.  This is on the back of Nissan overtaking Holden the previous month (also the first time in history).  Holden is a proud Australian brand, once enjoying bragging rights over fierce rivals Ford and Toyota – more pointedly when imported cars were still trying to break into the local market.

Putting further pressure on Holden is the fact they received twice the amount of government funding over the past 12 years ($2.17 billion) compared to Toyota ($1.2 billion) and Ford ($1.1 billion).  The company’s Managing Director, Mike Devereux does argue they have paid a lot of income tax ($1.4 billion) during this period and that subsidies were either similar to or less than what foreign governments give their local manufacturers.  However, this government spending, which in part is supposed to help protect local jobs seems to have backfired with Holden culling 500 staff last month, blaming the high Australian dollar as the reason.

In another attempt to make locally built cars more attractive to consumers, one Federal politician has floated the idea of imposing a temporary increase to the 5% tariff on imported vehicles.  Nick Champion says moving the tariff somewhere between 5 – 10% will make foreign cars more expensive, allowing Australian manufacturers to compete.  However this idea doesn’t have any support and with the current government on course to lose the next election in September this year, the alternative government has flagged it will cut $500 million dollars in funding for the local car industry.

All signs point to it being incredibly difficult to make money building cars in Australia.  An export market put off by a high Australian dollar which in turn wipes thousands of dollars off the purchase price of imported cars doesn’t help local car makers.  Holden looks to be pinning its future on the release of its latest VF Commodore and a hope the local currency will fall significantly for them to claw back market share.

The biggest problem Holden and other car manufacturers are facing is a significant change of attitude and buyer behaviour in Australia when it comes to new cars.  Buyers are looking for smaller, more fuel efficient vehicles.  The chief driver behind this is the price of unleaded fuel which has risen 45% in the last 10 years. See graph:

With cost of living pressures on the rise in Australia, one can only imagine it being hard to sell the idea of going with a bigger car when you can buy a cheaper imported make that saves you money at the petrol bowser as well.  It’s difficult to imagine Australians turning back to locally made autos in the longer term unless they sharpen their focus on building ultra fuel efficient vehicles.

What did you think of the recent announcements by Ford?

Do you think there is a future for Australian auto makers?

Please comment below.

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