Outlook for the Automotive Manufacturing Industry Fact Sheet 

Key Points:

• The Australian automotive manufacturing industry consists of three car manufacturers and approximately 190 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 car manufacturers are Ford, Holden and Toyota. According to the Key Automotive Statistics, 218,258 motor vehicles were produced in Australia in 2009.
• A total of 937,328 new motor vehicles were sold on the Australian market in 2009. Of these, 15.7 per cent were Australian made passenger motor vehicles.
• The value of Australian automotive exports in calendar year 2009 was $3.1 billion. Of this, $1.8 billion was motor vehicles and $1.3 billion was automotive components.
• The automotive manufacturing industry spent $798 million in 2007-08 on R&D.
• The automotive manufacturing industry employs over 50,000 people directly.

Facts and Figures

The automotive manufacturing industry is a strategically important part of the Australian economy in terms of the investment, jobs, skills, research and development, innovation and exports generated by the industry.

Research and Development

R&D in the automotive manufacturing industry benefits the entire economy, through the industry's extensive linkages with other sectors, such as heavy engineering, marine and aerospace. The motor vehicle and motor vehicle parts manufacturing industry spent $798 million in 2007-08 on R&D.

Industry Value Added

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

Automotive Industry Employment

The automotive industry is a major employer in Australia, with over 50,000 people working in the motor vehicle and parts manufacturing sector alone.

Source: Australian Bureau of Statistics (6291)

Automotive Sales

New vehicle sales in Australia for 2009 were 937,328 units, 7.4 per cent below sales for 2008. Although this is a moderate decrease, Australia performed well compared with greater decreases in countries such as the USA and Japan. Sales of Australian made vehicles in 2009 totalled 147,680, down 13.9 per cent on 2008. As a consequence, the market share of locally produced vehicles fell to 15.75 per cent, compared to 16.9 per cent in 2008.

Comparison of Yearly Sales

Source: VFacts

The Federal Chamber of Automotive Industries (FCAI) has said that 2010 will be ‘a year of consolidation’ for the automotive industry, following the challenges of 2009. The FCAI has revised an estimate of 980,000 vehicles to be sold in Australia in 2010. Strong year to date sales (to end July) suggest that this figure may well be achieved or even exceeded and 2010 sales may be closer to 1 million.

Automotive Production

Australian Vehicle Production, Domestic Sales and Export Sales (Calendar Year)

Source: VFACTS; KAS

Global automotive production is changing rapidly. China and India have significantly increased production of vehicles and components over the past decade. Most of these vehicles go to China and India’s expanding domestic markets, with exports growing more slowly. In contrast, there has been a slump in the production of higher-value, export oriented vehicles from the US, Japan and Europe. As a result, a shift in volume vehicle production away from traditional centres and towards China and India is being observed.

Automotive Exports

The Australian automotive manufacturing industry is one of the country’s largest export industries.  The value of Australian automotive exports in calendar year 2009 was $3.1 billion. Of this, $1.8 billion was motor vehicles and $1.3 billion was automotive components. The majority of exports go to the Middle East, the United States and New Zealand. The graph below illustrates recent export performance.

Source: DFAT Stars database

Comparison of Yearly imports and exports

Vehicle exports in 2009 were 72,503 units, an decrease of 55.5 per cent on 2008, when exports reached a record high of 163,718 units.  The previous record of 142,022 units was set in 2005. The Middle East is Australia’s largest export market for vehicles.

Japan is Australia’s largest source of imported vehicles, followed by Thailand, the EU and Korea. 

Changing consumer preferences

While the sector has enjoyed strong growth in export markets, (notwithstanding 2009) its share of the domestic market has fallen from 30.2 per cent in 2002 to 15.7 per cent in 2009.  VFACTS data indicates a long term consumer trend towards smaller, lower fuel consumption cars and, to a lesser degree, towards SUVs. This is away from the larger cars traditionally produced in Australia. Production plans announced by motor vehicle producers in the past year show that they are responding to this trend with more fuel-efficient and environmentally-friendly technologies.

For example, through support from the Green Car Innovation Fund, Toyota commenced production of the hybrid Camry in December 2009 and now it's on sale.

Also with support from the Green Car Innovation Fund, Holden will shortly commence production of a small car in Australia and Ford will apply a fuel-efficient EcoBoost, four cylinder, turbo-charged engine to the Ford Falcon from 2011.

What was been the impact of the GFC on the industry?

The GFC has significantly impacted on the Australian automotive industry. As shown in the Value of Automotive Exports graph above, export sales were greatly affected. In addition, the GFC quickly eroded domestic demand for vehicles as businesses and individuals limited spending. Indeed, household spending on cars fell by more than any other spending category in the December 2008 and March 2009 quarters.

As a consequence, vehicle sales fell significantly, meaning motor vehicle producers, component producers and car dealerships had to make difficult decisions, including cutting back on production and in some cases, staff.

However, despite these very difficult circumstances, the Australian automotive manufacturing industry is making a solid recovery. In 2009 vehicle sales were higher than were forecast by industry immediately after the crisis, boosted by a solid 2nd half performance. Moreover, Australian car sales performed well compared with the larger decreases in car sales that occurred in the USA and Japan. In a further encouraging sign, vehicle sales have improved for each of the first six months of 2010 as compared with 2009, including an all time record month in June.

How did the Government supported the industry in the face of the GFC?

  The Government put in place a number of key measures to support economic activity and Australian jobs. In anticipation of weak demand for new vehicles, the Government in 2009 introduced a $2.7 billion tax break to business, as well as other general stimulus measures. Under the plan, businesses were able to temporarily claim an additional 30 per cent tax deduction on eligible assets acquired before 30 June 2009. The tax break included business vehicles, a significant proportion of which are often Australian made. In the May 2009 Budget, a further tax deduction of 50 per cent for small businesses, available until 31 December, was announced.

The business tax break had a significant positive impact on sales to businesses, and notably, a number of Australian made models. In a media release made on 10 January 2010, the Federal Chamber of Automotive Industries said that the Government’s business tax break had led to a tangible increase in business vehicle purchases throughout 2009. Overall business sales for 2009 were down just 1.2 per cent on 2008 figures, compared with a 7.4 per cent decrease in total sales.

An additional measure that helped to stabilise the automotive market was the OzCar scheme, announced on 5 December 2008. With the support of the Australian Government and the leading Australian banks, the OzCar scheme, helped to 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.

A New Car Plan for a Greener Future

The Government is implementing A New Car Plan for a Greener Future. This $6 billion plan is assisting 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 $1.1 billion 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
• 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.