The novel coronavirus has hit the automotive sector hard. But as an optimist, you always look for what good can emanate from trying times. Both government and industries have a chance to revive Australia's car manufacturing industries. The results will be the re-emergence of high-value supply chains, upon which a robust economy will be founded.
A Look Back at the Automotive Manufacturers Decline
Australia's automotive industry kicked off in 1948, producing the first Holden, which was dubbed as ‘Australia’s Own Car’. It was successful. It was woven into Australia's social fabric. During the 1950s and 1960s economic boom, the industry employed several people, including migrants. Local manufacturing meant cars were cheaper, so most people got to own cars. Gradually, several companies started setting up shop. The industry became competitive, and quality improved with time.
Several car part manufacturers set up their companies, too, like Bosch and BorgWarner employed people in the thousands. Over time the number grew. At present, there are over 300 car part manufacturers in the country, the majority of them Australian-owned.
When the government’s Button plan came into effect in 1985, it rationalised the Australian motor vehicle industry and transitioned it to lower levels of protection. The effect was a reduction in tariffs not only for imported cars but also for outsourced auto parts. This has led to several companies shutting down.
The Coronavirus Pandemic Is Showing the Cracks in the Manufacturing Industry
About 60% of global manufacturers have had their operations hampered by the pandemic. Sourcing car parts overseas is fine, but what do you do when no goods are allowed in or out of a country? That is what's happening today to curb the spread of the virus, and it is exposing the weakness of the offshore-dependent businesses. Production lines have either stopped or are idle due to the COVID-19 supply chain disruptions.
Making a Case for Revitalising the Local Manufacturing
Australia has proven once its ability to locally produce cars, but the sector died a painful death. At present, its automotive parts industry is weakened but nevertheless alive. What it needs is for the government to pump-prime it and not allow it to go the way of Australia’s car manufacturing industry.
It’s about time we start exporting high-value products manufactured locally. This can only be done through government incentives like protecting the manufacturing export industry the same way it does the defence industry.
The world is rapidly employing high-tech products. And most of the work is done by small-to-medium enterprises. They are creating cutting-edge products with no export grants, market intelligence, trade missions, IP protection, and business improvement programs, to mention a few.
The government should step in and help them with this through laws that will make it easier to substitute imports with locally-made products. This will eventually strengthen the supply chain. Additionally, top-tier enterprises will change the way they do business with the government; and its result will lead to a win-win scenario.
Post-Pandemic Strategy
During the post-pandemic recovery period, our local industries will have the opportunity to diversify and build new capabilities. This will be made possible through a government and private sector collaboration where the government creates incentives and businesses take on the challenge. And this isn't impossible – look at how industries managed the medical PPE issue. Everyone was willing to collaborate. Why can't the engineering and manufacturing industries work together if the result is profits and a better supply chain?
CarPart supports efforts to revitalise the local manufacturing industries and would continue to publish articles like this. Keep posted!
By Eric Anyega