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Why Australian car manufacturing died — and what it means for our motoring future
Joshua Dowling, National Motoring Editor, News Corp Australia Network
February 3, 2017 6:00pm
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BY this time next year, the doors will have closed on the Australian car manufacturing industry forever — after almost a century of car making.
Holden will be last to turn out the lights after
Toyota announced this week it would close its Camry factory in Altona on October 3 — two weeks and three days before General Motors’ shuts its Australian outpost in Elizabeth.
Toyota has a largely Japanese image, but it has been making cars in Australia since 1963, the same year the iconic EH Holden was released.
A Holden wagon from 1963. Today’s recreational vehicles are SUVs. Picture: Supplied.
Over the past 10 years, Toyota has been Australia’s biggest vehicle manufacturer. It will also go down in history as our biggest automotive exporter.
Toyota shipped more cars in 16 years than Holden did over 63 years.
Australia was the first country outside Japan where Toyota made vehicles, which is why it fought so hard to keep Altona running.
The reality is, all three brands have a deep history in — and helped build — Australia, and had a lead role in shaping its culture.
Ford shut its Broadmeadows and Geelong factories in October 2016 after 91 years of operation.
Australia’s oldest car maker assembled almost 6 million vehicles since 1925.
General Motors began manufacturing in Port Melbourne in 1936 — assembling cars from parts imported from the UK and USA — before gearing up to support the Australian military in World War II by making aircraft engines, armoured vehicles and weaponry.
Prime Minister Ben Chifley at launch of the first Holden. Picture: Supplied
But Holden did not manufacture from scratch its first car and engine until 1948, when its first sedan rolled off the production line and then Prime Minister Ben Chifley declared “she’s a beauty”.
In that time Holden built more than 10 million engines in Australia and, by the end of this year, more than 7 million cars.
The Holden assembly line in Elizabeth on the outskirts of Adelaide will
continue to make the Commodore until the 20th of October, 2017, before it is replaced by a German model.
Holden has already wound back production after the Cruze small car reached the end of the line in October 2016, the same day the last Falcon was built.
The Ford Falcon reaches the end of the line. Picture: Supplied
Over the decades, the car industry has employed generations of workers and, until the end, kept close to 50,000 people in a job — once you include the small businesses that supplied parts and services to Australia’s car manufacturers.
But the tax payer has largely footed the bill, shelling out more than $5 billion dollars in “industry assistance” over the past 10 years alone.
The car industry says it invested three dollars for every one dollar of taxpayer funds.
That figure may be debated but one thing is certain: the end was inevitable.
With low — or zero — import tariffs over the past decade, Australia became flooded with foreign cars that were either cheaper to buy than local models, better equipped, or both.
That had the effect of eating into the volume that Australian car factories needed to remain viable.
In the late 1990s the Commodore filled the role of “dual purpose” car. Now utes and SUVs dominate. Picture: Supplied
Fifteen years ago, the Holden Commodore led the market with close to 100,000 sales per year.
For five of the past six years, small cars such as the Mazda3 and Toyota Corolla have topped the charts with a little over 40,000 sales. Last year the Toyota HiLux ute led the total market with a similar number.
There is not a car factory in the world that can survive on such small volumes — other than the likes of Ferrari or Lamborghini who sell supercars with super-high prices.
The flood of imports has given Australian car buyers more choice than ever before — and more than every other country on the planet except China.
Australia has 64 automotive brands, the US has 38 and the UK has 42.
While we are literally spoiled for choice, the Australian car market became so fragmented, the car manufacturers couldn’t solely rely on domestic sales for survival.
But they couldn’t export their way out of trouble either. They were caught in a pincer movement.
Australia is surrounded by developing countries with much cheaper labour costs.
The last small car to be made in Australia, the Holden Cruze. Picture: Supplied
The minimum wage in Thailand equates to less than $2 an hour.
Car assembly line workers are paid more generously — about $6 an hour, or close to $12,500 a year.
But it’s nowhere near the average Australian car manufacturing worker wage of $69,000.
By the time you add currency exchange rates into the bargain, you can cross exports off the list of possible saviours for the local car industry.
Of all the Free Trade Agreements Australia has with other countries, none was more brutal and swift than the deal with Thailand, introduced in 2005.
Since Australia agreed to lift the import tariff on cars from Thailand, we have bought close to 2 million vehicles from our Asia-Pacific neighbour — from familiar brands such as Ford, Holden, Toyota, (the three companies closing their factory doors) as well as Honda, Nissan, Mitsubishi, Mazda and others.
In return, Australia has shipped to Thailand just 100 cars. Not 100,000. Just 100.
That’s because Thailand maintained hidden, non-tariff barriers while Australia opened its borders completely.
Ingeniously, Thailand continued to impose higher registration fees on cars with larger engines — such as those made by Ford and Holden.
Production costs are cheaper overseas, so manufacturers have moved factories offshore. Picture: Supplied
Toyota already has a Camry factory in Thailand, so doesn’t need to export any cars there.
Ten years after the free trade deal was signed, Australia is shutting its doors on an entire industry — and with it more than 50,000 jobs.
Australia was the only country in the world to manufacture cars and not have some form of protection for its local industry.
