Oz Auto Makers Ask Government for More Assistance

The CEOs of Australia's four domestic auto makers reportedly have asked the government to freeze tariffs and give an additional A$1 billion ($785 million) in assistance to the country's struggling auto industry.

Reports say the heads of GM Holden Ltd., Ford Motor Co. of Australia Ltd., Toyota Motor Corp. Australia Ltd. and Mitsubishi Motors Australia Ltd. recently met with Industry Minister Ian Macfarlane in Canberra to request tariffs on passenger vehicles and auto components be frozen at 10% from 2010 and not reduced to 5% as planned.

The CEOs are said to also have requested more monetary aid through the government's Automotive Competitiveness and Investment Scheme, which has given A$3.2 billion ($2.5 billion) in industry assistance since 2001. An additional A$4.8 billion ($3.8 billion) has been pledged to manufacturers over the next decade.

Macfarlane says in a published report the industry faces an uncertain future.

"Australia has traditionally preferred medium-large cars, and I guess that is the challenge for manufacturers over the next 12 months," he tells The Australian. "I am confident the cars we produce here are as good as any in the world.

"It is not an issue of can we sustain four manufacturers,” he says. “It is what numbers of vehicles do we need to sell in Australia."

Macfarlane now is preparing a new industry policy blueprint to be released next year but appears irritated by the auto makers' latest plea.

"They asked for a decade of certainty,” he says. “Less than a year into the deal, it is very early to be saying, 'We want a complete review of the plan.'"

The government last year created a 10-year program of industry tariff reductions.

Treasurer Peter Costello says a consumer movement toward smaller cars needs to be properly considered by the automotive industry.

“Those manufacturers that are still in the larger cars are beginning to feel that in their sales,” he says in a published report. "There will always be a market for six cylinders, but the market may not be as great as it was when (gasoline) prices were lower.”

But while high fuel prices have received most of the blame for declining sales of domestic-built vehicles, the reality is sales of big Aussie sedans have been in a free fall for more than a decade.

Sales of Australia's two best-selling cars, the Holden Commodore and Ford Falcon, are at record lows despite four successive years of record new-car sales in Australia.

Ford Falcon sales at record low.

Last year, sales of small cars overtook large sedans for the first time.

A strong Australian dollar, free-trade agreements and a cut in tariffs on passenger cars from 58% in 1988 to 10% have made imports more affordable.

Additionally, government and businesses, which account for 80% of large-car sales, are updating their vehicle fleets less frequently. And the Australia-Thailand FTA has seen Thai-sourced cars make up 11% of all sales, up from a scant 0.08% some 10 years ago.

The Australian industry knows the key to success is exports. Toyota exports almost twice as many Camrys as it sells locally and GM Holden exports five times as many Statesmans. The biggest export market for both makers is the Middle East.

In the U.S., 41 vehicle brands compete for 17 million annual sales, while in the U.K., 46 brands vie for annual sales of 2.5 million units. By contrast, 42 brands compete for annual sales of less than 1 million units in Australia.