Australian Manufacurers Producing Small Cars

The trend in Australia is for people to drive small cars like the Toyota Yaris, the Holden Barina, the Hyundai Getz, and so on. Many think this is due to fuel prices. As fuel prices creep higher people think it's important to get fuel efficient cars and of course small cars are generally lighter and therefore don't need as much fuel. It could also be that most people just don't have large families anymore and when they drive they tend to travel alone or with only one other person. Therefore, having a massive car is not a waste as larger cars cost more.

This is not good for Australian manufacturers because Australian manufacturers mainly make large cars. All Australian-made cars nowadays is in the medium-large class: Mitsubishi 380/Magna, Ford Falcon, Toyota Camry/Aurion, and Holden Commodore. Some say that with the trend towards small cars that Australian manufacturers should switch from large cars to small cars. But Marco from aus.cars presents good reasons why this is not going to work:

If we change to smaller cars, then we will directly compete with dozens of countries that build the same types of cars, but do it in much greater quantities and/or at much lower cost, so our car plants would be uncompetitive. There'd be little to no export market for Australian-made small cars, as other places already have that one sewn up, so you couldn't use exports to make up the production numbers. And the shipping costs to most other world markets wouldn't help their pricetags, either.

It can't be a coincidence that all four carmakers stopped building small cars here a decade ago or more. They all saw the writing on the wall and realised that there was no way a Corolla built in Melbourne could compete with one built in South Africa, or a Colt built in Adelaide could compete with one made in Japan. Few people will buy the $25k Aussie-built small car over the $18k Korean-built one.

I can't see any realistic way out of trouble for the local manufacturers other than to boost export volumes of the cars they make now. We have some unique products of a type that most other places simply don't make - affordable large cars. They might not make the best seller list in most places, but a few hundred here, a couple of thousand there, and you might have enough exports to keep the whole thing viable. On this basis, Commodore is safe for the moment and will be even safer once the Pontiac G8 comes out of Elizabeth, and Camry is safe as long as no other Toyota plant grabs the Middle East deal. Falcon/Territory and 380 are in trouble as they almost totally rely on local sales, and they need some exports - fast.

Of course, improving their fuel efficiency would help their local (and export) sales, but you'd also need to work on the perception that smaller automatically equals more fuel efficient.

The only other options, as I see them, are this:

1. Forget the idea of having a car industry and import everything. Too bad you won't be able to get an affordable large RWD car anymore, though. Still, you could then just drop all car tariffs to zero, thus lowering prices on what's left, and I'm sure I'll enjoy my new Kia Magentis instead of a Commodore very much, thanks.

2. Put the tariff walls back up and slap a 20-30% duty on anything imported to artificially boost the price competitiveness of locally made cars. Sure, there will be more locally made cars but every car on the market will cost more and the loser will be the consumer. The end effect will be a decline in new car sales as people are less able to afford them - not sure whether the loss in car sales and associated jobs would be offset by an increase in car production jobs, or not. Neither of the political parties that are ever likely to form Government will do this anyway, and those parties that do suggest it tend to have other, similarly stupid economic policies that lead to them getting bugger all votes.

3. Find some other type of car that we can build competitively, that will sell in large enough volumes to be viable. Any suggestions? I can't think of any.

Marco