Australia's Auto Industry is Over: Why did this happen and what can we learn?

The industry already was substantially assembly. I very much doubt that any time soon multinational car manufacturers will conclude their best source of a component is going to be Melbourne rather than some 2nd world place with 1/10the labour costs and a shorter logistics train.

The problem I don’t think was stubborn-ness, it was that they were screwed either way.

The Aust. auto makers weren’t and aren’t stupid and knew where the market was heading. But if they re-tooled to produce smaller economical cars of the type that the Japanese and Koreans make so very well they would not have been able to compete. So that would have been doomed.

The other option was to maintain their aim at the traditional Big Dumb Aussie Car market, which at least gave them a niche market to sell into while they died slowly.

As has been noted, the automotive industry in Australia has been shrinking for decades.

As I understand it, the concern isn’t just all the car factory workers losing their jobs, its the countless component and parts providers who (from 2017 onwards) won’t have anyone domestically to provide parts and components to and will go out of business.

Sure, some of them will diversify or sell overseas, but a lot of them won’t or can’t, and will simply go under, putting a lot of workers out of a job - and they can’t all get jobs in the mines or at hipster cafes or whatever the current growth industry in this country is.

There is a very real fear that nothing will replace the lost jobs and there’s going to be a real and genuine crisis on the country’s hands.

It’s a big deal, but equally largely inevitable.

The strong AUD is a large factor but that could either swing further or back in the medium term

IMO economies of scale is the key factor.
Sales of domestically produced passenger cars is now around 130,000.
That’s shrunk by 50% in the past decade.

You know of many American plants with that short a production run?
Yet that figure is shared between Ford, Holden and Toyota and subdivided between a dozen models. It’s a niche and highly fragmented market with 60 manufacturer active.
So the only way the local producers were going to survive was boosting production through exports. The high AUD and rationalisation of models following the GFC have made that a very tough gig.

I’m kind of shocked Holden and Ford of Australia stopped building things and I didn’t notice. Maybe it’s because I still see Monaro derivatives on Top Gear reruns all the time.

Transportation costs are incredibly low. Toyota ships finished vehicles from its plants in Britain and Mexico to Japan.

First and foremost, while the British passenger car industry basically died from the 70s to 90s, its automotive R&D facilities have always been the best in the world. At just about the same moment the stake was officially driven into the heart of the Rover Group (the undead zombie that rose from the coffin of British Leyland), McLaren was launching the F1 road car - by far the most advanced road car built at the time. Lotus spent most of its existence teetering on the edge of bankruptcy, but large manufacturers were coming to it constantly for help designing suspension systems.

I don’t know exactly why “foreign” manufacturers’ UK plants have been so successful. I think it’s a combination of supplier availability (all the smaller companies that found a way to scrabble along building gearboxes and things) and protectionism: Toyota, Nissan and Honda all built their UK plants to get around British import restrictions in the early 1990s.

I think the major reasons have all been hit. The bottom line is that Australia is a marginal candidate for a national auto industry, even more so now than in the last 50 years.

[ol]
[li]Small population (smaller than that of Texas), which is scattered around the fringes of a[/li][li]Very large geographic area (nearly that of the continental US), which is[/li][li]Mostly very harsh terrain with[/li][li]Few of the natural resources that go into steel and heavy manufacturing (30th in world production, after most of Europe) and[/li][li]Already depends on imports for almost everything, which means[/li][li]They have very busy ports that can handle imports from the entire world of carmakers, which are also[/li][li]In the iron grip of the very powerful unions that on top of all the above factors made a sustainable auto industry unlikely.[/li][/ol]

Some quotes from he Australian newspaper, Ford and Holden have continued to pump out a dying product, people who can afford a SUV buy one, practically everyone else buys a small economical vehicle.

“While the overall car sales market soared to a record, the (Holden)Commodore found fewer than 28,000 buyers in 2013 despite an extensive mid-year upgrade, figures obtained by The Australian show.”

“The growth was driven by SUVs, with an additional 26,000 bought last year compared with 2012. The new breed of small SUVs were especially popular, with registrations up by 23 per cent.”

“There was some compensation in its (Ford)Territory, once our favourite SUV, which recorded the smallest drop among locally made vehicles, with 14,261 buyers.”

The problem with that, as I alluded to above, is that producing any one model range, like just SUVs or just small economical cars, wouldn’t have done it. That 26,000 extra SUVs sold is spread over dozens of manufacturers; one more wouldn’t have been the magic bullet to rescue Holden or Ford. And they could hardly tool up and produce a full range of vehicles in our tiny market, regardless of labour costs it wouldn’t have been economic.

