Outlook for the Automotive Manufacturing Industry Fact Sheet 

KEYPOINTS:

• The Australian passenger motor vehicle (PMV) industry consists of three car manufacturers and more than 200 component, tooling, design and engineering firms. The industry is largely based in Victoria and South Australia, with a small share of activity in New South Wales.
  
  
• The three motor vehicle producers are Ford, Holden and Toyota. According to the Federal Chamber of Automotive Industries, in 2008, 324,118 motor vehicles were produced in Australia.
  
  
• In 2008, a total of 1,012,164 motor vehicles were sold on the Australian market. Domestic sales of Australian made passenger motor vehicles and derivatives totalled 171,432 vehicles, or 16.9 per cent of the total Australian motor vehicle market.
  
  
• The value of Australian automotive exports in 2007-08 was $5.6 billion. Of this, $3.75 billion was motor vehicles and $1.89 billion was automotive components.
  
  
• The industry spent $648 million in 2006-07 on R&D, and employs around 3,200 staff in research positions.

FACTS AND FIGURES

The Future of Australia's Automotive Industry

The automotive manufacturing industry makes a vital contribution to Australia's economy and society. It is a key driver of innovation, employs around 63,000 people and exports from the industry were valued at $5.6 billion in 2007-08.

There are many opportunities for growth available to the Australian automotive industry including demand for cleaner technologies and emerging overseas markets. At the same time, the industry faces some serious competitive pressures, as does the global automotive industry.

Exports

The Australian automotive sector has become an export success and is of growing significance to the Australian economy. It is one of the country’s largest export industries, ahead of traditional commodities such as wheat, wool and beef. In 2008 exports exceeded 160,000 vehicles, approximately 48% of total domestic production. Although the industry is increasingly reliant on exports to the Middle East, the United States and New Zealand, there are opportunities for diversification and growth in emerging markets such as China, Russia and India.

Changing consumer preferences

While the sector has enjoyed strong growth in export markets, its share of the domestic market has fallen from 30.2% in 2002 to 16.6% in 2008. This is indicative of a long term consumer trend towards smaller, cheaper, lower fuel consumption cars, away from the larger cars traditionally produced in Australia. Recent years have also seen growth in sales of Sports Utility Vehicles in Australia. This trend has weakened with the financial crisis. Also, because sales are focused within a particular age group, this trend may not prove as long term as the trend towards smaller cars.

The future success of the local manufacturing sector will be largely determined by its ability to respond to these challenges. Production plans announced by MVPs in the past year show that they are responding by developing more innovative products –including more fuel-efficient and environmentally-friendly technologies. For example, Toyota plans to build the Camry hybrid locally from 2010; Holden have announced plans to produce a small car in Australia from 2010 and Ford will build the Focus in Australia from 2011.

Research and Development

R&D in the automotive industry benefits the entire economy, through the industry's extensive linkages with other sectors, such as heavy engineering, marine and aerospace. The industry spent $648 million in 2006-07 on R&D, and employs around 3,200 staff in research positions.

The automotive sector produced $5.8 billion of industry value added in 2006-7 which is 5.9% of industry value added for the manufacturing industry ($99 billion) and 0.8% of total Australian industry.

Niche Markets

The relatively small scale of production in Australia allows specialisation in niche markets and flexibility to vary production in line with market demand. Strengthening this capacity further will depend upon attracting investment, building up skills and encouraging research and development.

How will the Government contribute to the future of the industry?

The Government launched A New Car Plan for a Greener Future on 10 November 2008. The Government will provide $6.2 billion to assist the automotive industry to prepare for a low carbon future and to make the industry indispensable to global markets and supply chains.

A New Car Plan for a Greener Future consists of:

• a new, better targeted, greener assistance program, the Automotive Transformation Scheme (ATS), running from 2011 to 2020–21 and providing $3.4 billion to the industry;
  
  
• an expanded Green Car Innovation Fund of $1.3 billion brought forward to 2009 and running over ten years;
• changes to the Automotive Competitiveness and Investment Scheme in 2010 to smooth the transition to the ATS ($79.6 million);
  
  
• $116.3 million to promote structural adjustment through mergers and consolidation in the components sector and facilitate labour market adjustment;
  
  
• $20 million from 2009–10 to help suppliers improve their capabilities and their integration in complex national and global supply chains;
  
  
• $6.3 million from 2009–10 for an enhanced market access program;
  
  
• a new Automotive Industry Innovation Council, bringing key decision makers together to drive innovation and reform; and
  
  
• a $10.5 million expansion of the LPG vehicle scheme that doubles payments to purchasers of new private use vehicles that are factory fitted with LPG technology.

