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Australia: Is the end of local car manufacturing near?

Holden Commodore Australia June 20132013 Holden Commodore. Based on its CEO's most recent declarations, Holden could stop manufacturing in Australia (and anywhere in the world for that matter) as early as 2016.

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The answer is yes, and it could well be in 2016.

A little over a month ago, Ford announced it was pulling out of manufacturing Australia in 2016. At the time, both Holden and Toyota, the two remaining local manufacturers, assured the press that they were in Australia to stay and stopping production was definitely not on the cards. In the space of one month though, things seem to have taken a completely different turn, with Holden CEO Mike Devereux multiplying declarations inferring that Holden will stop manufacturing cars locally if factory worker pay cuts are not accomplished.

Problem is, if Holden leaves Australia, Toyota will have to as well, because parts suppliers need the scale and output of both Toyota and Holden to remain viable. And this would mean the end of car manufacturing in Australia, pure and simple.

Toyota Camry Australia June 2013It is estimated that Toyota loses money on each locally-produced Camry it sells in Australia.

In a very informative article published this morning on news.com.au, automotive specialist Joshua Dowling says Holden has made a complete u-turn in the last few weeks. While Devereux reaffirmed last month that Holden would "inject $1 billion in this country and secure production of two all-new global vehicles all the way out to 2022", Dowling remarks that "last week Holden sounded like it might shut its local factories at the same time as Ford" in 2016, with the almost certain knock-on effect that Toyota would leave too.

"If we don't accomplish (factory worker pay cuts) it is highly likely we will not make cars in this country,'' Devereux said. "We have to reduce the cost to make each car, which is too high in this country." Devereux also admitted that Holden makes a loss on locally built cars and only makes a profit from imported models. Dowling points out that "the Cruze is manufactured in 9 other factories around the world, one of which is in Thailand, which has a free-trade agreement with Australia. It's not too hard to figure out Holden could import the Cruze into Australia from Thailand and actually make a profit rather than build it here at a substantial loss".

Holden factory 1950sHolden factory in the fifties

In that context, Dowling recognises "It is therefore hard to figure out why, against the odds, Holden is fighting so hard to keep its loss-making factories", a point of view I happen to share. One of the main reasons Holden wants to try and continue making cars in Australia is because closing its factories could have a devastating effect on its brand image and sales. And this comes just weeks after the all-new Holden Commodore was released, still a very important model for the brand even though it is now out of the Top 10 best-sellers after spending 15 consecutive years at #1.

However, Dowling reckons that "switching purely to imported models would barely leave a dent on Holden's sales". The reasoning being that most Holdens currently sold in Australia are already imported, rebadged Chevrolets anyway. This is factually correct, however ask punters that purchased a Holden Barina (aka Chevrolet Sonic), Captiva or Colorado ute and a majority will probably assure you their car is manufactured in Australia, being a Holden. And this is where I agree with Holden (and disagree with Dowling), in the fact that when Holden pulls out of Australia (and not if), their market share will drop.

And if Holden goes, Toyota will have to go too... (see the rest of the article below)

Previous post: Australia May 2013: Toyota Corolla overtakes Mazda3 year-to-date

Ford post: Ford pulls out of Australia

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Categories: Australia
  1. October 18th, 2013 at 09:48 | #1

    I’m with you, I feel for the workers and their families. Labor costs are the key, being competitive is hard when you have China and Japan to contend with

  2. September 18th, 2013 at 18:00 | #2

    Sad to know about it…..local car manufacturer are going to close there business here in Australia, although they were launching nice models in previous days. Because Holden is a ancient company of manufacturing cars people are concerned emotionally they’ll miss it for sure.

  3. BooBoo
    September 7th, 2013 at 01:08 | #3

    It is sad that car manufacturing will come to an end in Australia. I feel sorry for the workers and their families.
    High wages and operating costs have felled the death knell on manufacturing in Australia.i find it interesting, that while tears are being shed for Ford and GM, no sampathy was shown to Mitsubishi when it exited Australia. mitsubishi was trashed as a inept company that left Australian workers in the lurch and took taxpayers money. Ford and GM , did or will do the same, but its sad because they are family. While Mitsubishi is asian. The next Prime Minister would do well to woo Asian automakers like Honda, Toyota, Mazda and Hyundai. They are competitive unlike the Europeans and Americans who do best is a protected market. Incidentally. What will happen to the taxi fleet once the Falcon and Commodore are gone. Will it be Korean Sonatas or Australian Camrys.

  4. July 6th, 2013 at 20:08 | #4

    Informative post it is very difficult for the workers there its better to select them for the new plants starting over there

  5. June 27th, 2013 at 16:41 | #5

    It is sad, Ford have stopped manufacturing vehicles here in the UK after about a hundred years (although they still make a huge number of engines and transmissions) with Transit van production being transferred to Turkey, the plant in Genk in Belgium is being closed next year with the loss of 4,300 jobs (the Mondeo will now be made in Spain) and now Australia, it is the end of an era, I also feel sorry for the workers and their families in the three countries, General Motors have also had to close plants recently, Antwerp, Belgium and now soon, Bochum in Germany, it is much cheaper to manufacture in Eastern Europe, Turkey, Thailand, India etc., Peugeot, Renault, Citroen, Fiat and others have either closed or will close plants due the sad state of the European car market.

  6. Brandon
    June 26th, 2013 at 07:10 | #6

    Sad, but inevitable. Australia’s opening markets due to low tariffs, free trade agreements, and high labor costs, including a much smaller market means manufacturing in Australia was pretty much doomed. It was a matter of when manufacturing will cease not if. I feel for the workers and their families.

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