View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Analysis
March 10, 2003

Australia’s auto industry – smarter working for global markets

Australian car companies and suppliers will have to "work smarter" in the future and concentrate on niche products that appeal to global markets. That was the message to come out of the Change by Design conference held by the Victorian Government during Automotive Week in Melbourne as a prelude to last weekend’s Australian Grand Prix. The conference was ‘chaired’ by UK Automotive Journalist Chris Wright, Director of Interchange Europe.

By bcusack

Australian car companies and suppliers will have to “work smarter” in the future and concentrate on niche products that appeal to global markets. That was the message to come out of the Change by Design conference held by the Victorian Government during Automotive Week in Melbourne as a prelude to last weekend’s Australian Grand Prix.  The conference was ‘chaired’ by UK Automotive Journalist Chris Wright, Director of Interchange Europe.

With an annual new car domestic market of just over 800,000 vehicles, only around 30 per cent are built in Australia – despite government-imposed import tariffs. With the distances involved, exports to other countries are small.

All this makes economies of scale difficult to achieve for car makers and suppliers alike. What the country does have however is an abundance of engineering brainpower and that’s what it needs to harness, the conference was told.

Laurie Sparke, Chief Engineer for Advanced Engineering at Holden GM’s unit in Australia said, ”Increasing access to world markets presented an opportunity, it allows Australian manufacturers to create specialised businesses providing supplementary or niche products that are needed in the larger markets. The opportunity is to be innovative and creative and to be first into niche market opportunities.”

Holden has already grasped the nettle. Its Monaro sports car launched last year to great acclaim is now going to be sold in the United States as a Pontiac GTO. European markets are also looking at the car.

Even so Holden had to virtually put the car together in a ‘skunk works’ as there was never any formal approval for the project from GM.

Sparke added: “Australian engineers seem to have an enhanced mechanical affinity compared to engineers from other regions and cultures. Australians have a long history of innovation, solving problems in isolation from the rest of the world and using the resources at hand.”

“This innovative culture means that Australian engineers have the potential to develop innovative products and manufacturing solutions to compete in the global market place. Australian industries cannot attempt to be at the forefront of all of the emerging technologies. We must carefully select those technologies that will enable future success.”

The conference was told that industry, government and academia need to work more closely together to ensure future generations of engineers are adequately trained. There are still too many gaps due to the lack of education is using computer tools, poor integration into mainstream engineering and a mistrust of new technology.

Steve Darcy, global automotive leader at PriceWaterhouseCoopers, said, “With local car manufacturers Holden, Ford, Toyota and Mitsubishi increasing exports, particularly to the Middle East and North America, Australia will soon be one of the most highly utilised production centres in the world”.

He added, “The country is still only ranked 24th in the list of world vehicle producers. In the Asia Pacific region Japan continues to struggle to come to grips with economic problems and has seen plant closures while in Korea the domestic market is growing rapidly with new demand for SUVs”.

“The biggest threat to Australia is likely to come from developing production centres such as China and Thailand. China has the potential to be the largest car market in the world and who is to say there will not be an indigenous Chinese car manufacturer rising up to enter the top 10 vehicle makers in the next few years. It will then not be too long before China starts exporting, “ said Darcy”

This was a fear echoed by Max Gillard, Associate Director for Toyota Australia. He said: “Right now we have the most flexible and cheapest Camry manufacturing operation in the world but we can’t always rely on having this competitive edge with countries like Thailand and Malaysia raising their game.”

“The need for change has never been greater. We must change the way we operate to stay competitive because we just do not have the economies of scale that other countries enjoy in terms of the domestic market and exports. As we become more integrated into global strategies we have to move from an isolated industry to one that is globally competitive reducing our development and tooling costs and time.”

Ford Australia is hoping its new SUV, due for launch next year, can fill a niche in other markets round the world. Design Director Simon Butterworth said: “All cars in Australia are niche by North American or European standards, but we have always been good at small volumes. Suppliers have had to survive on volumes that the Europeans or North American businesses would not even look at.”

There was also a plea from the suppliers at the conference. Michael Coates, Managing Director INC Corporation said: “We need to get some help from the manufacturers. They are part of big multi nationals with operations all over the world and what we would like to be able to do is use our contact with them in Australia as an entry into their global supply chain. We do not have the resources to set up around the world on our own.”

