Outlook for the Automotive Manufacturing Industry Fact Sheet 

KEY POINTS

• The Australian automotive industry is a key employer, with around 60,000 people working in the automotive sector, and as a key driver of R&D throughout the economy, the industry has a vital future role in Australia.
  
• New vehicle sales in Australia for the fiscal year 2007 were 1,068,301 vehicle sales, an increase of 64,419 over the previous record.  To the end of September 2008, sales of all vehicles are up 0.3 per cent on the same period in 2007.  Despite this, year to date sales of all Australian built vehicles are down 14.7 per cent in 2008 on the corresponding period in 2007. Locally built vehicles made up 17.6% of total new vehicle sales in September 2008.
  
• The Australian automotive manufacturing industry faces some serious competitive pressures, as does the automotive industry worldwide, where there is up to 20 per cent overcapacity.  
  
• The future of the Australian automotive industry lies in increasing exports to key markets, including the Middle East.  Last year, exports of vehicles exceeded 140,000 units.
  
• The industry’s future wellbeing also depends on its ability to respond to the competitive pressures and challenges it faces, by developing and producing innovative products – this may include more fuel efficient and environmentally friendly technologies such as hybrids.
  
• The Government has already announced the $500m Green Car Innovation Fund, to commence in 2011, which will generate a total investment of $2 billion in new and innovative technologies.
  
• The Government is considering the report of an independent and broad-ranging Review of Australia's Automotive Industry, which also dovetailed into the concurrent Review of Australia's National Innovation System.
  
• The automotive review was led by former Victorian Premier, the Hon Steve Bracks.  The review consulted with a broad range of stakeholders to identify ways of overcoming barriers to success and to take advantage of new opportunities.
  
• The automotive review considered the impact of climate change on the industry, the impact of changing consumer preferences and made recommendations on the implementation of the Green Car Innovation Fund. 
  
• The future of the industry is dependent on attracting investment, building up skills, encouraging research and development and ensuring that government programs are effective and efficient. The Automotive Competitiveness and Investment Scheme is an important element of government policy. The review will assist laying down a new set of principles to make the industry sustainable into the future.
  

FACTS AND FIGURES

New vehicle sales in Australia for 2007 were 1,049,982 units, a new record for the Australian automotive industry and the first time that a million sales have been exceeded in a calendar year.  The previous record of 988,269 was set in 2005.  Despite this growth, sales of locally produced vehicles were flat with 200,485 sales, a decrease of 0.6 per cent (1,137 vehicles) on 2006, following significant decreases in the preceding 2 years.  As a consequence, the market share of locally produced vehicles fell to a low of 19.1 per cent, down from 20.9 per cent in 2006.

Comparison of Final Year Sales

Source: VFacts

The exports of vehicles in 2007 were 140,243 units, an increase of 6 per cent over 2006.  The previous record of 142,000 vehicles was set in 2005 while 2006 exports totalled 132,742.  2007 exports were valued at just over $5 billion.

Of 2007 exports, Toyota has exported just under 100,000 vehicles, mostly to the Middle East while GM Holden has exported around 36,000 vehicles, again mainly to the Middle East.  Total production in 2007 was 335,625 units (195,382 local sales and 140,243 exports), up 6,197 units on the 2006 figure of 329,428 (see table below).

TOTAL AUSTRALIAN VEHICLE PRODUCTION, DOMESTIC SALES AND EXPORT SALES

Source: VFACTS; DITR Key Automotive Statistics 

 The automotive industry is a major employer, with approximately 60,000 employees.

AUTOMOTIVE INDUSTRY EMPLOYMENT

Source: Australian Bureau of Statistics (6291.0)

REVIEW OF AUSTRALIA'S AUTOMOTIVE INDUSTRY

In February 2008, the Minister for Innovation, Industry, Science and Research announced a comprehensive Review of Australia's Automotive Industry, led by Mr Steve Bracks.  Mr Bracks was supported by an expert panel comprising:

• Mr Tim Harcourt (Chief Economist, Australian Trade Commission); 
• Mr Peter Upton (former CEO, Federation of Automotive Products Manufacturers); 
• Dr Elizabeth Webster (Principal Research Fellow, Melbourne Institute of Applied Economic and Social Research); and 
• Mr Nixon Apple (Industry and Investment Policy Adviser, ACTU).

Mr Bracks called for public submissions on 31 March 2008, coinciding with the release of a discussion paper and a background paper on the automotive industry.  These papers a provided information and identified issues for public consideration and debate.

The automotive review consulted with a wide range of stakeholders and received more than 130 public submissions.  The automotive review took account of issues raised in the concurrent Review of Australia's National Innovation System.

The Government requested that the Productivity Commission undertake modelling of the economy-wide effects of future automotive assistance options. The Commission publicly released its modelling in June 2008 to inform the automotive review's examination of the industry, public debate, and the Government's deliberations.

Mr Bracks delivered his final report to the Australian Government in July 2008 and the Government is currently considering its response.  The report was released publicly on 15 August 2008.  A copy of the report and other information on the Review, including its Terms of Reference, can be accessed at the review's website at www.innovation.gov.au/automotivereview

The report’s recommendations were predicated on changing the behaviour of automotive firms and the industry to make them more competitive and better able to meet global challenges, including the move to a lower carbon environment.  The report proposed new transitional arrangements to enable the Australian automotive industry to be world-competitive and viable.  Key recommendations covered:

• replacing the current Automotive Competitiveness and Investment Scheme with a new and retargeted Global Automotive Transition Scheme designed to support research, development, design and export;
  
• bringing forward, and doubling to $1 billion if successful, the Government's Green Car Innovation Fund;
  
• contributing to a short-term restructuring fund to assist the automotive supply chain to improve economies of scale;
  
• reducing the passenger motor vehicle tariff from 10 to 5 percent by 2010, making Australian car tariffs the third-lowest amongst major automotive-producing economies in the world;
  
• including road transport in an emissions trading scheme;
  
• encouraging automotive exports through expanded free trade agreements, particularly with the Gulf Cooperation Council, the Association of Southeast Asian Nations and South Africa;
  
• expanding access to overseas automotive supply chains through a ‘Team Australia’ approach using eminent automotive ambassadors;
  
• harmonising, and in some cases reducing, state and territory passenger motor vehicle taxes, while encouraging governments to support an environmentally sustainable Australian industry; and
  
• establishing a new Automotive Industry Innovation Council to provide advice and oversight in relation to the new transitional arrangements.