Ford/Holden/Toyota all pulling out manufacturing in Australia in 2016/2017. How will the car price be affected?

scotty on 11/02/2014 - 10:13

The big news yesterday ought to be Toyota's decision to quit car manufacturing in Australia (rather than someone being released on parole in Bali). That's the last of 3 big car manufacturers making the announcement, after Ford last May and Holden last December.

Whose fault is this? Should government do more? Is manufacturing substantial in the first place? How is it going to affect the economy? Or maybe it's a good thing? A lot is up to debate, but as it's OzBargain and I would like to know — how are all these affecting the new car and second hand car price in Australia, between now and 2017 and after 2017?

Automotive

Comments

        • _Bruce_ on 17/02/2014 - 14:26

          If you don't like it don't pay taxes, and don't live in a democracy.

          If you think you don't benefit from public money you need your head examined.

        • ItsMeAgro on 17/02/2014 - 15:56

          Oh, I'm happy to pay taxes and benefit from public money. I've just worked in the public sector enough to have no illusions about how much of our tax money goes completely to waste due to incompetence and corruption.

          Some sort of crazy extremist libertarianism is not the only possible cure.

        • Speckled Jim on 18/02/2014 - 11:31
          +1

          Collins sub project, anyone?
          The Australian Submarine Corp was gambling public money on the stock market.
          And built crap subs too.

        • _Bruce_ on 18/02/2014 - 12:21

          Glad you mentioned Collin's class, there are very good.

          And built crap subs too.

          This is pure myth.

          During several multinational exercises and wargames, the Collins class has demonstrated its effectiveness in the hunter-killer role by successfully attacking both surface warships and other submarines.[169] In late May 2000, Waller became the first Australian submarine to operate as a fully integrated component of a USN carrier battle group during wargames.[170] Waller's role was to search for and engage opposing submarines hunting the aircraft carrier USS Abraham Lincoln, a role in which she performed better than expected.[170] A few days later, as part of the multinational exercise RIMPAC 2000, Waller was assigned to act as an 'enemy' submarine, and was reported to have successfully engaged two USN nuclear submarines before almost coming into attacking range of Abraham Lincoln.[171][172] Waller performed similarly during the Operation Tandem Thrust wargames in 2001, when she 'sank' two USN amphibious assault ships in waters just over 70 metres (230 ft) deep, although the submarine was 'destroyed' herself later in the exercise.[171][172] Waller's second feat was repeated by Sheean during RIMPAC 02, when the boat was able to penetrate the air and surface anti-submarine screens of an eight-ship amphibious task force, then successfully carry out simulated attacks on both the amphibious assault ship USS Tarawa and the dock landing ship USS Rushmore.

          More here:

          http://en.wikipedia.org/wiki/Collins-class_submarine#Operati…

        • Speckled Jim on 18/02/2014 - 13:11
          +1

          Yeah, I'm certain that was rose-coloured blurb from the pen of the RAN PR dept.

          I worked on the project for five years, so I know their many dificiencies. Revealing them, however, will land me in a great deal of trouble as I signed a Secrecy declaration with the Commonwealth.

          In general terms:
          Diesel-electric are never as effective as nuclear vessels. The propulsion batteries discharge and they have to surface in order to snort air for the diesel generators. Big disadvantage.

          Their high noise levels were widely publicised. Possibly addressed.

          Certain software was an issue, also possibly addressed. There was a press release regarding the ISCMMS update recently (kinda like a firmware update).

          The design was based on a North Sea vessel (Swedish) and had to be adapted for RAN patrol areas. This results in a compromise — I'm not at liberty to say what.

          There was a major cultural/technophobia issue with the older crews who had done everything manually on the O-boats. These training and technical problems combined meant we had a definite gap in our capabilities.

          I've been as general as I can. I don't fancy time in prison :)

    • _Bruce_ on 13/02/2014 - 09:33

      Paywalled, and I'm sure it is not interesting enough to bypass their own "don't use us please" wall.

      I did hear some quotes of people comparing the job losses in Victoria to employment in Australia, which has the obvious problems. Also, there is a big issue that many of the jobs lost are for people on the low end of the pay scale, and these people will struggle to get employment. I don't think the overall Australian numbers will change much, but the social issues this can cause in Melbourne might be significant.

  • Mr Wowtrousers on 13/02/2014 - 09:34

    I can't see prices moving down, that's for sure, unless we get more Chinese manufacturers in. Sure their quality is terrible but that was the situation in the 70's for Japanese cars and the 90's for Korean cars. They don't compete against Euro cars, but completely different markets. Perhaps with "local manufacturers" there will be less resistance to getting other players in the market from the entrenched big guys.

    I can't help feel that Australia is going to have to pay the piper soon with regard to sticking its head in the sand on a lot of issues. We have been propping up ineffecient manufacturing industries for decades and not investing in any replacement emerging tech or knowledge industries/sectors.

