End of the Line - Holden and Toyota close the door on Australian Car Manufacturing
So here we are. The end of mass car manufacturing in Australia. And although we have known it was coming for some time - since Holden and Toyota announced they would be closing their Australian factory doors in December 2013 and January 2014 respectively - it still feels slightly surreal to acknowledge that it’s all over.
In truth, the end has been coming for a good deal longer than four years.
Nine years ago, Mitsubishi ceased manufacturing at its Tonsley Park plant in Adelaide, three years after it had closed its engine plant at Lonsdale. At the time, CEO Robert McEniry was pretty clear on the reasons, highlighting the impact of exchange rates, the need for exports and the buying patterns of customers which had seen sales of its Australian-made model, the 380 sedan, dwindle to around 10,000 units.
Along with talk of a marketplace chock-full of choice (more than 60 brands were, and are, sold in Australia), it was a refrain that would be repeated by Ford in May 2013 when it revealed it would be winding up its manufacturing operations, and again a few months later by Holden and Toyota.
Add to that a reticence on behalf of the federal government to hand over any extra money above the hundreds of millions in support taxpayers were already giving the industry through devices such as the Automotive Transformation Scheme, and the odds were that home-grown manufacturing was doomed.
“The decision to end manufacturing in Australia reflects the perfect storm of negative influences the automotive industry faces in the country, including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world,” said Dan Akerson, Chairman and CEO of Holden’s parent company, General Motors in 2013.
“This has been a difficult decision given Holden’s long and proud history of building vehicles in Australia,” added Mike Devereux, Holden boss at the time. “When we look at the business model (of assembling cars in Australia), it is not viable going into the future.
"We have looked at every possible option to build our next-generation cars here. No matter which way we apply the numbers, our business case to make and assemble cars and engines in this country is not viable."
With Holden’s decision made, it made Toyota’s departure from manufacturing almost assured. In a statement released shortly after Holden made its announcement, Toyota said: “We are saddened to learn of GM Holden’s decision. This will place unprecedented pressure on the local supplier network and our ability to build cars in Australia.
“We will now work with our suppliers, key stakeholders and the government to determine our next steps and whether we can continue operating as the sole vehicle manufacturer in Australia."
A month later, Toyota succumbed and its statement was almost a carbon copy of Holden’s.
“The market and economic factors contributing to the decision included the unfavourable Australian dollar that makes exports unviable, high costs of manufacturing and low economies of scale for our vehicle production and local supplier base. Together with one of the most open and fragmented automotive markets in the world and increased competitiveness due to current and future Free Trade Agreements, it is not viable to continue building cars in Australia.”
So, in Australia, Holden and Toyota, as with Ford and Mitsubishi before them, will transition to importers and national sales companies, with Holden also remaining part a global design studio for GM and retaining the Lang Lang proving grounds in Victoria for vehicle testing.
These manufacturers have played a vital role in Australia’s history – employing generations of workers and generating billions of dollars that flowed through the nation’s economy. And their influence was not just in the jobs they created or their economic muscle. Their cultural impact has been equally important – the Falcon and Commodore are as iconic to us as the Mustang and Camaro are to Americans or the Mini and Jag E-type are to poms. Falcons and Commodores (and Monaros and Toranas too, of course) battled it out on race tracks across the country for decades, spawning a motorsport, and fan, rivalry second to none. And the fact that deep-pocketed Australians are willing to part with hundreds of thousands of dollars to buy cars that are 50 years old and more, and which would struggle to get a single ANCAP safety star, is proof of how much we value them.
While most of us have a measure of sorrow that these companies, which have been so important to the nation’s economic welfare and created and built such iconic vehicles, are turning the production lines off, the deed is done and the question raised now is what will become of the wider industry.
