Future trends affecting the automotive industry
This chapter highlights the reliance Australia has on automotive
transport and the unprecedented change facing the industry. It explores the
need for a comprehensive and coordinated approach to policy development that
fully incorporates all aspects of the sector and relevant government agencies.
Australia will continue to depend on automotive transport
Australia is a country that relies heavily on the automotive industry to
overcome the tyranny of distance and achieve its economic potential through
connecting people and places. Automotive transport also plays an integral role
in establishing, maintaining and developing social connections and
While it is true that the majority of the population live in capital
cities and generally have access to public transport, they still value the
benefits provided by owning and using automobiles and related vehicles. The
automobile is even more valued in regional and rural Australia, where it is generally
the only form of transport available. The importance of the automotive industry
to individuals is reflected in the fact that there are almost as many vehicles
in Australia as people aged old enough to drive them.
The automotive industry is also integral to moving the vast majority of
Australia's freight task and, even when not used for the majority of a journey,
is still essential in providing the final link in the supply chain. Indeed, the
Motor Trades Association of Australia commented that:
By 2020, we will have a national fleet of 20 million
vehicles...We have no plan B in this country, despite assertions to the contrary.
There is no massive public transport infrastructure planned. There are no
massive alternatives to our reliance on road transport planned. So it is here
to stay, and it is here to stay for the medium to longer term.
With a growing population and aspirations of increasing economic growth
and prosperity, there is no doubt that Australia's automotive industry will remain
Industry undergoing unprecedented change
While the future of the automotive industry in one form or another is
assured, the industry has been, and will continue to be, subject to significant
changes which will transform almost every facet of the industry. The industry
will be shaped by a variety of different socioeconomic forces, including
globalisation, environmental protection policy, rapid technological advances,
workforce shortages and changing skill requirements, and shifting consumer behaviour.
As in almost every other area of society, technological developments and
their adoption are likely to be the most influential source of change to the
Australian automotive fleet. The MTAA explained the profound affect that
technology is having on the automotive industry:
Technology applied to motor vehicles has increased
significantly over the last decade and has included the integration of
mechanical, information and safety systems, and the increasing use of
alternative construction materials in response to safety, efficiency and
The development and widespread adoption of alternative fuels and
propulsion systems is challenging long held beliefs about the infrastructure
needs required to support the automotive fleet and the skills and information
required to enable such vehicles to be serviced. While the uptake of electric
vehicles in Australia has been relatively slow to date, improvements in range
and the continued scale roll out of accessible charging infrastructure will
undoubtedly increase the attractiveness of such vehicles to consumers. Overcoming
similar infrastructure and information requirements will be necessary if there
is to be wide‑scale adoption of hydrogen and fuel cell technologies.
Intelligent Transport Systems (ITS) is another example of a profound
technological change that will revolutionise the automotive industry in the near
future. As the AutoCRC outlined:
During the next decade, vehicle-to-vehicle and vehicle-to
infrastructure will provide platforms for a smarter and more productive
Progressive deployment of Intelligent Transport Systems (ITS)
technology will drive higher levels of productivity...through better just-in-time
freight delivery; fuel cost savings and more efficient intermodal transport. It
can also greatly enhance the driving/transport experience by providing accurate
and adaptive route selection and real-time parking identification.
The AutoCRC also highlighted the potential for Australian business to
contribute to the development and implementation of these technologies:
Australia has companies that are at the leading edge of this
transport revolution and we also have some of the world's best researchers in
areas such as sensor development, traffic management, optimisation,
telecommunications, complex systems, control systems and artificial
intelligence...Australia's strategic challenge is to rapidly and cost-effectively
capture the productivity benefits that will flow to technology leaders and
early adopters. Australia has a rare opportunity to capitalise on its existing
intellectual assets and its deep experience in transport and mobility, to
participate in the formation of the global ITS industry.
The committee was pleased to learn that an Australian company, Codha
Wireless, is exporting locally manufactured wireless sensor systems for use in
the emerging ITS market through sales of five generations of on-board and
In the context of automotive manufacturing, the importance of
technological developments to future sustainability was recognised in the Australian
Automotive 2020 Roadmap ('Roadmap') in 2010. The Roadmap highlighted four
areas—vehicle electrification, gaseous fuels, light weighting applications, and
data and communication systems—where there appeared to be significant
opportunities for Australian manufacturers to develop a strategic capability
and a competitive edge in the global automotive industry.