#1. Check
#2. Check
#3. Check but as 96% of the population doesn’t live within cooee of there I’m unsure of the impact on passenger vehicle sales
#4 (Few of the natural resources that go into steel) Well apart from being the world’s largest exporter of iron ore, coal and #2 for LNG
#5 (depends on imports for almost everything): Well apart from minerals, energy, food, fibre etc, though not so much elaborately transformed goods.
#6 No, because the busy ports are the bulk handling terminals. The container and cargo ports are modest by world standards, not highly productive compared to world’s best practice but they aren’t rate limiting
#7 It been a while since “iron grip” was a correct descriptor.

Transporting them FROM Australia to potential markets.

Even the Japanese, Germans and Koreans realized that building vehicles here was easier than exporting finished products to the US.

Your point being what?

#6 As you say, this isn’t relevant. Cars are notoriously easy to transport. Ports for car shipment require only shallow draft vessels and basic wharves and hence no massive capital investment.

#7 It’s very important idealogically for some people to believe unions were the problem. This is why we have the strange conflict over the last few weeks of people insisting that companies have collapsed due to unions while the companies themselves say unions weren’t the problem.

There was a hilarious if disturbingly accurate cartoon on the front page of the Australian yesterday depicting the Prime Minister sitting on the remains of Toyota Australia, talking to the national airline, QANTAS (which is also potentially in trouble). QANTAS says:

“… but Toyota never actually blamed the unions…”

And the PM replies menacingly:

“I recommend you avoid making the same mistake”

Ha! Reading my local paper I can often forget that political cartoons don’t have to be so lame.

What’s interesting is they’re saying the price of imported cars will probably drop by $1000-$2000 or so when the tarrifs are removed in 2017.

To me, when you’re spending $20k on a car, an extra $1000 or so really isn’t that big a deal - you’re probably taking out a loan anyway since most people don’t have twenty large sitting about on the off chance they want a new set of wheels.

Personally, I think it’s a shame all the car manufacturers are going. I’m also surprised there aren’t more bespoke car manufacturers in this country given how huge motorsports are here.

That’s the problem with the “Ford or Holden” culture. I think it’s a big part of the reason why they are virtually no independent marques in the US.

What do they race in the V8 Supercar series now? Old models? Or was it folded?

They’re still making Fords and Holdens for a couple of years and the cars already in existence aren’t going to turn to dust the moment the factories close. There are still plenty of people getting around in 1970s and 1980s vintage Ford or Holden (or Toyota, or Mitsubishi, or Datsun) cars, after all.

I imagine the V8s will either be run with the older chassis or they’ll use imported cars - there’s still a market for V6s and V8 four-door sedans here, just not enough to support an entire automotive industry which includes two large companies making them and not much else.

I’m not a huge fan of the “Ford vs Holden” culture either - as you say, I think it’s one of the reasons there’s no “independent” marque in Australia (that I’m aware of) and I don’t think there’s enough Serious Money floating around to support an Australian equivalent of Aston Martin, for examle.

No real Ford vs Holden any more with the V8 Supercars starting fixed chassis design and specification last year, former Holden driver Mark Skaife designed and produced the first lot of chassis.

Clearly you have no idea what you’re talking about.

Sure, we have 23 million people but #2 is horribly, horribly wrong. We’re not spread out over the whole continent. 12 million live in 3-4 cities alone.
[ul]
[li]7.2 million in NSW (5 million in Sydney alone)[/li][li]5.7 million in VIC (4 million in Melbourne alone)[/li][li]3 million in South East QLD (2 million in Brisbane alone)[/li][/ul]
#3 is irrelevant. 90% of the population lives in urban areas. People still buy ‘soft roaders’ and toy 4WDs but only to take the kids to sports practice on the weekends. They never leave the tarmac.

#4 is irrelevant. Raw materials have no bearing on auto production here.

#7 is irrelevant. I know yanks love to bash unions but it’s a red herring. We’re competing with developing countries like Thailand, and even in a capitalist utopia with no unions, we couldn’t compete with their wages. Not even close.
Bottom line is this: we have a staggering amount of imported cars that are made cheaper overseas. We’re too far from the major markets for domestic production to be able to export in an effective way, therefore the domestic automakers must try to survive off the domestic market. Also, they keep making cars that people don’t want to buy.

This got me curious how much transpo is so some googling led me to these calcs:
2 cars per 40 foot container (not sure how actually packed, just a guess)
$1,800 per 40 foot container from China to US

These calcs come out to $900 per, but there must be volume discounts etc etc - so my first guess is $500 per vehicle.

But because you say very low, I’m wondering if it’s closer to $300?

Cars aren’t carried that way. They are carried in specialist car vessels or in general purpose ro-ro (roll on, roll off) vessels. The cost on a specialist car carrier is going to be way less than your calculation.

Not only that but Australia has a severe import/export balance for manufactured goods (heavily weighted towards import). This means shipping lines are positively looking for ways to backfill ships out of here.