Australia: Is the end of local car manufacturing near?

June 25, 2013
Matt Gasnier

2013 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.

It 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 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)