Within the next four years, the last remaining automotive factory in Australia will close. Ford, GM and Toyota each have manufacturing plants in this southern continent country and all three recently announced that their respective plants will soon shut down.
That Australia will be without a car manufacturing plant may seem surprising to some. However, when you learn why automotive plants were built there in the first place, you may understand why they’ll be closing.
Steep National Tariffs
Like many nations, Australia has long had tariffs in place on a number of goods. Tariffs are a tax or a duty paid on imports or exports, typically put in place to protect local manufacturing.
Earlier tariffs of 54 percent made it worthwhile for foreign manufacturers to build and maintain plants in the country. And as long as those tariffs were in place, then a handful of automakers would and did build locally, reaping a competitive advantage in a relatively small national market.
Yes, Australia’s population is small: the country is home to 22.7 million people. Australia’s population has grown by 50 percent in the last three decades. Canada, with 34 million people, has automotive manufacturing plants too. However, the US and Canada have had trade agreements in place for decades what allows cars and parts to move primarily between Michigan and Ontario free of tariffs.
Globalization and the End of Tariffs
Globalization is a word used commonly today, but its roots go back many decades. The second Random House definition for the word may best explain what is going on in Australia today, indeed in the rest of the world, …the emergence since the 1980s of a single world market dominated by multinational companies, leading to a diminishing capacity for national governments to control their economies.
In Australia, it was the Button Car Plan of 1984 that ushered in the gradual demise of local automotive manufacturing. An Australian publication, Manufacturers Monthly took a look at its impact in 2011, tracing the industry’s subsequent decline. Specifically, the plan was adopted in a bid to force industry consolidation, thereby making it more efficient.
The plan as crafted and later adopted forecast increased competition from imports, in an effort to improve the industry. Declining tariffs would play a significant part in that change, falling to 30 percent in the 1990s, then down to 15 percent by 2004. By 2010, tariffs dropped to 5 percent, but the rate comes in even lower when various trade agreements with other countries are factored in.
Declining Local Production
Perhaps the most telling change in recent years is the big decrease in local production, currently at half of the 409,000 units produced as recently as 2004. Even so, most of the cars built in Australia are exported including the Chevrolet SS, sold as the Holden Commodore in Australia. It represents a dying breed of large, rear-wheel drive models that sates the appetites of a limited number of buyers around the world. Meanwhile, Australians are embracing the many smaller and less costly models imported from abroad including Thailand, Malaysia, Korea, and China.
Many Australians are upset over the auto industry’s demise and rightly so: tens of thousands of direct and feeder jobs will go away. Likely, Australia’s brimming economy will take a hit its current 6 percent unemployment rate may rise. Even so, one group of retailers car dealers will find a way to roll with these changes.
The pending changes to Australia’s automotive industry will have some effect on dealers. Nevertheless, dealers such as DVG in Perth will continue to serve their customers with a wide variety of products from different manufacturers, said a spokesman for the DVG Automotive Group. The company has 38 dealerships in nine locations and counts current local producers Toyota and Holden (GM) among its 18 new car brands.
See Also — Australia: Auto Manufacturing Done in 2017
Photo courtesy of General Motors Company.