Despite its distance from
the major automotive markets and decision-making centres, Australia still has
a significant – and unique – automotive industry. Large rear wheel cars and
their pick-up derivatives (known locally as Ute’s) have dominated the market
and automotive manufacturing since the industry’s inception and these vehicle
are as synonymous with Australia as koalas and kangaroos. Despite the trend
to small cars, SUVs and other niche vehicles, Australia’s commitment to large
cars remains strong, although now for front wheel drive vehicles as well as
traditional, locally made rear wheel drives.

Australia has a vehicle
manufacturing capacity of well over 300,000 vehicles and, a strong components
sector underpinning this. The Australian car manufacturers are made up of the
local operations of Ford and General Motors (Holden), and two transplants (Toyota
and Mitsubishi). Nissan stopped production in Australia in the 1980’s, while
Chrysler formerly owned the current Mitsubishi plant. Toyota and Mitsubishi
produce cars designed and engineered in Japan. The future of the Mitsubishi
plant has been under review for many years.

At the start of the new
millennium, the Mitsubishi plant appeared destined for closure as Mitsubishi
lurched towards implosion on a corporate level. However since the stake taken
in Mitsubishi by DaimlerChrysler, its future may be more secure and rumours
have surfaced that either Mercedes-Benz or Chrysler models may be made there
for Asian markets. Ford and Holden have complete vehicle design and engineering
capabilities of their own, which have traditionally operated almost wholly independently
of their parents’ operations.

Vehicle Production in
Australia 1995-1999

Manufacturer 1995 1996 1997 1998 1999
Ford 101,731 100,115 88,852 88,491 88,258
Holden 107,345 108,006 87,662 120,381 128,205
Mitsubishi 39,724 43,916 58,386 46,375 33,234
Toyota 64,108 73,594 77,628 101,434 96,698
Total 312,908 325,631 312,528 356,681 346,395
Source:
Trade Sources


The manufacturers’ strategies vary, but they have all recognised the need for
economies of scale, involving a progressive rationalisation of vehicle production
line-ups. In the 1980’s, Australia had five manufacturers producing thirteen
different models, with plants in five states, a monument to Australian federalism,
with some model runs as low as 15,000, well below recognised levels of desirable
scale. The industry was also very insular, heavily protected by import tariffs
and with almost no exports.

The national government
was not ultimately prepared to support the industry and as a result in the 1980s
and early 1990s there was a steady reduction in vehicle production in Australia.
Volkswagen had long since left the scene, and short-lived export programmes,
including Ford Lasers being exported to the USA, were just that, short-lived.
Nissan closed its plant in 1992, following many years of losses. At the same
time the government instituted a programme of gradual tariff reduction as part
of a plan to expose the industry to the forces of international competition.

In 1988, import quotas were
abolished; tariffs on imported cars were reduced to 45 per cent and were then
reduced by 2.5 per cent a year to reach 35 per cent in 1992. Since then, for
commercial vehicles – including the increasingly popular sports utility vehicles
and pick-up trucks – the duty has fallen to 5%. For cars, however, the tariff
is currently 15% and will reach 10% in 2005. A long-standing local content scheme
to help domestic component producers was also abolished. While it may be wrong
to say that the industry is in perfect health now, a great deal has been done
and Australia is playing an increasing role in the dynamics of the global automotive
industry.

Not everyone is entirely
happy with the reduction in tariffs. In discussions held with the heads of Australia’s
car manufacturers last year, a preference for retaining the tariff regime was
clear. Indeed, one CEO intimated that without a tariff of some sort, vehicle
manufacture in Australia by that company would not continue. However, the industry
had long known how its preferential status would not last and it had taken several
steps to move away from the hitherto protected internal market and towards competing
globally.

New models and expansion
in manufacturing capacity underline the commitment by Holden and Toyota to Australia.
While commitment to Australia from Ford and Mitsubishi is undoubtedly genuine
– at least from the perspective of their local operations – these companies’
Australian futures are still being decided upon in Detroit, Tokyo or indeed
Stuttgart; for now both operations lack clear direction.

As the accompanying market
data table shows (below), imported brands are numerous; they have increased
steadily in importance for many years and this will certainly continue in line
with tariff reductions. Holden and Toyota especially (and Mitsubishi to a lesser
extent) have tried to compensate for this increased export effort. Certainly,
Toyota and Holden have clear export strategies, with the Middle East at the
heart of both companies’ actions. Mitsubishi’s export efforts have been less
successful as is evident from the fact that its production levels have been
running at a little over 50% of capacity.

