Local Car Makers Face Oblivion

The Australian car industry is racing to oblivion

Making cars in Australia has gone steadily downhill since about 1970, although recently the pace of that decline has accelerated.

See also Why Holden Should Hang its Head in Shame. 

Incredibly, in 1970, we managed to make 475,000 cars Down Under. During that decade, Australia produced a broad range of cars including Minis, Leylands, Valiants, Chryslers, Nissans, Renaults, and Volkswagens … as well as Fords, Holdens and Toyotas.

Fast Forward to 2011: Just 224,000 cars were made here – a drop of more than half, despite monumental increases in the population, in the fleet of cars out there on Australian roads, and a significant jump in the total distance driven nationally each year. By 2011, all but three manufacturers had disappeared from the Australian landscape (although some remain as importers). Chrysler morphed into Mitsubishi and closed its doors in 2008, after sales of the ill-fated 380, which evolved from the Magna, flatlined. Nissan, which was established here just after the 1973 oil shock to make small four-cylinder cars, had a phenomenal run with the locally made Pulsar. But that run ended in 1992. Renault closed in July 1981, and Volkswagen shut its Victorian factory doors in 1976.

Today, just three carmakers remain: Toyota, Holden and Ford. By the end of 2016, there will be, at best, two. Over the past 10 years, Ford Falcon sales have raced to oblivion, falling 74 per cent (from 54,629 in 2003 to just 14,036 in 2012). The locally made Territory had also fallen from 23,451 sales in 2005 (its first full year on sale) to just 14,646 last year – despite a well overdue re-vamp. Falcon Ute sales have fallen to roughly one third of their 2003 levels.

On May 28 this year, ironically the same day Holden debuted the VF Commodore, Ford announced it would cease making cars here in October 2016. Ford Australia president Bob Graziano says 1200 workers will lose their jobs when the Broadmeadows factory closes. Falcon sales have fallen by another 27 per cent so far this year.

Back in the early 2000s, Holden employed around 7000 workers in its manufacturing workforce. Today, that number has atrophied to more like 1700 – and no commitment has been made to continue Holden’s manufacturing operations beyond 2016. The best-selling Holden of all time was the HQ, which totaled 485,650 sales between 1971 and 1974. Commodore sales are on a trajectory not unlike the Falcon’s, though not quite as steep. A total of 88,478 Commodores were sold in 2003, but this dropped to 30,532 last year – a fall of 66 per cent. Commodore Ute sales have also dropped profoundly in the same time – from 13,791 to 7925, a fall of 43 per cent.

Earlier this year, Holden announced significant price reductions – multi-thousand-dollar reductions across the range – on Commodore and Cruze, in an attempt to keep sales aloft.

Toyota builds the Camry and Aurion here as well, at its Altona plant in Melbourne. Of the three remaining manufacturers, Toyota is the only one with a viable export program for its cars. Toyota Australia exports Camrys to the Middle East – about $1 billion worth each year – where that car is the region’s top-seller. Camry sales have actually increased in the past 10 years – from 20,536 in 2003 to 27,230 last year. Sales of the V6 Camry in 2003 (not included in the 20,536 just quoted) were 10,416 – roughly line ball with the 9074 Aurion sales last year.

There are two elephants sitting quietly in the room: inevitability of the demise, and taxpayer support – both recent and ongoing.

Internationally, car company CEOs will tell you they build factories near the markets with a thirst for the vehicles. They build them where labour costs are low. They don’t build a manufacturing plant unless they can produce at least 300,000 cars annually. By these criteria, Australia fails the ‘car factory’ test on all three counts. The Holden Cruze, for example, can be built in eight other countries including China, South Korea and Thailand – for about $2700 cheaper than it can be made in Elizabeth, South Australia, by Holden.

Over the past five or so years, Holden has lost more than half a billion dollars, despite a massive injection of around $900 million in taxpayer support. Holden claims its car importing operation (that’s every Holden that’s not a Commodore or a Cruze, basically) is profitable; all the hemorrhaging happens at the local manufacturing level. For General Motors, building cars in Australia is a great way to make a small fortune … provided you start with a really big one.

Whether you like it or not, you have contributed substantially to the local manufacturing of cars – at least you have if you’re a taxpayer. Every year for the past 12 years, Holden has received around $180 million from you, the Australian taxpayer – totaling $2.18 billion. Ford and Toyota have each received about half that amount. It’s unclear exactly what the Australian taxpayer receives as a return on his or her $4 billion investment there – because all of the funding details are undisclosed, under the auspices of being ‘commercially in confidence’. Certainly, jobs are not guaranteed, given the profound attrition in the workforces at both Ford and Holden.

Another way of looking at this, as you drive past a Ford, Holden or Toyota dealership is to look at all the brand new Commodores, Cruzes, Falcons, Territorys, Camrys and Aurions on the lots and ask yourself how you feel about contributing $2372 for every locally made Ford, $2117 for every locally made Holden and $944 for each locally made Toyota you can see.

In August this year, Ford threw a two-hour, $4 million party at Fox Studios in Sydney – for 1000 VIP guests. This amount is more than double what the company would traditionally spend on a presence at a 10-day Australian motor show. Its purpose was to talk up the future – after the factory closures, to excite attendees about the Mustang and the Everest SUV. Ford’s global senior executive management team (or at least a representative sample) attended. It seems, if you believe the rhetoric, life after the fait acompli of factory closure will be rosy.