Why Did The Car Industry Fail In Australia?

Australian Car Manufacturing Industry

The car manufacturing industry in Australia depicts a progressive manufacturing journey that has had a tremendous impact on the lives of many Aussies. The car industry is still revered despite the many setbacks that have marred it. A keen look into the Australian auto industry history reveals its impact on shaping the country's local production.

This article will discuss how the Australian car manufacturing industry was born, with some top brands dominating it before their untimely demise. Before the end of an era came, there was its birth. Will there be a rebirth? Let's find out!

The Birth Of The Car Manufacturing Industry AUS

The Phaeton was the first steam car introduced in Australia by Edward Homes and Herbert Thomson in 1896. The first experiment was a drive from Bathurst to Melbourne. With an average speed of 14 km/h, the car covered roughly 790 kilometres in slightly above 56 hours. This feat consequently spurred a keen interest in further research and development of motor vehicles in Australia.

In 1901, Harley Tarrant sought to satisfy Australia's demand for automobiles by developing its first petrol-driven car. The petrol-powered engine makes Tarrant's prototype popular as arguably Australia's first car. Tarrant's impact on the local auto industry became more evident in 1906 when he lobbied for improved traffic regulations in support of the Motor Importers Association.

After that, Tarrant was fortunate enough to score the Commonwealth military motor transport tender when the first world war broke out. As much as the war saw a massive spike in local motor production, Tarrant motors received a lot of backlash due to damage to the Australian auto industry's reputation. As a result, Tarrant Motors' duty to the Commonwealth military motor transport ended.

The last years of world war I also saw a decline in Australia's car manufacturing industry. Furthermore, the 1917 trade restrictions strained Holden's production output, thus putting more pressure on the car manufacturing industry's productivity.

Global complications

Despite global complications trickling from the Great Depression's toll on the car industry, production displayed signs of recovery in the 1920s. Ford Motors became the first motor vehicle company to set up camp in Australia in 1925. But then Holden Motors, in association with General Motors, formed General Motors Holden Limited, thus becoming Australia's number one car manufacturer in 1926.

The subsequent ten years saw a tremendous improvement in the country's car industry, with Holden opening assemblies in Port Melbourne and Sydney. The only setbacks that marred the industry onwards came during the second world war (1939), with significant strains on production.

The Evolution Of The Australian Car Industry

Even though the second world war severely impacted the Australian car industry, the period after that war saw the industry receive massive support from the Australian Government. At that time, cars were a mark of the ensuing modernity and progression, hence why the car industry got enormous government support. This meant that the industry was set to evolve beyond expectation.

Well, what could go wrong when the Government is on your side? The years that followed the second world war saw companies like Holden enjoying massive successes. By 1948, Holden had developed its first badge for the FX model, with the Holden Ute following in 1951. The Holden FX retailed at close to 733 Australian Dollars, equivalent to approximately 23,600 Australian Dollars in modern currency.

As 1953 approached, Holden started designing new models, such as the Holden FJ, that would later be popular in 17 different countries. Holden became a famous car brand, and by 1958, the company had opened another production facility in South Australia. The 1950s saw one of ten households owning a car. Germany, the United States, and Great Britain were some of the countries shipping cars during that era.

With the evolution of technology in the 1950s, manufacturers started making faster and more modern cars fitted with devices like transmitter radios. As a result, more expensive cars such as Jaguar, Ford Zephyr, and Rover were introduced into the Australian market. And as European car models gained popularity in Australia, manufacturers like Peugeot, Volkswagen, and Renault opened car assemblies in the country. These were the redefining moments of the car manufacturing industry in Australia.

Holden's era was born

As years passed, Holden's era was born. The company invested approximately 11 million Australian Dollars in enhancing development and expansions in 1952. Holden was able to expand into New Zealand, and by 1956 the company was shipping cars to Thailand and Malaysia.

During that time, it was said that one couldn't pass three cars without seeing a Holden among them on the Aussie roads. The following years saw Holden leading, whereas other car manufacturers followed in the car industry. For instance, in 1960, Holden's growing popularity resulted in the release of the Ford Falcon in a bid to foster competition.

However, the release did not have a significant impact as Holden trumped Ford in car sales with industry-leading figures. By 1962, Holden had already sold roughly 1 million vehicles in Australia. The car manufacturer also saw the number of manufacturing plants increase to seven. This only meant one thing, which is the production output had increased.

The later years were followed by Ford and Toyota

The later years of the 1960s were filled with car manufacturers like Ford and Toyota trying to put pressure on Holden to make the industry more competitive. But then, it was not that easy for them. For example, the Ford Falcon model failed to thrive in the Australian market since Holden was more affordable and widespread.

In addition, the Australian rural roads made it difficult for the Ford Falcon to provide any significant competition to Holden. Toyota, a Japan-based car manufacturer, ventured into Australia's car industry in 1963 and became Australia's most extensive vehicle exporter in the later years.

The 1970s was the year of the Holden Commodore, which was more prevalent among families due to its size, availability, and price. However, the 1980s saw the Ford Falcon gain popularity ahead of the Holden Commodore. During that decade, Ford and Holden competed for the top spot in the industry.