Now those jobs have been transferred to Thailand, known as the Detroit of the Asia-Pacific.
Thailand is now the second-biggest source of motor vehicles in Australia after Japan and ahead of South Korea.
Should we have kept the Australian car industry alive, or was it right to end taxpayer handouts and suffocate it to the point of extinction?
How many former factory workers will find employment in hospitality, tourism, IT, or in a job that involves “innovation”, the catchcry of government? We’re about to find out.
Holden builds its last V6 engine at Port Melbourne in November 2016. Picture: Supplied
A 2013 report by University of Adelaide Associate Professor John Spoehr estimated about one-third of sacked blue collar workers are likely to become long-term unemployed.
The statistics were gathered after the closure of the Mitsubishi car factory in Adelaide in 2008, and from other associated industries.
“We know from the research that a high proportion of manufacturing employees go on to be long term unemployed,” Professor Spoehr said. “It requires significant retraining to work in … other sectors.”
As Former Victorian Premier Jeff Kennett wrote recently, there is also a rise in “mature-age” unemployment, as manufacturing closes.
“These people are often breadwinners with good personal values who have been paying taxes and charges for years,” Mr Kennett wrote.
While we wait to count the social cost of wiping out an entire industry, car buyers may well be wondering what the impact will be in showrooms.
The answer, to be blunt, is almost nothing.
A flood of imports squeezed out the local car manufacturing industry. Picture: Supplied
New-car prices are not suddenly about to go up. Australia is the most competitive market on the planet and that keeps prices low. It’s one of the key reasons our car factories are closing.
The biggest void to be filled — and no-one yet has any idea on how to fill it — is the lack of affordable performance sedans from Ford and Holden.
There is no replacement in sight for Holden Commodore V8s, or the choice of supercharged V8 power or turbocharged six-cylinder power for the Ford Falcon.
These were the fastest and most powerful sedans in the world for the money. But they could only be built thanks to the families and fleets that bought the regular models.
Historically, Ford and Holden sold so many of their fleet sedans that they could afford to fit bigger engines, bigger brakes and wider tyres to appeal to enthusiast customers.
Unfortunately, “rev heads” only account for a third of sales of our big fleet sedans — and that’s not enough to justify the investment in a unique performance model.
Ford has no direct replacement for the Ford Falcon XR8 and XR6 Turbo performance sedans. Picture: Supplied.
This is why police highway patrol divisions across Australia are scrambling — and struggling — to find suitable replacements for their Ford Falcon and Holden Commodore pursuit cars.
The best candidate in terms of performance and price is the Ford Mustang.
Police used to run two-door coupes in the late 1970s and early 1980s. It may happen again — for specialised purposes — if the Mustang passes muster after some initial hurdles.
In Queensland, the police have announced they’re running Hyundais. Criminals are presumably delighted.
General duties police officers, meanwhile, will migrate to sedans like the Toyota Camry, SUVs like the Hyundai Santa Fe, and prisoner vans like the Volkswagen Transporter or Hyundai iLoad — as they do currently.
In the meantime, Australians will continue to have just as many — if not more — cars from which to choose once the last of the local assembly lines closes.
Take a picture ... the last generation of Holden Commodore V8. The imported replacement will only have four-cylinder or V6 power. Picture: Supplied
But the type of vehicle we are buying is changing.
Sales of passenger cars dropped dramatically in 2016 as SUVs continued their record growth.
In 2015, passenger cars had a lead of 100,000 sales ahead of SUVs. In 2016 passenger cars were just 37,000 sales ahead of SUVs.
It looks like 2017 could be the year that SUVs finally overtake passenger car sales in Australia.
“A lot of people are replacing small cars with SUVs,” says Jordan Pakes, car industry director at Roy Morgan Research, which surveys 6000 car buyers each year.
“It’s possible SUVs could overtake passenger cars (in 2017), we know it’s a booming segment and there so many new small SUVs hitting the market.”
The latest Roy Morgan research shows 278,000 private buyers are considering an SUV in the next 12 months, versus 254,000 with a passenger car on the top of their shopping list.
In case you’re wondering, an SUV couldn’t have saved the car industry, because no single model sells in sufficient numbers to justify local manufacturing.
Then there is the rise and rise of utes to consider. In October and November, the Toyota HiLux and Ford Ranger led the market outright.
It was the first time in Australian automotive history that utes filled the top two sales spots. As noted earlier, the HiLux took the title as top seller for the year in 2016 — the first time a ute has led the market in our entire motoring history.
Mercedes-Benz believes utes are “the next SUV” trend, and has forecast massive sales growth globally over the next 10 years. Which is why Mercedes will join the ute brigade in 2018.
Ten years ago, the idea of a Mercedes-Benz ute would have been unimaginable. Now it seems overdue.
And who would have thought a Mercedes would be Australia’s second-best selling medium-size car — after the Toyota Camry and ahead of the Mazda6, Honda Accord, Ford Mondeo, and others.
With our rich, diverse and rapidly changing taste in vehicles — and fickle buyers who chant “buy Australian” while driving foreign cars — it is no wonder the Australian car industry never stood a chance.
