Wednesday, January 25, 2012

Australian Automotive Manufacturing Home Truths

Roughly twice a year, Australian media goes on a little crusade to try and “reveal” the level of assistance which domestic manufacturers are currently receiving from Federal and State coffers. And, as inevitable as the rising of the sun, opinions fly about the viability or value for money obtained through these continual hand outs. To be honest, it’s pissing me off! Not the government support. Not even the genuine concern that other Australians have about the current circumstances surrounding our manufacturing industry. It is the unfounded, and often, inaccurate rhetoric that is passed on as facts. Still, you can’t expect everyone to know everything about …everything, so here are a few (literally just a general run down) of the key facts about Automotive Manufacturing in Australia.

Let’s have a look at some of the circular arguments that always seem to materialise:

They’re not even Australian Companies! They don’t even use local content!

Yes, local cars do have content from foreign manufacturers. It’s a global market place. But, making a price competitive, wholly Australian built car with 100% Australian content could only be done with manufacturing subsidies which would tower above the current level of public investment.
 Aside from that, tell me Arm Chair Industry Ministers, which car are you going to buy? How much local content is there in fully imported vehicles? More than you think, but obviously not as much as locally assembled products.

Most of the engines in Australian built cars come from Australian manufacturing plants.

The money just goes off shore to the foreign owners!

The overwhelming majority of government assistance goes to LOCAL research and development. Funds are utilized to engineer powertrains (such as engines, drivelines and gearboxes) and domestic products, to better suit Australian tastes and conditions. Holden is a leading Design Centre for the infamous US Bogey man General Motors, as is Ford Australia for their evil foreign overlords (just accept the sarcasm okay? I’m all out of smilies). As a result, their expertise, and thus, a small portion of your investment (assuming you pay taxes) does benefit the foreign parent company. The return on that investment is an international reputation that puts them in favourable stead for winning future business. Which brings me neatly to the next Furphy (if you don’t know what a Furphy is kids, google it).

They aren’t innovative enough. They’re still building Dinosaurs. They’re no longer relevant.

This is probably the most ridiculous of all misconceptions (considering 4 of the top ten in Oz are Australian made), so I’ll address it individually by manufacturer:


They still build the most popular mid size car on the market; the Camry. Not only is this Camry widely sought after in the used car market (it’s not my kettle of fish, but plenty love it) but it is also a staple of fleets looking for a reliable, cost effect vehicle. Aside from the new generation (just arrived), Toyota also locally assemble the Camry Hybrid. What the Hybrid lacks in driver involvement, it makes up for in impressive fuel economy. Try 6.0 litres/100kms (ADR Rated). 

Toyota Australia used a large portion of government research and development funds to instigate a local engine manufacturing plant. Both, the Hybrid, regular Camry, and their V6 sister car, the Toyota Aurion, are all built right here in Australia. Last year they built around 94,000 examples for local sale and export.


Ford Australia has had a tough run with their parent company placing the Oz manufacturing arm in a less than favourable position. Despite the Falcon beating Ford Taurus (a gargantuan FWD monstrosity) in packaging (interior space) and beating their halo SHO model (a gargantuan all wheel drive monstrosity) to the punch with Euro IV (that’s an emissions standard kids. Again with the googling) compliant turbo charged 6 cylinder, which would out drive it any day of the week and twice on Sundays, Ford North America declined and denied any opportunity for export.

Nonetheless, the Ford Falcon continues to innovate, with the all new LPG system bolting onto the Australian made in line 6, which shames many 4 cylinder cars for Carbon emissions and running costs, whilst returning better power than the regular Petrol iteration.

 Their impending Ecoboost 2.0 direct injected turbo engine is apparently worth raving about and is the first time the global powerplant has been used in a RWD vehicle anywhere in the world. Economy is likely to scare most mid size vehicles and rightfully shame many compact and mid-sized SUVs (Don’t kid yourself; just accept that you bought a mini-van).

Last, but not least, Ford Australia also engineered the much needed diesel V6 (originally from Land Rover) to slot into the Territory. It pulls like a truck (I recognize that many inner city folk don’t need to tow, but I didn’t exclude the merits of the Camry, so recognize the skills okay) and can handle most anything Australia can throw at it (unlike Mercedes G-Wagens which get stranded in the desert awaiting rescue).


If the Commodore is such a dinosaur, why has it sold more units in Australia for the last 16 consecutive years? That’s right: 16. Mazda 3 outsold the sedan and wagon by a few hundred units this year, but ute sales are not included, as they are classed as a commercial vehicle. That is despite the fact that the base model is now only built to order. The sport models are far and away the biggest sellers.

