Australian Car Industry in Review - What Does The Future Hold?

Over the last few months, the Australian car industry has been experiencing a very tumultuous period, especially since the federal government announced the decision to alter the Fringe Benefit Tax (FBT) breaks.

This move alone has tremendously affected various sectors in the car industry including manufacturers, dealers, car loan finance providers, suppliers, salary packaging companies, and many more. Over 800 workers lost their jobs over the past month and industry experts expect this number to significantly rise once the FBT changes are made official on April 1, 2014.

On top of that, Ford also announced that they will be closing down their manufacturing plants at Geelong and Broadmeadows in 2016. Ford Australia and New Zealand CEO Bob Graziano, revealed that the company had lost $141 million in the 2011-2012 financial year, and it wasnt financially feasible to keep the plant afloat.

Worse still, the car manufacturer also had to close down the plant for two days earlier this month due to falling market demand for new cars, and there will be ten other down days over the next two months. Low-demands for new cars due to the FBT changes are one of the major factors that have affected the companys sustainability.

Victorian Manufacturing Minister, David Hodgett said, This is just the tip of the iceberg in terms of the impacts being felt right across the sector. The FBT changes stand to reduce Australias car production by 20 per cent. We are talking about thousands of potential job losses here. Dealers are already reporting drops in sales of up to 70 per cent and say they are facing the prospect of laying off staff.

There were 400 job losses at Holdens manufacturing plant in Adelaide, and if circumstances dont improve over the next few years, they might be put in a similar position as Ford.

However, there is a silver lining in every cloud. It was reported that car sales figures for the 2012-2013 financial year hit a record-breaking $1.14 million.

This can be attributed to the fact that car dealers and manufacturers are slashing prices to attract buyers and the availability of better car loans being offered by motor vehicle financiers across the country. Plus, the competitiveness of the car finance industry has forced lenders to reduce interest rates and loosen up on loan terms and conditions.

There is also an abundance of bad credit car loan options for people with unfavourable credit history. This is because lenders are now more willing to approve bad credit car finance to make up for sales targets. Perhaps better rates on car loans will help increase buyer interest and help boost the local industry.

More importantly, the government is also taking initiatives to increase the sustainability of local manufacturers. Industry Minister Kim Carr said, We will be providing a $200 million stimulus measure and a 100 per cent Buy Australian made target to drive up sales of locally made cars.
He also said that an additional $500 million will be provided to secure the long term investment needed to maintain jobs and ensure the longevity of the industry.

The real question is, even with these additional funding, will it be enough to cover the FBT changes and help the entire Australian car industry sustain beyond 2020?

Only time will tell but for now the industry will have to rely on lower car prices and smarter car loans to keep buyer interests alive.