In terms of each major company’s operations in Australia, we can note the following:

Ford

Ford produces a number of
vehicle variants from its rear wheel drive AU163 Falcon platform, ie sedan,
estate (wagon), long wheel base (Fairmont) and high performance versions made
in association with Tickford, the UK engineering specialist which has an operation
in Australia, and a range of commercial vehicles, mainly pick-ups or Ute’s.
Vehicles are only produced in right hand drive format and mainly for the domestic
market, although there is a limited export programme for New Zealand and a number
of smaller markets, e.g. Hong Kong and South Africa; however, these volumes
are small by comparison with Toyota and Holden’s exports.

The Falcon was designed
independently of European and North American design, but it is most unlikely
that this will be repeated with the replacement vehicle. Vehicle manufacture
in Australia seems assured – as much as anything can be described as assured
in the modern automotive industry. However, the design work will almost certainly
take place in North America, with Australia in charge of engineering the car
for the local market.

Ford’s main plant in Melbourne
produces 400 vehicles a day, ie around 88,000 vehicles a year. There is also
a second plant near Melbourne, which makes engine castings and stampings/sub-assemblies
for the car plant.

Holden (General Motors)

Like Ford, Holden has a
full design development and manufacturing company in Australia. Unlike Ford,
it has a definite role within GM’s global plan, as GM’s sole large car, rear-wheel
drive operation. This role not only underpins its future as the supply point
for the local market, but it has also created a series of export opportunities,
to the Middle East primarily, but also to Brazil and a number of smaller markets.

Holden has 2 manufacturing
plants in Australia, Port Melbourne for engines and Elizabeth, near Adelaide,
for vehicle assembly. The Port Melbourne plant makes castings for engines, transmissions
and brake parts, for both Holden and for export and this plant is one of Australia’s
major manufacturing export operations, supplying South Korea, Japan, Taiwan,
Indonesia, the US, the UK, Germany, Poland, Belgium, Egypt and South Africa.

The Elizabeth vehicle assembly
plant ran at a daily rate of a little under 600 a day in 1998 and 1999. Until
Q3 2000, the Elizabeth plant will make both the European-designed Vectra and
also the locally designed Commodore, in a variety of formats, sedan, wagon,
long wheelbase and Ute. The Vectra, with its own assembly line and 30% local
content, has been made in sedan and wagon formats, with the hatchback imported.
However disappointing Vectra exports to Japan and better than expected Commodore
exports to the Middle East have made Holden re-assess the practicality of continuing
Vectra production. Hence in late 1999 the decision was taken to end Vectra production
and increase output of the Commodore and its variants – especially for export.
In the future, Holden is likely to produce a sports coupe based on the Commodore
platform at the rate of around 5,000 units a year.

Mitsubishi

Mitsubishi also has two
manufacturing locations at Tonsley Park (cars) and at Lonsdale (engines and
castings), south of Adelaide. The car plant manufactures the Magna and Verada
in sedan format for the domestic market and also for worldwide export, apart
from Japan; and also the estate for all worldwide markets, including Japan.

The car plant has a nominal
capacity of 75,000 units a year, but it is running well below that level and
has done so for some time. The car plant has its own stamping and robotic welding
lines, paint plant and full trim and assembly line. It can make left and right
drive, saloon and estate cars as required, with a single shift production capacity
of 320 vehicles a day, although current production is running below this level.

The Lonsdale plant manufactures
engines and castings and also supplies engines for the nearby car plant and
also components for export to Japan. The foundry also makes steering knuckles,
brake components, camshafts and manifolds, alongside engine blocks and heads
in both aluminium and iron.

Toyota

Toyota is the biggest vehicle
exporter and the second biggest manufacturer. It has two manufacturing operations,
one at its original home at Port Melbourne for component manufacture (bumpers,
seats, door trims and small metal pressings); and a second plant, also near
Melbourne, at Altona, where full engine and vehicle assembly operations exist.

In 1998 the factory produced
over 100,000 units for the first time, 30% of which were exported. In 1999 output
dropped below 100,000, because Corolla output ended and the assembly line was
modified to make the Avalon, a stretched version of the Camry. From 2000, once
output of the Avalon is running at full line rates, 30,000-35,000 (possibly
more) will be for exports.

Camry output has certainly
helped to sustain Toyota’s market profile in Australia, its exports are increasingly
important on a global level. The Camry is supplied to South East Asia and the
Middle East to Saudi Arabia, Oman, the UAE, Kuwait, Bahrain and Qatar; in 1999,
Yemen, Pakistan and Iran were added to Toyota’s export market portfolio.