    We give money to corporations to dig holes in the ground and then sell of our once in a lifetime resources for cents in the dollar. We have a tax system that promotes the recycling of property without necessarily creating anything. Politicians still think building bigger roads into the CBD is a better business idea than having faster internet so we can telecommute domestically and internationally. We have a retail sector that STILL hasn't realised they are competing in an international market and expects to make 30% profits for doing nothing.

    I think we have been expecting a lot for a little for a loooooong time.

  • imcold on 13/02/2014 - 11:04

    Since Ford/Holden/Toyota are all claming distress, I assume there are too many failed car manufactures in Australia. Best option is to let 1 or 2 close and financially support the ones that want to hang around abit longer.

    Governments should never pick winners. This always have a tendency to end up badly.

    • _Bruce_ on 13/02/2014 - 14:20

      …. is it possible you haven't read any news for the last 6 months (or even any of this thread)?

      All three are closing, there are none left. They are also all closing because the less you have, economics of scale makes it harder for the remaining manufacturers to survive (and very hard to ever start them up again).

  • findit on 13/02/2014 - 12:39

    Would less competition normally means higher price?

    • GameChanger on 13/02/2014 - 23:12
      +1

      I don;t think Holden or Ford was seen as competition. Both cars were charging similar prices for a product that is inferior.

      • ESEMCE on 14/02/2014 - 08:47
        +1

        …similar prices for a product that is inferior?

        I can't think of anything even remotely comparable in size, performance, or running costs (when on LPG) for ~$35k.
        To achieve that price you have to compromise on at least one of the above (namely size).
        We'll be driving our 2005 Magna Wagon into the ground (it doesn't do huge K's anyway) cause nothing compares to it apart from a Twin Cab Ute with canopy with a price around $50k..(ie 40% extra)
        Even the boat size SUV's have pitiful boot space and the newer wagons (even the Commodore) are smaller.
        Personally I don't understand the move to SUV's it's lose, lose, lose as far as I see it.

        • GameChanger on 14/02/2014 - 15:54

          The cars you named are not the majority on the road.

        • ESEMCE on 14/02/2014 - 16:15

          I'm not arguing there, but I can't understand why…
          Australians are idiots I guess!

          You seem to think the product was inferior at the price. As such, I guess you're one of the aforementioned idiots, so please feel free to explain why I'm wrong and why you're not an idiot? :D

        • Speckled Jim on 14/02/2014 - 16:48

          Um, ever heard the axiom You Get What You Pay For

          or

          Fast. Durable. Cheap. Pick two.
          ?

          The stuff made here has to be price competitive for each market segment. And it is, but something has to give. Those somethings are quality/depth of engineering and quality in general.
          I wish it wasn't so, but it's true.

          Back when the EA Falcon was released… do you recall? They were awful because of the rush to match the release of the VN Commodore. Any time demand outstripped supply at Ford or Holden, they'd crank up production (extra shifts, whatever) and the cars would always have more production faults.
          And you were on a waiting list for the privilege.

        • tonyjzx on 14/02/2014 - 17:35

          its fashion

          station wagons are daggy, sportwagon type lifestyle wagons are ok but getting rare

          SUVs and CUVs are the new hotness

          its the allure of 'capability'

          i may live in the city but i can push the button marked "4wd" and i can go anywhere in the outback

          try that in a magna

          dont get me wrong, i'm not for or against the trend but it is in part, what killed local industry

        • _Bruce_ on 14/02/2014 - 18:28
          +1

          try that in a magna

          My old Magna went many places a city SUV doesn't. The only advantage for most of them is a bit more clearance, and many don't even do well at that.

  • MATTDAMON on 13/02/2014 - 15:07

    I find it interesting to say its too expensive to manufacture here, yet companies such as Kenworth/Paccar (Victoria) Mack/Volvo (Waco QLD) Freighter Trailers (Victoria) etc cant output enough units to meet demand. We have 35 909, 409 SAR and K200's on order, looking at close to 2 years before we can recieve them all.

    • _Bruce_ on 13/02/2014 - 16:00

      The scale is very different, and Australia specialises in long distance hash conditions trucks. Passenger cars are not a specialisation.

  • websta on 15/02/2014 - 04:13
    +2

    This is very long but worth a read.

    A tsunami warning for business and executives
    Robert Gottliebsen12 hours ago 5

    Between 2015 and 2017 Australia is going to be hit with three unprecedented tsunamis. The three huge storms will fundamentally change the nation and affect middle class salaries over a wide area, the share market (particularly banks and retailers), plus dwelling prices in many places. These are just a few vulnerable points.

    Today I will attempt to set out what looks like happening and what employment, business, investment and other strategies you will need to consider in preparing for the three tsunamis.