For the several thousand skilled workers who have lost their jobs, and the many businesses within the automotive supply chain that now have no one to supply, the future is uncertain. There has been some time to prepare, and the automotive companies and governments, both state and federal, have assistance programs in place including the Automotive Industry Structural Adjustment Programme, the Skills and Training Initiative, the Automotive Diversification Programme and the Next Generation Manufacturing Investment Programme. These initiatives are designed to assist retrenched automotive workers with intensive employment support and training for new jobs; help automotive supply chain firms find new markets; and drive private sector investment in high-value manufacturing sectors.
While it is hoped that these initiatives pay off, and there are certainly success stories out there already, the true outcome won’t be known for some time.
And so, this is new territory we find ourselves in and, in truth, the demise of automotive manufacturing here has coincided with the first shudders of a seismic change in the global industry which, in perhaps a decade or so, will see the industry evolve into a completely different beast.
That evolution is highlighted in part of a new report, Directions in Australia’s Automotive Industry: An Industry Report 2017, that was produced with input from Motor Trades Associations from across the country, including MTA Queensland.
Comprehensive in nature with a focus on industry trends over the next three years, the report also discusses longer-term trends.
"There is a great level of uncertainty and speculation concerning future directions and outcomes facing the automotive industry over the next few years. Whilst the closure of passenger car and component manufacturing has been associated by many with the demise of the automotive industry, realistically this is not the case, as manufacturing represents only a small percentage of automotive industry operations.”
And that, of course, is true.
While many jobs will be lost, and that is a painful reality, the industry as a whole remains in rude health. More than 360,000 people will remain employed within the industry, from repair shops to tyre fitters to vehicle retailers, and its contribution to the Australian economy will continue to be vast – in 2015/16 that contribution amounted to $37.1 billion, or 2.2 per cent of the nation’s GDP, and it will fall just a fraction to $35.1 billion with the end of manufacturing.
The report goes on to mention the developments in automotive technology.
“ . . . it is claimed that automotive technology is on the cusp of greater change that could revolutionise not only transport, but urban planning, government policy, work and society in general. Many stakeholders believe that the next decade will see the creation of innovations that will impact the automotive industry more than over the previous century. In particular, trends and innovations relating to electric, autonomous and connected vehicles could potentially create a tipping point of disruption for the automotive industry . . . “
Evidence for this is already coming in.
The UK and France have already signalled they will ban the sale of petrol and diesel vehicles by 2040 and even China has indicated it will do the same; German regulators have drafted a set of guidelines dictating how autonomous vehicles should ‘behave’ in certain situations; most western nations, including Australia, are testing autonomous vehicle technologies and considering the infrastructure changes that have to be made to accommodate them; all-electric cars, though currently (no pun intended) just a blip in terms of sales, are coming in a big way with every major manufacturer now turning their attention, and their billions of R&D dollars, to their development.
These cars will be so stuffed with technology – from the computers that run them to the technology that connects them to the world – that they will be as much a mobile entertainment and communications system as they will be a way to get from A to B.
In time, there will likely be a shift in manufacturing, perhaps using 3D printing and lighter and stronger materials. 3D printing will be used to produce spare parts as well – perhaps on demand and on-site at a local mechanical or smash repair workshop.
And the public will use cars differently too. As the Directions in Australia’s Automotive Industry report mentions: “There is emerging evidence of a transition away from car ownership and towards car access. This trend is evident particularly amongst millennial customers, many of whom are struggling to find full-time employment and have developed a sharing mentality about services. Many see little separation between car sharing, rental, leasing and ownership, with cars being increasingly viewed as only one of the means that can move them around, rather than defining who they are.”
While we will have to come to terms with the fact we are no longer a car manufacturing nation, the companies themselves – Holden, Toyota, Ford and Mitsubishi – will likely thrive. With the weight of their global parents behind them, they will be selling, maintaining and repairing a model fleet of increasingly excellent, sophisticated vehicles.
And the industry as a whole can thrive along with them by recognising that change is coming, and adapting and evolving along with it.
Holden, Toyota, Ford and Mitsubishi might be gone as manufacturers, but the automotive industry is here to stay.