Much has been made of the cost of manufacturing in Australia, and wages have the main issue in the firing line. But are they really to blame? The cost of building a car in Germany is much higher and their car industry is strong, their wages as high, and their standard of living even higher. No, it isn’t the cost of manufacturing. Indeed Holden is part of the giant GM Corporation and bought Daewoo a decade ago and now manufacture their cars cheaply in South Korea. Also, just across the East China Sea, Chinese wages are famously low at only a few dollars a day, but would you buy a Chinese car?
The truth is cars have been far too expensive in Australia for far too long. If buyers want a vehicle of quality feel they don’t buy a Ford or Holden, they buy a BMW, Mercedes Benz or Audi. If they want something cheap, they buy a KIA or Hyundai.
Toyota also makes cars in Australia and has recently committed to building their Camry Hybrid here long term. Interestingly, Toyota sells more cars in Australia than Holden and Ford put together. Ford and Holden have been complaining bitterly about how hard the industry is, but isn’t the truth their cars lag behind Toyota? VW, Volvo and Peugeot are also way ahead in quality and technological terms? For example, the “advanced tech” like lane departure and self paking in Holden’s new Commodore has been in Volvo and VW for years. Neither Ford nor Holden have diesel in their large cars despite both having quite good diesels elsewhere in their range. There appear to have been bad decisions made showing an appalling lack of foresight.
The cost of cars being sold here seems to bear no relation to build costs. A Caprice and Commodore SS are sold in the USA for half the price that they are sold here where they are made. It’s the same story with Toyota’s Camry Hybrid being sold in the UK substantially cheaper than in Australia. So the question is: if they can be made here and sold in the USA and UK at half the price, why aren’t they half the price in Australia too? A car doesn’t magically cost more to make when it is being made and sold here as opposed to made here but sold overseas. Our high dollar has been blamed, but the Caprice and Camry being exported as we speak are sold for less in the USA than in Australia where they are made.The high Aussie dollar is sounding like merely an excuse to justify gouging. Surely our high dollar would make the cars more expensive in foreign countries, not less.
Tax comes in for attack, but tax is applied to the “ex-factory” price. In other words tax is applied once the vehicle is built and expenses taken into account. If a car costs $20,000 to build, how can it cost $40,000 here, and $22,000 in America? The top Camry and Prius Hybrids cost $27,670 and $30,000 respectively in the USA but $41,990 and $45,990 in Australia. It’s the same story with just about every other car sold here. There are a few notable exceptions, one being Toyota’s magnificent 86 (GTS) which is $38,900 in the UK and $35,490 here. Yes, minus the on-roads it appears to be cheaper here. What’s going on? The tax and high dollar arguments don’t seem to hold up.
Then there is the cost to transport but again, cars being made here are being sold cheaper overseas. Does it cost more to transport a car a few thousand K’s by road or train than it does 15,000 k’s by boat? How can the boat trip make a car cheaper?
When asked about pricing the car companies are cagey in their replies. Apart from the above reasons, they claim the formula is “complicated”. It it? Unless Toyota heavily subsides the 86 in Australia, the only reasoning behind our pricing seems to be a theory which states “what the market can bear”. They can companies can charge what they want because we can’t go elsewhere to buy. Parallel importing is not allowed because the car retailers lobbied the government to ensure cars imported privately cost the same as the local product to protect the local market.
A quick look at the sales figures tell the real story year-to-date:-
Commodore- 6510 units
Falcon- 3194 units
Aurion/Camry- 1564/5549 units
And it’s the same story for the totals of all vehicles sold year-to-date for each manufacturer at
Holden- 32771
Ford- 27574
Toyota- 64947
(Total for the Australian market to date is 358165. NOTE:- figures correct up to April 2013)
This clearly shows Ford sales have slumped badly against Holden but also shows Toyota sells more cars than Holden and Ford put together. Holden only makes Commodore and Cruze here, Ford makes Falcon here and Toyota makes Camry Hybrid here. In other words Ford makes most of its cars overseas already so why are they blaming our dollar and other manufacturing costs for their slump in sales? No, that argument doesn’t hold up under scrutiny. Just as they did in the USA during the GFC, Ford and GM were in trouble because of their products not their costs. If the cars had been what people wanted and at the right price, people would have bought them. After all, the market as a whole has increased not decreased. Buyers are spending their dollars, just not on Ford. Ford, one of the world’s largest car makers, has only 8.3% of the Australian market.
The sad thing is the current Falcon is quite a good car, but like Commodore, lacks an interior that says “quality”. Focus is the world’s top selling cars and Fiesta has the same kind of charisma. Ford has some very good products so it is very hard to say why they aren’t selling. One thing is for certain the AU Falcon damaged Ford and they never recovered so perhaps the closure of the manufacturing plants here was inevitable.
The Australian car industry needs a shake up and perhaps there simply isn’t room here for 3 car makers. Life after 2016 will be interesting for our car industry but the cessation of Ford manufacturing will be sad none the less. It’s sad not only for those who lose their jobs and those companies who rely on Ford down the line, but also for the passing of an era. No more Ford manufacturing means no more Falcon.
Holden hasn’t confirmed Commodore beyond the recently released VF so we may see it go this decade as well. It is a lot to take in, but things change and we must change with them.