Breaking news: In a press conference that started 30 minutes ago, Ford Australia President and CEO Bob Graziano has announced that Ford is pulling out of manufacturing cars in Australia in October 2016. Graziano has confirmed local production of the Falcon, Falcon ute and Territory will continue until then, but these are models that are almost solely sold in Australia so the volumes will be low.
Why do I write about this now? Simply because Ford had been a huge part of the automotive culture in the country, manufacturing cars in Australia since 1925 when it assembled the legendary Model T. Ford is considered an Australian brand here, in the same way it is considered an English brand in the UK. So this event is similar to Volkswagen announcing they stop manufacturing in Germany, Ford pulling out of the US or Renault giving up producing cars in France…
This announcement comes as most global manufacturers are adding hundreds of thousands of production capacity in China, as I detailed in my “China: Return to explosive growth predicted” article yesterday. Among them, Ford will be doubling its production capacity there by 2015 to reach 1.2 million annual units.
The main two reasons for this pull out are market fragmentation and production costs. If you are a regular reader of BestSellingCarsBlog, this would not come as a surprise. Ford’s traditional local best-seller the Falcon has seen its sales drop by 81% over the last decade, going from 73,220 units in 2003 (#2) to just 14,036 in 2012 (#21) and hitting a lowest-ever 717 units in April, which placed it outside the Top 30 most popular models in the country.
Bob Graziano announced that the Falcon nameplate will be retired when production ceases in October 2016, putting an end to 56 years of activity in what was the longest-running nameplate in Australia and one of the longest ones in the world. As a brand, Ford had been on the Australian podium for the best part of the last 90 years, but is down to #6 year-to-date in 2013, below Toyota, Mazda, Holden, Hyundai and Nissan.
More details below.
Bob Graziano said it costs twice as much to manufacture cars in Australia as it does in Europe and 4 times as much as in Asia.
That General Motors (with the Holden brand), Ford and Toyota were all still manufacturing in Australia was a little bit of an anomaly in the current car world. Locally produced cars sell in less and less volumes year after year, and export markets have also thawed down. Ford is currently only producing 40,000 units a year in Australia, which is going down towards 30,000 and this simply doesn’t provide the necessary economies of scale for the brand to stay competitive. As a comparison, the only two remaining local manufacturers, Toyota and Holden, both produce a little bit over 90,000 annual units locally.
Source: Ford, Sky News.