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Car industry question time

Asking questions: Steve Bracks will provide the answers by the end of July.

Former Victorian premier sets the agenda with interim industry review report

General News logo1 Apr 2008

By DAVID HASSALL

THERE were, as we expected, more questions than answers when former Victorian premier Steve Bracks presented the Australian automotive industry review’s interim report in Melbourne yesterday.

Mr Bracks, who is heading the panel appointed by the Federal Government, presented a 41-page background paper and a 23-page discussion paper, containing data and information already well-known to the industry along with 59 questions designed to stimulate discussion before the final recommendations are made.

The questions start with the big one – Is the Australian automotive industry sustainable in the long term? – and cover a broad spectrum, including the possible introduction of tougher emissions standards.

Calling on “anyone with an interest in the local industry” to put forward their views, Mr Bracks said it was critical to receive submissions to identify a broad range of issues and challenges facing the automotive sector.

It is expected that a great deal of focus will be on the government’s two key assistance regimes – the $7 billion Automotive Competitiveness Investment Scheme (ACIS) and import tariffs, which are scheduled to go from 10 per cent to five per cent in 2010 and then to zero in 2015.

However, Mr Bracks said there were far more important issues to address.

“The panel has not determined a view on that matter (tariffs) and won’t until the final report,” he said. “But that is not the most significant issue facing the industry. It pales into insignificance compared to exchange rate issues, worldwide competition, the question of volume and the need to look at export and bigger markets.

“These are bigger issues, so it needs to be put into context and we will do that as we undertake this review.

“The panel is extremely aware of the challenges outlined in the discussion paper.

“(With) the exchange rate, the decisions from Ford, Toyota and Holden were all based on contracts written in US dollars when the exchange rate was somewhere anticipated between 60 and 70 cents. Currently, the exchange rate is somewhere over 90 cents and that has required better productive capacity for the industry to survive.

“Competition is moving significantly from traditional markets and producers in North America, Korea and Japan to new markets in China, India, Russia and Eastern Europe, and that will have a profound impact on our market here in Australia.

“With volume, we have a very open market in Australia – a lot of cars are imported for domestic consumption and that’s a good thing. We have a much more competitive industry, but that leads to volume questions for our existing producers and requires a significantly greater production capacity than the domestic market can provide, so it does require export.

"It does require finding new markets (and) it does require the components parts suppliers to look broader than just the three producers and look for worldwide markets for their total volume.”

 center imageLeft: Federal Chamber of Automotive Industries CEO Andrew McKellar.

Mr Bracks also said that the panel would look at emissions, fuel costs and fuel efficiency – including the application of the government’s $500 million Green Car Innovation Fund, which has led to discussions on producing hybrid cars in Australia.

Despite this, Mr Bracks told GoAuto that it was outside the panel’s brief to look at fuel tax regimes or other strategies to encourage more widespread use of arguably more environmentally helpful fuels such as diesel and natural gas.

The other four members of the review panel are the Australian Trade Commission’s chief economist Tim Harcourt, former Federation of Automotive Products Industries CEO Peter Upton, Melbourne University economist Dr Elizabeth Webster and ACTU industry advisor Nixon Apple.

Dr Webster said that the Australian industry can look to Europe and the UK for examples of how high-cost countries can be successful and profitable by being innovative.

“I think it’s a very impressive industry in terms of the calibre of people in there and what they’re doing,” she said. “There has been quite a major cultural change within the car industry towards how they can survive into the long-term.

“We have a very skilled, capable workforce, so there’s no reason why the Australian economy can’t occupy the same sort of niche as these other high-rate countries.” The CEO of the Federal Chamber of Automotive Industries Andrew McKellar said the review is a chance to ensure that the automotive industry is well placed to take advantage of future opportunities.

“Australian car-makers are designing and producing vehicles at world standard, not just for the local market but also for export to the world,” said Mr McKellar. “It is essential that the outcome of the review provides the certainty and stability in policy settings necessary to secure ongoing investment in model development and production in Australia.” Mr Bracks acknowledged that the industry has already confronted significant challenges and shares the FCAI view on the need for stability in what he described as an important industry for the nation.

“We need to let the industry get on with its business. What they want is certainty and predictability, not only for the period up to 2010-2011, but the period at least up to 2020. Decisions are being made now for the period between 2010 and 2020. That’s the long-lead conditions for investments that’s required for the car industry,” he said.

“It is often said that this is an industry which has been reviewed many times, and that is true, but the circumstances have changed considerably since the last time that the previous government had a review of the industry and had a structural adjustment package to assist as tariff barriers were reduced. And, of course, the circumstances worldwide have changed and it’s very important therefore that we take account of those changes.” He noted the advantage Australia has with its huge and growing research and development capacity, and defended the investment in producing large cars, saying it would be very difficult to compete with larger, existing small-car producers.

“Australia has had a speciality in large cars and has that niche in the market worldwide,” he said. “There is always going to be a demand for larger cars around the world. Not everyone can do smaller cars.” The closing date for submissions is May 14 and the panel’s final report will be presented to the Minister for Innovation, Industry, Science and Research, Senator Kim Carr, by July 31.

Read more:

Bracks to orchestrate new car plan for Australia


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