For more information on A New Car Plan for a Greener Future visit www.innovation.gov.au/newcarplan

What is the impact of the global financial crisis on the industry?

The global financial crisis has impacted on the automotive industry both domestically and internationally. The Automotive industry was arguably one of the first to be impacted by the crisis. Sales have fallen considerably with sales for March 2009 falling 17.1% compared with March 2008. Lack of finance to the industry has meant motor vehicle producers, component producers and car dealerships have had to make difficult decisions, including cutting back on production and in some cases employment.

In the face of this situation the Government is doing all it can to support economic activity and Australian jobs. In the current climate weak demand for business, rental and fleet buyers may soften sales of large cars; the type predominately produced in Australia. In anticipation of this, the Government announced a $2.7 billion business tax break to business on 4 February 2009. Under the plan, businesses will be able to temporarily claim an additional 30 per cent tax deduction on eligible assets. The tax break will apply to business vehicles, a significant proportion of which are often Australian made. This will give businesses a vital incentive to invest for the future with flow on benefits to sectors such as the automotive sector.

On 5 December 2008, the Australian Government announced the establishment of a Special Purpose Vehicle (SPV) with the support of leading Australian banks to help provide critical wholesale floorplan financing to those viable car dealers that were financed by GE Money Motor Solutions and GMAC, prior to their withdrawal from the market. The SPV is a transitional funding arrangement – it is not designed to provide an on-going and indefinite line of credit to car dealers. It is expected that viable car dealers will negotiate acceptable credit lines with finance providers over the next 12 months.

Automotive Facts and Figures

New vehicle sales in Australia for 2008 were 1,012,164 units, only the second time that a million sales have been exceeded in a calendar year. Sales of Australian made vehicles in 2008 totalled 171,432, down 29,053 on 2007. As a consequence, the market share of locally produced vehicles fell to 16.9 per cent, compared to 19.1 per cent in 2007, and 20.9 per cent in 2006.

Comparison of Yearly Sales Source: VFacts

	2006	Change	2007	Change	2008	Change
Total Vehicles	962,666	-2.6%	1,049,982	9.1%	1,012,164	-3.7%
PMVs	598,394	-1.7%	636,965	6.5%	596,765	-6.4%
Aust Made Vehicles	201,622	-19.0%	200,485	-0.6%	171,432	-14.5%
SUVs	170,847	-5.2%	198,230	16.0%	194,458	-2.0%
Light Trucks	161,791	-3.6%	177,556	9.7%	185,016	4.2%
Heavy Trucks	31,634	1.1%	37,231	17.7%	35,925	-3.6%

Comparison of Yearly imports and exports

Vehicle exports in 2008 were 162,929 units, an increase of 14 per cent over 2007. The previous record of 140,106 units was set in 2005, while in 2007 exports totalled 139,297 units. Total automotive exports in 2007-08 were valued at $5.6 billion.

In 2008, Toyota exported just over 100,000 vehicles, mostly to the Middle East while GM Holden exported around 57,000 vehicles, again mainly to the Middle East. Total domestic production in 2008 was 324,118 units, down 11,507 units on the 2007 figure of 335,625 (see table below).

Total Australian Vehicle Production, Domestic Sales and Export Sales

	2003	2004	2005	2006	2007	2008
Domestic sales	276,392	274,537	248,912	201,622	200,485	171,432
Export sales	120,178	131,474	142,022	132,742	140,243	162,929
Total sales	396,570	406,011	390,934	334,364	340,728	334,361
Total domestic Production1	406,668	407,537	387,821	328,512	335,625	324,118

Source: VFACTS; DIISR Key Automotive Statistics; FCAI

Automotive Industry Employment

The automotive industry is a major employer in Australia, with around 63,000 people working in the sector, 93 per cent of whom are employed full-time. It is estimated that a further 100,000 jobs directly or indirectly depend on the automotive industry in industries such as steel, glass, plastics and services.

	Aug 2002	Aug 2003	Aug 2004	Aug 2005	Aug 2006	Aug 2007	Aug 2008
Employment2	67,375	78,925	74,275	70,750	77,950	70,700	63,050

Source: Australian Bureau of Statistics (6291)

References

1. Total domestic production and total sales may differ due to changes in stock levels
2. These figures are an annual average of the previous four quarters to August

For further information

Phone: +61 2 6213 7088
Email: auto@innovation.gov.au
Web: www.innovation.gov.au/newcarplan