American Nationalism Killed the Australian Car Industry

 
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The last Australian Toyota Camry will be produced on 3rd October 2017. The Last Holden Commodore will follow two weeks later. The Australian car industry has been slowly dying ever since Mitsubishi closed its Tonsley Park plant in 2007. Blame has been placed on the Australian government, on the unions, and on Holden, Ford Australia, and Toyota Australia. But they were all mostly powerless to save the Australian car industry because the Australian people and GM and Ford didn't want to.

Each year fewer and fewer Australians were buying locally built cars. Australians didn't want large sedans and SUVs anymore. Now they want medium SUVs, small cars, and 4WD diesel utes. The Holden Cruze was the only Australian car to fit one of these segments, but it was one of the most crowded and least profitable market segments in Australia. It's often suggested that the government should have raised tariffs to make imported cars more expensive. Had the government done this, it would have worked in the short term, but it's not a sustainable way to run an industry. Suppose tariffs were raised. The only affordable small car left is the Holden Cruze, the only affordable medium sedan is the Toyota Camry and the only affordable SUV left is the Ford Territory. That would be good for Holden, Toyota, and Ford initially, but in time you would have the Holden Insignia and Captiva, Toyota Corolla and Kluger, and Ford Focus and Mondeo all aiming for the same relatively small market share. If they did it earlier you could throw the Mitsubishi Lancer, 380 and Outlander into the mix, too. The reduced profitability would lead to lower quality cars that can't be exported, or locally built cars so expensive they negate the tariff.

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The Australian car industry wasn't exactly healthy last time we had high tariffs. There were too many different models being produced, more than could be sold profitability to such a small population.

Other countries do have high import tariffs on new cars. Japan, Germany and the United States are three prominent examples. There are a couple of key differences, however. All three of those countries have large enough populations to sustain their car industries on their own, and the US is so large that it's simply impractical to import mass market cars from outside North America. That allows the US car industry to thrive with dismal export volumes. Japan and Germany have been very successful exporters. Australia has neither of these.

The Button Rationalisation Plan was intended to make Australian cars more competitive in export markets, and the Australian car industry more efficient. Had the Button Plan worked well enough to turn Australia into one of the world's largest car exporters, the government could have reinstated high tariffs to further strengthen an already strong industry.

But exporting cars wasn't that simple for Australian car makers. The Australian car industry was owned by Japanese and American companies, and the Americans were very protective of their own domestic factories. That's the only reason why America didn't get the Falcon. The Australian government offered a deal that could have kept the Australian car industry going for a could more decades. They were willing to fund the entire R&D costs for a LHD Falcon police patrol vehicle. Ford rejected it. They were more interested in protecting Taurus sales. Americans don't buy too many Tauruses (Taurii?), but Ford feared the public backlash that would come from closing the plant that made them. Even though the Falcon would have made a better police car,  American police were offered the Taurus instead.

Instead, the government was left subsidising Australian manufacturing in the hope that it would result in export sales. Part of their agreement with GM involved exporting a certain number of cars to the US, which is how the Chevrolet SS came about. The Australian government, however, didn't provide nearly as much funding as other countries do to their car industries. $18 for every Australian, 1/12th what the US government provides per capita. They got less than a quarter of the funding that the mining industry received, despite employing three times as many people. The income tax generated by car manufacturing repaid the government three times over. There was a good case to be made for continuing, but with falling sales, it might not have helped for much longer. 

Only Toyota managed to successfully export cars from Australia in serious numbers. More Camrys were exported from Australia to New Zealand and the Middle East than were actually sold in Australia.

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There was one thing the government could have done. They could have excluded cars from the free trade agreement with Thailand and only offered the lower import tariff on 4WDs to the farmers it was intended to help. The decision to place a lower tariff on 4WDs was something John Button would later regret. At the time, these were niche vehicles essential to certain industries and weren't manufactured in Australia. In recent years, some car companies increased the ground clearance of their SUVs to 200mm so they could be imported under the lower 4WD tariff. Excluding cars from the Thailand FTA, and applying lower the 4WD tariff as a tax rebate for primary producers would have only added 10%, but that would have been enough to make Ford's plan to build the Ranger and Everest work. Unlike large sedans, Australian's are buying pickups and 4WDs in record high numbers. The Ranger is the best and most popular vehicle in its class right now. Ford could have built them profitably here. If only it weren't cheaper to import them from Thailand. Saving Ford would have allowed Holden and Toyota to continue. Subjecting SUVs to the same import tariffs as cars would have also helped Toyota build the Kluger in Australia. But hindsight does see in 20:20. It probably wasn't that simle at the time.

There was no saving the Falcon and Commodore, however. Ford’s only vaguely viable option was the Ranger, and Holden was planning to replace Australian Commodore production with the Captiva before the Ford closure made Australian manufacturing unviable. Australian parts suppliers needed at least three car manufacturers in order to turn a profit. Mitsubishi was the first domino to fall. From there it took a few years because the other three were much larger. Once Ford announced its closure, Holden and Toyota following was inevitable.

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It didn't help that Australians weren't buying Australian cars. Australians possess a strong cultural cringe and shunned Australian cars simply for being Australian. The French, meanwhile, overwhelmingly buy French French cars even when they're not very good. Between Holden, Ford, and Toyota, almost every mainstream market segment was covered. There was no need for most Australians to buy an imported car. The only major need segments that weren't being addressed were light cars, dual cab utes, and 4WDs. Unfortunately, Australians had become obsessed with predominantly FWD medium SUVs. These vehicles offered no functional advantage over the cars being made in Australia, but we bought them anyway. The deserting of the traditional station wagon for something objectively worse put Holden off building the Cruze wagon in Australia.

The sad reality is that without a massive change of attitude by the Australian public or the American car industry, the Australian car industry was beyond saving. If Ford was insistent on putting nationalism ahead of offering Americans the best cars they could, it didn't matter how much money the Australian govermnet offered.