But the car industry was gearing up for a different industry leader in the 1990s, with Toyota overtaking both Ford and Holden in sales in 1991. Affordability and technological advancements such as anti-lock braking systems and airlocks made a difference during that era.

AUS Government Influence On The Car Industry

The successive Australian Governments ensured that the car industry got the requisite support for many decades before its untimely demise. Things were not always bad for the Australian car industry. The Government ensured that the sector got budgetary assistance, import tariffs, purchasing agreements, and quotas.

The Government consistently reviewed its policies to make the industry competitive while providing a conducive environment. The most notable government action that positively impacted the car industry was the consistent reduction of tariffs. Tariffs were reduced from 57.5% to 45% in 1988. In 1992 tariffs were further cut down to 35%.

Further reductions followed in the subsequent years, with tariffs falling to 15% and 10% by 2000 and 2005, respectively. By 2010, the Australian Government had cut the taxes to 5%. The Government also introduced an automotive transformation scheme initiative worth approximately 3.4 billion AUD to cushion the car industry.

Later, in 2012 the Government further approved roughly 25 million AUD for the Automotive New Markets Initiative. This support hugely helped the car industry be productive and competitive until the Government decided to reduce the funding by approximately 500 million AUD. And that was the beginning of the end of a prosperous era.

Car Manufacturing In AUS - The End Of An Era?

For a long time, the Australian car manufacturing industry thrived because of the massive government support in the form of subsidies. In ten years (until 2016), the sector received over five billion AUD from the Government to boost its productivity while also creating employment for the locals. But the decrease in government support, the appreciation of the Australian dollar, and the emergence of better and affordable car models created difficulties for the car industry.

The existence of more auto brands in Australia meant that the local car production had to suffer. For instance, at their peak, Toyota produced roughly 148,000 cars in a calendar year, Ford made approximately 155,000, and Holden produced around 165,000 vehicles. But prior to their closure, all three manufacturers locally produced an estimated 87,000 cars only in 2016.

No car manufacturing industries in the whole world can thrive with such meagre numbers. And that's why all three manufacturers had to get out of the Australian market. This dented Australia's local car production massively. But one cannot blame the three car manufacturers for pulling out of Australia's local car production industry. With better and cheaper cars from other countries flooding the market, the local manufacturers had to maintain favourable economies of scale.

It became difficult for car manufacturers like Ford, Holden, and Toyota to ensure the utilisation of local labour since it was costly. How would manufacturers compete with Asian companies when their labour cost was just a fifth of the Australian one? The only option for manufacturers like Ford, Holden, and Toyota was to cease local production.

Ford ceases car production in Australia

October 2016 marked the end of what was otherwise a successful journey. After 91 years of car manufacturing in Australia, Ford had to draw the curtains on production. Even though the decision left many people jobless, the company could no longer sustain operations in Australia.

The appreciating Australian dollar meant that locally produced cars would be more expensive than those shipped from places like Asia and Europe. For the five years leading to 2013, the automaker suffered a loss of approximately 600 million AUD.

Moreover, while production and labour costs were rising, sales were dwindling. So, Ford's only viable option was to cease production in Australia.

Toyota ends car manufacturing in Australia

One year after Ford closed the lid on car production in Australia, Toyota followed suit in October 2017. Just like Ford, production costs had increased beyond Toyota's capability. How could they compete with a manufacturer in Asia whose expenditure was a fifth of their production cost? But then, for Toyota, there were other reasons apart from production costs.

Toyota and Joe Hockey

The car manufacturer was at loggerheads with the country's then treasurer, Joe Hockey, regarding the cause of the dwindling car industry. In an interview with Fairfax Media, Hockey opposed Toyota's assertion that worker's unions were making it difficult for car manufacturers to operate, thus resulting in the industry's decline.

However, circumstances such as the workers' union demanding a 21-day Christmas break instead of the ten days offered by Toyota are an example of the union's interference. And when Toyota could no longer keep up with the Asian manufacturers, the company had to shut down operations in Australia.

Holdens local car manufacturing in Australia comes to an end

Just like Toyota, Holden also ceased production in Australia in October 2017. Of course, the reason was high production costs which became a menace for the entire industry. But then the manufacturer also encountered the former treasurer (Joe Hockey), just like Toyota.

Holden and Joe Hockey

When the entire car industry was trying to sustain operations due to the rising production costs in 2013, the Government refused to increase the car production subsidy. This resulted in an exchange of words between Holden and former treasurer Joe Hockey, with the latter daring the manufacturer to cease operations in the country. Four years after that war of words, Holden closed its doors to local car production.

What Next For Australia's Car Industry?

It is unlikely that Ford, Holden, and Toyota will revisit their decisions on local car manufacturing in Australia. We are talking about the three manufacturers because up until recently; they were the three largest manufacturers in Australia. But maybe the car industry can take a swipe at electric vehicle manufacturing.

If you would like to uncover more about the early car industry or are simply interested in a vehicle from that era, why not try your luck at a reputable car buying and selling company?