Australia is soon to lose its vehicle manufacturing industry for exactly the same reason New Zealand lost its car industry in the early 1990s, says Toyota New Zealand chief executive Alistair Davis.
"All car industries in the world exist due to the political will to have such an industry," he told journalists at the media launch of the new Toyota Highlander SUV in Auckland last week.
"New Zealand lost its industry because there wasn't the political will to keep it. Now Australia is to lose its industry for exactly the same reason."
In most countries, some form of government support is required to allow the vehicle manufacturing industry either to survive or to compete against other countries.
Many governments insist that vehicles sold in their country must be built there. Others impose tariffs on imported vehicles to improve the economics of locally built cars. Others subsidise the local manufacture of vehicles.
In New Zealand, up until the days of Rogernomics there was all of that. But once the tariffs and subsidies were removed in the interests of a more open economy, the vehicle assembly industry quickly became uneconomic and shut down.
Now exactly the same is happening in Australia, and as a result Holden, Ford and most recently Toyota have all announced they will stop building cars there from 2017.
Davis said the economics of car assembly also played a major role in decisions regarding where to assemble, and this has also had a major effect on the viability of the industry in Australia.
"You have to remember that on a world scale, a vehicle plant that builds 150,000 cars a year is a small plant," he said.
"And when you look at the cost structure of such plants, the car companies have to weigh up whether there are better options." Those options are to simply source product from elsewhere rather than build it at smaller plants such as Toyota's Altona facility in Melbourne.
And there are plenty of countries from which to source the product, added Davis. Toyota currently builds cars in 27 countries, with many of them producing right-hand drive models.
The sourcing of new vehicles for New Zealand has undergone major change in the last two decades, he said.
In 1993 around 78 per cent of all new vehicles sold in this country came from Japan, with 16 per cent coming from Australia and 5 per cent sourced from Europe.
By 2003 the Japanese sourcing had reduced to 46 per cent, Australian sourcing had risen to 23 per cent and from Europe to 21 per cent, and Thailand had entered the equation with 6 per cent of the vehicles sourced from factories there. South Korea had also entered the fray with 3 per cent sourcing.
Last year things had dramatically changed yet again. The Japanese sourcing had reduced further to 33 per cent, Europe had reduced slightly to 19 per cent - and the Australian sourcing had crashed to just 8 per cent.
Meanwhile the Thai sourcing had grown to 20 per cent, and from South Korea to 13 per cent.
And the change continues - with perhaps the perfect example being the new Toyota Highlander, which is now sourced from Indiana in the USA.
- © Fairfax NZ News
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