Blog No 44 – RIP Australian Passenger Vehicle Manufacturing

During last week, we got the long awaited final news that Toyota would officially cease production of passenger vehicles at Altona in October later this year. This will be followed by GMH ceasing production a few weeks later. Ford have already ceased production at Broadmeadows late last year and Mitsubishi ceased production in Australia back in 2008.

It will bring to an end Australia’s 90-year history of domestic manufacturing of passenger vehicles.

No doubt, many local component manufacturers will also be hard hit during the fall-out unless they have successfully prepared for the transition away from the automotive industry. As a career manufacturing Accountant and member of SEMMA (South East Melbourne Manufacturers Alliance), it is sad to see!

How can this happen?

There are many reasons why this has happened, but I have a few theories around this disappointing situation.

How many of us are driving locally made vehicles? We all had a role to play here, supporting our local manufacturing colleagues rather than buying cheap imports or higher end luxury German cars?

Should the government have been more protective of our automotive manufacturing industry? I don’t necessarily agree with propping up inefficient industries, but surely there was scope for some kind of assistance given the flow-on benefits of having this industry provides. Of course, now we will be paying unemployment benefits to these poor redundant employees when surely that money would have been better spent redirected to some level of support to the industry and keeping these folks employed (paying taxes). And the government has a role to support the local industry by ‘Buying Australian” where reasonable for it’s own car fleets.

There is certainly a clear trend towards the larger SUV vehicle in the automotive market. I have a question to the manufacturers also. Was there no place for the Australian Station Wagon in this market, was there really an effort to market these vehicle as true alternatives to the SUV’s? Or are the local operations beholden (no pun intended) to the parent entities of these large multi-national motor vehicle companies and have no influence over strategic decisions and directions? I am sure this is part of the picture in my view.

Are our high unit cost of labour at the heart of this move? I am sure overseas parent entities note this as part of their global strategic planning. Our minimum wage is amongst the highest in the world.

Will we lose the ability to undertake heavy manufacturing? We will lose the skill base of a modern advanced economy as this occurs.

Good news stories

Interestingly, local innovative off-road vehicle manufacturer Tomcar is growing strongly and has developed Australia’s first electric powered vehicle. Another great story is the reshaping of plastic injection moulding business Perroplas away from reliance on the automotive sector. So it can be done!

Where our manufacturing sector will be in the future in unclear, but it is a sad farewell to the local automotive passenger vehicle manufacturing industry – RIP!

Ross – Billson Advisory

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