And in the 5 years since the release of the Roadmap, a number of local
manufacturers, such as Codha Wireless, have been able to harness the
opportunities presented by these trends.
But change is not just driven by technology and change is not
The automotive manufacturing industry will be severely affected by the
cessation of vehicle production in 2017. While some automotive manufacturing
will remain, generally focused on supplying the aftermarket, it will only be a
shadow of its former size.
The committee holds deep concerns not only about the future of
automotive manufacturing but manufacturing more generally in Australia. Professor
Goran Roos outlined the role of the automotive industry in increasing economic
complexity which, in turn, contributes to a country's wealth.
Different industries have different complexities. The
automotive industry has a high level of complexity. Countries like Germany and
Japan have extraordinarily high complexity. They have a complexity which is
something like 200 per cent of the complexity of Australia. That means their
ability to create wealth is substantially higher...
The relevance to automotive of this is that automotive is the
largest chunk at the moment of the Australian industrial structure with the
highest level of complexity. That means, when that disappears, Australia's
complexity will be reduced...
And the size of the manufacturing sector is fast approaching a critical
level. According to Mr Gavin Smith, President of Robert Bosch Australia, the manufacturing
...has shrunk to something just above six per cent of GDP—the
lowest in the developed world—and this is before the auto sector reduces... Below
six per cent it is deemed there is no manufacturing sector that is able to be
Automotive manufacturing plays a pivotal role in supporting the broader
manufacturing industry by providing an environment where innovative processes
and workforce skills can be developed and transferred.
The committee also heard concerns about how change in the downstream
sectors is making it harder for independent small businesses to continue
trading. For example, some independent mechanical repairers are experiencing
difficulties in reliably and affordably accessing repair and service
information from manufacturers. The complexity of modern motor vehicles is
driving automotive technicians to become specialists in specific models or
Such changes will have significant impacts on the skill requirements of
workers in the sector which are currently not being adequately met through
industry training programs.
In addition, the automotive industry also faces an image problem and much
has been said about the 'death' of the automotive industry in light of the
impending closure of passenger vehicle manufacturing. However, the automotive
industry will continue to employ over 340,000 Australians after 2017 and there
are currently over 15,000 skilled vacancies in the sector.
This image problem is adversely affecting the ability of the industry to attract
and retain skilled technicians.
'End-of-vehicle-life', namely what happens to the more than 400,000
vehicles that come off the road each year, is another important policy area in
the downstream sectors that requires attention. The committee notes that the
MTAA and members of the Auto Parts and Recyclers Association of Australia
(APRAA) are planning a trial of an end-of-vehicle-life project that seeks to
gather information to inform a holistic approach to dealing with vehicle
recycling. The Department of the Environment should look at and support moves
by industry to improve end-of-vehicle-life management.
Government must recognise that the automotive industry will
endure. Given this recognition, the committee recommends that the government
devote the necessary resources across a range of government departments to
ensure the process of transformation continues. This includes a redefinition of
the automotive industry to recognise and support the role of all sectors,
including, but not limited to, motor vehicle production, component making,
aftermarket manufacturing, engineering and design, servicing and smash repairs,
retail motor trades, sales support and training.
Coordinated policy approach required
In order to overcome these challenges and harness the opportunities, the
automotive industry requires a comprehensive and coordinated approach from
government. For too long, government policy around the automotive industry in
Australia has focused on the manufacturing of passenger motor vehicles.
While the committee appreciates the importance of automotive
manufacturing, greater emphasis needs to be placed on better supporting the
industry as a whole. The announced closure of vehicle manufacturing in
Australia provides additional impetus to develop a new approach to
appropriately assist the entire industry through the transition period and
The interim report clearly articulated the rationale for taking a
broader approach to defining the industry for public policy to foster the
growth of the industry as a whole. The committee concluded that:
...an overarching and internationally competitive policy
framework is necessary to ensure that Australia remains a prosperous nation
supported by a broad-based economy.
Recommendation 1 from the interim report called on the government to
work with stakeholders to develop an internationally competitive automotive
policy framework for the entire industry. To achieve this, government
departments should coordinate their efforts to attract new automotive
investment and maintain existing skills and capabilities.
