The Recovery of Australia's Auto Industry

The auto manufacturing industry in Australia has seen brighter days. The once supreme car industry used to flourish with seven major auto manufacturers. There are now only three (Ford, Toyota, and General Motors Holden), and their future in the nation is uncertain. The industry is propped up by government support and in need of a revival. Is the industry holding onto false hopes of prosperity? Or is it going to show its typical resilience and bounce back from another punishing year?

There are several reasons why the Australian carmaker industry has been stagnant in recent years. The current environment for manufacturing in Australia is very harsh, as the nation has neither a large domestic market nor a large export market for automobiles. Nearly 80% of domestic vehicle sales come from imports. This is not a very good sign for a country that is trying to rebuild its once dominant auto industry. Auto exports are also shrinking, as the increasing strength of the Australian dollar makes exports very expensive. Growing competition from nations such as Thailand, China, and Brazil have also been hurting the manufacturer’s margins.

The Australian government spends over $789 million a year subsidizing carmakers, trying to make their prices more competitive internationally, as well as domestically. Due to the amount of these subsidies, the car assembly industry loses money on every vehicle that it assembles. Experts believe that the key to success lies in exporting to the surging demand for cars in the Asian and Middle Eastern middle class. Others believe that the auto industry should abandon its import/export strategy completely. They believe that the government should stop supporting multinational manufacturers and instead invest in innovative local firms working in the niche research and development sector of the auto industry. Australia is one of very few countries that can design, engineer, and manufacture a car from scratch within its borders. This is seen as a huge advantage over competing nations, and a key to future success.

Manufacturing is at the heart of the Australian economy and will remain crucial to their prosperity. Do you believe that the auto manufacturing industry in Australia will be able to regain its position as a world leader?