√In 1996, we predicted the end of local car manufacturing

In October 1996, then-Drive editor Phil Scott, in an eerily prescient story, reported on the growing unease around Australia’s local car industry.

Story originally published in Drive on 27 October, 1996

Australia’s four domestic car makers, losing ground to a flood of cheap imports, are nervous about their future.

Ford, Mitsubishi, Holden and Toyota all provided a keyhole view of how they see the next 10 years in a series of submissions to the Federal Government’s Productivity Commission this week.

Holden says we’re being slugged an average $5000 a car in sales tax, more than three times the whack levied on other products. Affordability being the key to getting new, low-polluting, safer cars on the road, it wants a $3000 reduction in the sales tax slug to the same rate you pay on a refrigerator.

Ford says it pays $10,000, or one-third the retail price of a Falcon, in government taxes and charges. This compares to less than $6000 on a Taurus, in North America. Ford says that by 1997, under the current tax regime, Australian car manufacturers will be paying more in taxes and charges than those levied on imported vehicles.

Toyota agrees we are taxed to the teeth but warns imports will soar to over 60 per cent of the market by 2000, putting any form of Australian car production at risk. Toyota should know. It is a big importer as well as manufacturer.

The big Aussie six, a motoring institution since 1948, is an officially endangered species, according to Holden. The size of the Commodore, in relation to big sellers in other world markets, is way over the top, it says, making the car impossible to export and highly vulnerable in an increasingly green world. Holden says it can not survive long-term on the Commodore alone.

Ford, which has cut its workforce in half since 1990, fixed its shoddy quality and saw productivity zoom from 10 cars per employee to nearly 14, politely suggests Australia is just plain naive. We are already cutting our import tariffs by another 10 per cent between now and 2000.

By then, imported cars will pay a 15 per cent tariff with unrestricted access.

In return, if Australia wants to export cars we will pay 300pc for that pleasure in Indonesia, at least 140pc in Malaysia, 50pc in India and 30pc in Taiwan. Even the Koreans, who are selling up a storm in Australia, make it all but impossible for foreign makers to return the favour.

Less than two per cent of Korea’s car market is imported. Buying one as a private citizen almost guarantees a tax audit.

The Productivity Commission will digest submissions from all sorts of interested parties before making recommendations to the Government on how the car rulebook should be written beyond 2000.

Cutting tariffs still further, argue three of the four domestic makers, is crazy while our potential export markets are so highly protected. Get the other countries to give us a fair go first, is the underlying message, although Mitsubishi prefers to use as many $20 words as it can: “It is inimical to Australia’s best interests to further reduce assistance to the industry in advance of tangible, reciprocal action by APEC nations.” Tit for tat is what they mean.

Since Australia’s import tariff walls were lowered, beginning in 1988 when the tax on foreign cars was a thumping 57.5pc, the traffic has been all one way.

Australian production of new cars has fallen by 100,000 since 1990. Imports have soared.

Consumers have generally received a far better deal as a result: lower prices on the imports and a surge in the quality and value offered by the local makers.

No sensible car buyer could argue that opening up the Australian car market has been a good thing. Even the most die-hard manufacturing people will admit all that import pressure has changed Australian attitudes to building cars.

But it seems, crunch time is here.

Toyota predicts another 45,000 Made In Australia models will be lost to imports by 2000.

If this happens, then the industry loses its critical mass, the volume of cars it needs to stay afloat, generally reckoned at about 350,000 a year.

The bigger picture is what all those $14,990 Hyundais are doing to our national debt.

Australia’s annual automotive deficit has grown from $3.9 billion in 1991 to $7.45 billion last year and will exceed that in 1996. That takes into account exports, which have improved from $1.16 billion to $1.78 billion in the same period.

The domestic car makers – all foreign-owned – are telling the Government we are lean and mean and will live with more competition from imports until 2000.

We’ll get leaner and meaner in the process, but beyond that, do you want us to build cars in Australia or not?

If the answer is anything but an unequivocal yes, then the headquarters decision makers in Dearborn, Detroit, Nagoya and Tokyo, will find it just as easy to invest their money elsewhere, load a few boats with cars and send them to Australia.

The Nissan Motor Company already did, three years ago.

For Australia, letting the car industry die would be the ultimately folly.

Holden candidly admits it can make some cars here cheaper than its General Motors affiliates in the US or Europe and there’s nothing too much wrong with the quality.

Australia without a car manufacturing industry would join a select club of advanced nations.

Only Switzerland, Hong Kong and Singapore don’t make cars. Every other country believes it’s essential.

The post In 1996, we predicted the end of local car manufacturing | Drive Flashback appeared first on Drive.