    Clearly this will be an unfolding situation. Today all media outlets are full of just one tsunami – in the motor industry. If anything they have understated its devastation because it will happen around the same time as the vast gas, coal and iron ore construction projects are wound down. As the tens of thousands of white and blue collar workers from mining industry suppliers etc are stood down from these investment projects they will seek jobs elsewhere.

    As they do, they will be hit not only by the motor tsunami but a third tsunami which will rival the first two – in retail. The first two tsunamis were always going to hit retail but by imposing crazy shift allowances, the swing to online trading is going to accelerate. A large numbers of retail workers are going to either have their hours cut back or be retrenched and it will all happen in the 2015-17 period. And guess what? In 2016 it will be an election year.

    Australia has never encountered anything like three tsunamis at once in its post-war history. Unfortunately neither Tony Abbott nor Bill Shorten understand the magnitude of the three tsunamis. They soon will – but it’s now too late. They are coming and it’s time for ordinary Australians to prepare for these events and aim for high ground. It’s true the biggest blows will be in Victoria, South Australia, Queensland and Western Australia. But New South Wales will not escape.

    In terms of the effects on Business Spectator readers, the three biggest areas will be executive salaries, the value of businesses and the blows to banks and retailers and their shares.
    The main offsetting factor will be the massive Chinese investment in Sydney and Melbourne real estate development.

    So here are strategies you should consider (and I invite you to contribute more):

    There will be a huge glut of well-qualified and experienced middle managers from mining projects, retailers and those related to automotive. They will include accountants, engineers and people managers. If you are involved in the tsunami industries of mining investment, auto or retail at least consider jumping ship now. In many cases (particularly auto) your retrenchment pay will be so high that you will be forced to stay on to the end. In mining investment you may be on such a high pay level that you also can’t afford to jump early. Save hard and go for a job at Roy Hill if it goes ahead.

    If you can jump ship, look for employment in an area that is less vulnerable to the tsunamis and don’t be frightened to take a pay cut.

    If you are in a relatively safe area, stay there and try to enhance your position. Do not press hard for pay rises unless you are certain that you are indispensable. In simple terms, next year there are going to be people to replace you who will sell their services for a far lower price than you. And they may be better than you.

    The effect on the value of many businesses will be devastating. A large number of the motor parts companies have foolishly signed retrenchment deals that mean that all the equity in the business flows to the workforce rather than the banks or shareholders. The owners will be wiped out but banks will also incur losses. Currently few balance sheets include retrenchment as a contingent liability. The losses the banks will suffer will cause them to be much more cautious lending to businesses that have long-serving employees. Business values will therefore fall.

    Be prepared to buy cheap assets (not the staff involved) and rearrange the operation on the basis of a series of independent contracts with minimal conventional employment. Given our rigid industrial relations laws, independent contracting is the way of the future. This will be a very different Australian society.

    Most public servants are probably safe but once the reduction of executive and other salaries extends through the community, public servants will be affected. Look for areas of the public service that are less prone to reduction. The public service is the highest tree in the land. Do not take redundancy packages.

    Clearly, the three tsunamis will make servicing inflated mortgages very difficult. I spent some time with a person who took his family to Sydney two years ago and lost his new job after a year. He says that there are more jobs in Melbourne than Sydney but that will now change. His wife is the sole breadwinner because she works in the growth industries. They are learning to live with the situation. Parents help.

    Where will there be employment growth? Here is my list, but it is not exhaustive: heath and aged people services; tourism (particularly Chinese tourism); dairy; infrastructure building; security; delivering parcels; clever marketing; picking overseas markets where scale is not important; and accounting. I am sure there are many more.

    The three tsunamis will mean that we will see more people find a way to lift their wealth and a much larger group of people on lower incomes. The middle class will be greatly reduced. This has been happening in the United States for some time. The tsunamis mean that we will catch up with the US. Look for work and investment in operations that are supplying the top or bottom income parts of society. The middle class is where the hits will take place.

    Interest rates will fall but the consequent lower dollar will lift inflation, including the price of cars. I think banks are in for a harder time than is currently expected because of the effect the three tsunamis will have in dwelling and business values outside areas of Chinese investment.

    And we have to hope that there will not be a fourth tsunami – lower commodity prices – which would devastate our tax revenues.

    • ItsMeAgro on 17/02/2014 - 16:13

      …imposing crazy shift allowances, the swing to online trading is going to accelerate. A large numbers of retail workers are going to either have their hours cut back or be retrenched…

      and

      Given our rigid industrial relations laws, independent contracting is the way of the future

      Sound like ultra right-wing paranoia, but I'd be interested to know what he's talking about with the new shift allowances.

      Other than that, some interesting things to watch for and consider.

      Hopefully a lot of it's doom-and-gloom I-think-Tony-Abbott's-too-much-of-a-lefty hysteria.

  • elf888 on 17/02/2014 - 15:26

    No import duty if there's nothing manufacturing in Australia at that tariff code!
    That's mean more profit for the importer or reduce in price in retail!

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