The Australian automotive market is one of the most cut-throat markets in the world. The number of automotive brands that operate in Australia can vary anywhere from 64 to 67 and are represented by over 380 different models. And all in a new car market that saw just over 1.13 million units retailed last year.
Amongst this crowded back drop, it’s no wonder local manufacturers – Ford, GM Holden and Toyota – have all pulled the plug on local manufacturing and plan to cease production between 2016 and 2017.
The announcements, which were spread over eight months from mid-2013 to early 2014, came as a heavy blow to the automotive manufacturing industry which employs some 50,000 people (over 5 per cent of manufacturing employees).
The result is dire for manufacturing in Australia, which has enjoyed flow-on benefits from the automotive sector including technology transfer, lean management practices, a highly skilled workforce and innovative manufacturing techniques.
The outlook for automotive suppliers is equally grim. Some have been successful in diversifying into new industries and markets but in a many cases the revenue generated from ‘non automotive’ business is insignificant. Those who have failed to diversify are likely to cease to exist – no matter how revolutionary the product or service. The Australian dollar is too high, the market too mature and the competition from Asia too great.
The result is a significant challenge for the Australian economy. The demise of the Australian automotive manufacturing industry will lead to a permanent loss of GDP and will increase unemployment by up to 1.5 per cent – more in some areas.
But the true effect won’t be known for some time.
Watch this space.