The HFV6 engine has dedicated engineers who work tirelessly to improve economy yet still gain power, and, both the 3.0 litre and 3.6 litre units are built right here in Australia (Port Melbourne to be exact). The 3.0 litre has it’s own throttle mapping to match Australian tastes (the US 3.0 has a sky high pek torque) . Both versions (and the GM Power train V8) can all run on 85% ethanol. In case you didn’t know, ethanol is a renewable energy source that can be extracted, not just from regular organic sources such as sugar cane, but also household rubbish and old car tyres.

Have a guess who is investing in the business case for a garbage munching ethanol plant in Victoria….
That’s right; Holden (and their partners) are investing in other industries, with the potential of creating more jobs outside of their sector.

Beyond the Commodore, Holden also locally manufactures the Cruze sedan and hatch. Boasting the largest interior in it’s class and competitive pricing, the Cruze also offers buyers a choice of 1.8 petrol, 2.0 diesel and a turbo charged 1.4 petrol (unlike Japanese and European turbos, the Belgian sourced 1.4 can run on regular unleaded). After 2 years on the market, it falls nicely into the top 5 best selling vehicles in the country. Don’t forget that: both sedan and hatch are made in Australia. For some reason, many people seem to have trouble grasping that point.

Did you know that all of them are built on the same assembly line in Elizabeth, South Australia? No, not just the Cruze sedan and hatch. I’m talking about the Cruze sedan and hatch (in four different specifications, with manual or automatic transmission and 3 different engines) as well as the Commodore sedan, sportwagon, ute, Caprice and Chevrolet Caprice PPV (google) which offer 3.0 and 3.6 Direct injected V6, 6.0 Litre V8 with AFM (you should really have google open in a separate tab by now) and associated gearboxes. This has been done so that Holden can respond to market shifts as swiftly and efficiently as possible.

Oh, and they also export to China as a Buick.

Remember, this is just the manufacturing side. I assume you are starting to glaze over by now, so I’ll just generally tell you that Ford Australia was lead developer for the new Ford Ranger (which is sold across most of the planet). Holden is also doing development work for Buick and Chevrolet. Let’s cover the international design and R&D side of things another day mkay?  All righty then.

So let’s just summarise with another old chestnut.

It’s protectionism, pure and simple.

Well duh. It is protecting one of Australia’s greatest assets: the manufacturing industry as a whole. There is an estimated 200,000 of your fellow Australians building, designing and innovating across the country. Not all of them rely directly on the Automotive industry, but most will take a severe hit if the three local manufacturers go down the gurgler. Just think for a second, what effect that will have on state and federal revenue, not just through personal income tax, but our reliance on importing goods, and, as skills decline, the importation (or off shore outsourcing) of professional services. How can states build infrastructure when you can’t pay for it?
What it isn’t, is Isolationism. In reality, our level of protection for the Automotive industry is actually the lowest in the developed world. Germany has a significant finger in its Automotive pie (German state, Lower Saxony, owns 20% of VW) and in China, you can’t even build a car unless you enter into a joint venture with a State owned company. 

We tried to play fair with Thailand, entering into a Fair Trade agreement, and they stiffed us by introducing big fat tax on six cylinder cars (essentially eliminating any opportunity for our products to reach their shores). Conversly, here are a few vehicles we import from Thailand:
Toyota Rav-4 and Hilux, Nissan Navara, Honda Jazz, Civic and Accord, Ford Ranger (Mazda BT-50) and Holden Colorado. 

For us, imported vehicles are hit with a piddling 5% tariff. Most of those products come from countries where workers do not enjoy the level of rights, nor the standard of living that we have in Australia. Don’t let anyone tell you that the luxury car tax is to blame either. That only kicks in above $57,000, so there is no excuse for Audi to cry poor when you have to pay for options in their base model A3, like cruise control and pockets in the back of their front seats (really, you can’t make this stuff up).

So next time you are at a dinner party and the discussion turns to the local Automotive industry, don’t be a chicken shit and shake your head in disapproval with the rest of the know-nothings (there is no excuse now that you know the facts). 
Be proud of what the local manufacturers are doing. Their products are Australian cars built for Australian conditions, by Australians and for Australians (and occassionally, the middle east, Asia and potentially...North America come MY2014). 

Four Australian built cars in the top ten can attest to that.

Why don’t you instead ask why, despite our sky rocketing Australian dollar, does it still cost tens of thousands of dollars more to buy a European marque than the equivalent model in the US. After all we just hit parity. Or is that parody? 

Disclaimer: some of those European cars may not actually be built in Europe. Try South Africa. Shhhhh, it’s a secret.

The truth shall set you free.

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