08 August, 2013

Cars need their nourishing slice of pie

Melbourne Herald Sun, August 8, 2013.

"Guten tag", "guten nacht". Yes it's "g'day" and "g'night" from our friends at Opel. In less than a year the German brand made its debut into Australia with a modest advertising splash promoting a range of five models. But by the end of last week, they took their leave.

It seems the Australian public did not respond to the cars in terms of sales - just 1530 cars sold between 20 dealerships. They suffered a classic Australian marketing problem - too much competition in too small a market.

Our appetite for cars is immense - just last month Australians bought 88,000 cars. But we attract all the manufacturers from around the world. The British and Europeans, the Americans, Japanese, Koreans, Chinese, even Brazilians. Not to forget the Australians. Even the record highs in the dollar exchange rate could not stem the inflow.

But in the end, each vendor's slice of the pie left others severely undernourished. Such was Opel. Just a few months earlier, Hyundai Australia had dropped its i45 sedan, and models quietly slip off the pages of dealers' catalogues around the industry.

Much noisier is the departure of a manufacturer. We have too few of those. Ford has announced the longest farewell since Melba, telegraphing its departure in late 2016. But for all concerned it's better than a midnight flit and a note for the milkman.

Mike Devereux at Holden has also been making warning noises, about the consequences of a decline of government support. Industry Minister Kim Carr has come waving $200 million at them on top of current subsidies, but at the same time $800 million in fringe benefit tax breaks is being pulled out from under.

With the election now in swing, Opposition Leader Tony Abbott is talking tough, ready to slash the $500 million in existing industry subsidies, presumably also pocketing Senator Carr's $200 million - but leaving the tax breaks in place.

Six of one, half a dozen of the other, this shell game has been played in Australia since before you were born.

Of course, through much of last century the subsidies were not so obvious as they were provided by high tariff walls. A mixture of import taxes, incentives and barriers encouraged motor manufacturers to make or assemble cars here. It was a very cosy, if at times confusing, relationship. And it made cars in Australia extremely expensive.

But it was an industry. Ford Australia had five plants. Australian Motor Industries had Standard Motor Company and Mercedes Benz, Rambler, and Fiat tractors. BMC had Austin and Morris. There were Chrysler, Peugot, International Harvester, Leyland, Renault, Rootes, Pressed Metal Corporation - most of the Land Rover was made and assembled here. Volkswagen, Willys Motors, White Trucks - the list goes on. Car and truck making on an industrial scale.

No doubt some of you, or your mums or dads, worked for one of the names mentioned here. At some time, the whole country was involved.

Of course, General Motors is still manufacturing, still demanding subsidies, as is Toyota. Will they still be doing so at the end of the decade? A lot of decisions will be made, a lot of lobbying - and no political party is immune.

Car makers were huge factories that built cities around them - think of Detroit, Dagenham, Wolfsburg, Turin, Geelong. These days they have had to be nimbler, more strategic.

So it is with Opel. Try it in a market, measure the sales, pull out if the results don't come in. If you were one of the Opel buyers, you're safe. General Motors promises that service and guarantees will be met through Holden.

ray@ebeatty.com

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