Lutz loves ‘Golden Holden’
When General Motors’ product chief Bob Lutz visited Australia at the beginning of last year he was impressed. He went away believing that GM’s Holden unit could be held up to the rest of the company as an example of lean manufacturing.

Lutz is a big fan of what he calls Golden Holden and he sees opportunities for Australian-built cars to put some sizzle into the United States – starting with the Monaro, launched at the Melbourne Motor Show a year ago. This car is now being exported to the USA and rebadged as the Pontiac GTO. GM in Europe is also very interested.

More could follow. The Ford Territory, launched at this year’s Melbourne Show and slated for production in the second half of 2004 is a crossover vehicle which could also be attractive to other markets.

The Australian motor industry is pragmatic, however. The four assemblers, Holden, Ford, Toyota and Mitsubishi have been building exports and capacity utilization is among the best in the world – but as a car assembly base the country is still ranked 24th in the world.

Ford Territory

Making the most of what you have
It does see a prosperous future, though. It is one that draws on Australia’s history as a country that has had to make the best of what is available. It is good at engineering and it is good at small volume assembly – by being good it can make money out of it. Focus on design, research and technology is a mantra being chanted throughout the industry in Australia, from very supportive local government to the auto makers and their suppliers.

Holden’s Monaro is a case in point, a car developed with little support – or probably knowledge – from GM HQ. The Ford Territory is designed, engineered and built in Melbourne. Toyota is building a new research and development centre next to its plant in Port Melbourne and president and ceo there, Ken Asano, has a plan to build Australia-specific cars off the next Camry/Avalon platform due 2005.

A hint of this was the X-Runner ‘ute’ concept unveiled at the Melbourne Show. Utes are peculiar to Australia, a sporty two door, two seat pick-up at home in the outback or on urban roads.

Mitsubishi is extending its design centre near Adelaide. It already sends the Magna, badged Diamonte, into North America and is now planning to export a further model around 2005 or 2006.

Among the suppliers Air International has just established a global technical centre in Melbourne where Robert Bosch is invested tens of million of Australian dollars in a diode factory.

“Design research and development are critical to the future of Australian auto industry,” says Tim Holding, minister for manufacturing and exports for the State Government of Victoria. “We are good at design and we are very good at low volumes so this is where we can fill niches in terms of the industry worldwide.”

A good example he sites is at Siemens VDO which is to produce 100,000 instrument panels a year for BMW motorcycles. “It is these small volumes which other countries around the world are unlikely or unwilling to take on that sets us apart,” added Holding.

Leaner and meaner
The Australian market has been through the wringer and is now coming out the other side leaner and meaner. Despite moderate economic forecasts, aggressive marketing, pressure on prices, showroom incentive deals and new models pushed the domestic market to around 825,000 vehicles in 2002.

Expert Analysis

Australian Automotive Intelligence Report
Australian Automotive Intelligence Report is a strategic tool for companies and organisations involved in the Australian industry with: key inputs to business plans and budgets, independent analysis of trends in the Australian automotive market, research on strategic issues of direct relevance to the industry & an expanding data and information base on the industry. Discover more here.

 

Laurie Sparke, chief engineer, advanced engineering at Holden agreed that the industry has to build on its strengths. “What we do have is an abundance of engineering brain power,” he said.

“Increasing access to world markets presents an opportunity. It allows Australian manufacturers to create specialised businesses providing supplementary or niche products that are needed in the larger markets. The opportunity is to be innovative and creative, and to be first into niche market opportunities.”

Sparke added: “Australian engineers seem to have an enhanced mechanical affinity compared to engineers from other regions and cultures. Australians have a long history of innovation, solving problems in isolation from the rest of the world and using the resources at hand.”

For example, he added, Hargrave’s flying machines, the stump-jump plough, the Hill’s Hoist and the Black Box flight recorder.

“This innovative culture means that Australian engineers have the potential to develop innovative products and manufacturing solutions to compete in the global marketplace.

“Australian industries cannot attempt to be at the forefront of all of the emerging technologies, but must carefully select those technologies that will enable future success.”

Holden considers that commitment to develop flexible manufacturing processes, occupant safety and automotive information technologies, computer visualisation techniques and environment strategies to be import areas for ensuring continued success.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Monday. The industry's most comprehensive news and information delivered every quarter.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Auto