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The end of the Australian car industry

By Don Aitkin - posted Wednesday, 26 February 2014

I thought I had said all I really wanted to say about the car industry, but Toyota's pulling out has prompted a wave of semi-hysteria about jobs and the wickedness of the Abbott Government in ignoring the needs of workers.

Arguments fly backwards and forwards: every country protects its car industry, say some; Australia does more of it, say others. I remember the Gillard Government's pumping a lot of money into Toyota to produce the hybrid Camry in Melbourne. Indeed Toyota made it pretty clear in 2008 that it wouldn't produce the hybrid engine here unless the Federal and State Governments came to the party with subsidies, and Prime Ministrer Gillard duly opened the factory at the end of 2012.

How much were the subsidies to the car-makers? Heaven knows. As you'll see below, Toyota seems to have received nearly $500 million from the taxpayer over the last four years.


I am of the view, as I said last time, that the time has come to accept that with our high cost-structure we simply can't afford to make cars competitively here unless there are subsidies and a high tariff wall. I'm not much in favour of either measure. Other countries can make vehicles at least as well, and much cheaper, than we can. But I thought that Judith Sloan nailed the issue in a piece she wrote in the Australian a few days ago (12 February).

Figures have been bandied around that suggest that the Australian automotive industry is receiving only $US17 per capita compared with $US265 per capita in the US. Take it from me, these figures look wrong.

She went off to the Productivity Commission's recent report on the automotive industry.

It turns out the dodgy estimates are based on a number of faulty premises. First, a highly atypical year is selected - 2009, during the global financial crisis. Second, different types of government assistance - loan guarantees, cash handouts, general industry assistance measures - are simply lumped together and added up. Third, the figures are presented in per capita terms, an approach that makes no sense at all. The only sensible measure is in terms of per vehicle produced.

And it looks like this:


And what happens when you do that? Australia has subsidised the manufacturing of vehicles to an extraordinary extent - $US1885 per vehicle, compared with Sweden ($US297), Germany ($US206) and the US ($US166). In other words, Australia has the highest rate of budgetary assistance of the seven first-world countries listed.

So this [calculation] puts paid to this argument. The Australian government as well as state government have bent over backwards to bribe the foreign multinationals to continue to produce cars in this country. We now know that Toyota Australia has received nearly $500 million in the past four years. Given that there are some 2500 Toyota employees, this works out at $50,000 a worker a year.

Some think that Toyota was going to go anyway, even before Ford and Holden make their own decisions, and Ford at least had flagged that possibility some years ago. Maybe they were, and maybe they weren't. But surely the end was always in sight. There were once seven manufacturers producing cars in our country. The Rootes Group (I once had a Humber) merged with Chrysler in 1965 and no more Rootes Group cars were produced after 1973. Chrysler then merged with Mitsubishi, and the last Chrysler Valiant was produced in 1981. Mitsubishi stopped making its own cars in 2008.

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About the Author

Don Aitkin has been an academic and vice-chancellor. His latest book, Hugh Flavus, Knight was published in 2020.

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