The committee reiterates the importance of that recommendation and the
support that stakeholders have provided. The MTAA, for example, submitted that
whole of industry solutions are needed:
for automotive industry sectors to adopt improved
self-regulation, pursue greater business acumen and revitalise industry partner
to unite peak automotive industry bodies behind issues common to
the whole of industry—be it manufacturing, retail, service, repair, recycling
for industry and government partnerships to improve the
integration and coordination of services and policy initiatives; and
for interventions that improve regulatory and economic reform and
mitigate the social impacts arising from industry restructure and job losses.
But the industry itself has not necessarily presented a united front:
The automotive industry is characterised by diversification,
segmentation, fragmentation, specialisation, and wide geographic distribution.
It has sometimes proved difficult, if not impossible, to drive wholesale
Recognising this, industry stakeholders have been proactive in
organising themselves. The MTAA organised and facilitated the Australian
Automotive Summit (the Summit) in August 2015 which brought together key
industry leaders, policy makers and government to talk about the future of the
industry and determine strategies so Australia can retain an active but
different automotive industry.
Following the Summit, the MTAA proposed the establishment of an
Automotive Industry Taskforce (the Taskforce) to represent the industry as a
whole. The membership would include representatives from relevant government
portfolios and members drawn from senior leadership roles in the manufacturing,
engineering, design, retail, service, fuel, repair, recycling, aftermarket and
other automotive sectors.
According to the MTAA, the Taskforce would enable coordinated policy
responses to changing industry operations, strengthen government partnerships,
guide government intervention and support a longer-term policy framework that
charts a future road map for a sustainable industry.
By representing the industry through a united voice, the committee
considers that the proposed Taskforce has the potential to overcome some of the
challenges for policy makers in developing strategies to understand and meet
the requirements of this diverse industry, and its businesses and employees. The
Taskforce could build on and employ an approach similar to the model used to
develop the Australian Automotive Roadmap 2020.
The committee recommends that the Australia Government support
the establishment of an Automotive Industry Taskforce—with representatives from
industry, unions and governments—to facilitate a collaborative and coordinated
approach to developing and implementing a national automotive policy framework
which encompasses all sectors of the industry.
The Automotive Industry Taskforce would also build on the work of
the AutoCRC and the Automotive Australia 2020 Roadmap Project. It would develop
strategies to understand and meet the challenges and opportunities associated
with alternative fuels and emerging technologies as they affect the automotive
industry, including electrification, light-weighting, gaseous fuels and fuel
cell technologies, car sharing, telematics and autonomous vehicles.
The Automotive Industry Taskforce should also examine the
findings of this committee inquiry and report back to government with further
recommendations for action and strategies to address the issues raised over the
course of this inquiry.
One of the key themes to emerge from the Summit workshops was a lack of
knowledge and coordination among government departments with a role in the
While the Department of Industry, Innovation and Science generally takes
the lead role in policy affecting the automotive industry, there are a large
number of the other departments with responsibilities that are associated with
the industry in one form or another. These departments and their responsibilities
Department of Infrastructure and Regional Development—responsibility
for vehicles, roads and motor vehicle standards;
Department of the Treasury—responsibility for taxation (e.g. fuel
excise), small business, and competition and consumer affairs;
Department of Employment—responsibility for employment services
and workplace relations;
Department of Education and Training—responsibility for training
and skills development;
Department of the Environment—responsibility for pollution and
waste, including end‑of‑vehicle‑life management; and
Department of Foreign Affairs and Trade—responsibility for trade.
Given the sheer number of government portfolios that affect the
automotive industry and the feedback from stakeholders from the Summit, a more
coordinated government approach to policy development is warranted.
Indeed, it is imperative that government departments also develop a
coordinated government strategy to deal with the impending job losses and
economic impacts following the wind‑down and cessation of passenger
At the hearing on 15 April, the committee was disappointed to discover
that there was no government department or agency which seemed to be able to
articulate an overarching approach and/or specific details about how the
government was responding to the impending crisis in Victoria and South
The committee recommends that the government urgently develop and
implement a comprehensive and coordinated strategy to:
avoid a social and economic catastrophe arising in those areas
most affected by the closure of vehicle manufacturing; and,
address the unprecedented structural adjustment occurring across
the retail service, repair, recycling and associated sectors.
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