The vehicle market

The Australian vehicle market
has risen steadily in recent years and in 1999, the total market – as shown
in the accompanying table was over 800,000 units. The first quarter of 2000
shows a 4.2% decline year on year, a reflection of people holding off vehicle
purchases ahead of the new sales tax regime due to start in July 2000. The new
sales tax regime will result in price cuts, estimated to be around 6% on average.
The industry is expecting an upturn to demand in the second half of 2000, a
period which will also be accompanied by a number of new model launches in the
country; these include the Chrysler PT Cruiser, a new range of SUV’s, MPV’s
and cars from Hyundai, the Zafira MPV and many others. AutoAsia recently suggested
that Australia could see a total industry volume of as much as 900,000 units
by mid-decade. This may seem optimistic but if the economy maintains the buoyancy
of recent years, then such a level is indeed possible.

VFACTS


VEHICLE
RETAIL SALES

NATIONAL
December
1999


Current
Year
Prior
Year
Prior

MONTH YTD MONTH YTD MONTH

Volume Volume Volume Volume Volume
TOTAL VEHICLES 72,544 786,845 71,562 807,669 69,921
Passenger 50,062 547,575 51,745 584,360 47,807
Trucks 22,482 239,270 19,817 223,309 22,114
Light Trucks 20,618 218,848 18,087 203,941 20,193
Heavy Trucks 1,864 20,422 1,730 19,368 1,921
Manufacturer / Importer Passenger
Light Trucks
Heavy Trucks
Total Vehicles
Prior Year Total

MONTH YTD MONTH YTD MONTH YTD MONTH YTD MONTH YTD

Alfa Romeo
129
1,502




129
1,502
42
311
Asia



3



3
4
43
Aston Martin
1
10




1
10

13
Audi
254
2,890




254
2,890
127
2,346
BMW
687
8,904




687
8,904
1,411
9,318
Chrysler
175
1,637
296
3,870


471
5,507
346
5,541
Citroen
26
457
15
105


41
562
39
461
Daewoo
1,792
21,069
18
448


1,810
21,517
1,201
21,772
Daf





3

3


Daihatsu
280
4,081
147
1,981
21
356
448
6,418
603
8,134
Ferrari
6
61




6
61

64
Ford
8,350
103,015
2,313
23,598
24
284
10,687
126,897
11,697
128,814
Hino




158
1,887
158
1,887
153
1,732
Holden
12,483
115,751
3,544
33,801
583
5,755
16,610
155,307
14,071
153,589
Honda
908
15,925
953
12,592


1,861
28,517
2,174
25,571
Hyundai
3,777
47,133




3,777
47,133
3,220
57,219
International




95
1,284
95
1,284
139
1,469
Jaguar
64
1,016




64
1,016
41
601
Kenworth




113
1,045
113
1,045
89
1,145
Kia
633
3,471
170
2,132


803
5,603
259
5,047
Lamborghini
1
7




1
7
1
4
Leyland









1
Lotus
4
37




4
37
2
65
Mack




63
739
63
739
50
729
Man




15
164
15
164
13
164
Maserati
4
22




4
22

9
Mazda
1,477
19,757
428
6,345
46
588
1,951
26,690
1,689
27,080
Mercedes-Benz
471
7,205
385
2,691
166
1,871
1,022
11,767
711
9,880
Mitsubishi
4,597
49,137
1,362
18,004
277
2,782
6,236
69,923
7,769
84,142
Morgan

1





1


Nissan
1,779
24,571
1,459
23,011
59
826
3,297
48,408
4,037
45,719
Peugeot
237
2,453




237
2,453
186
3,006
Porsche
94
608




94
608
55
754
Proton
172
2,263




172
2,263
305
3,182
Rolls-Royce
1
9




1
9

15
Rover
22
348
529
7,020


551
7,368
568
7,078
Saab
166
2,628




166
2,628
323
3,000
Scania




15
390
15
390
32
467
Seat

266





266
25
75
Subaru
1,014
13,555
857
11,609


1,871
25,164
1,544
20,445
Suzuki
262
3,536
324
4,414


586
7,950
615
8,413
Toyota
9,476
85,343
7,758
66,454
135
1,269
17,369
153,066
17,094
158,290
Volkswagen
425
5,444
60
770


485
6,214
611
7,375
Volvo
295
3,463


85
874
380
4,337
284
4,233
Western Star




9
305
9
305
32
353
TOTAL VEHICLES
50,062
547,575
20,618
218,848
1,864
20,422
72,544
786,845
71,562
807,669