Blowing money out the exhaust?

Posted on November 11th, 2008 in Driving Emotion,Opinion by Julian Edgar

Looking at how astonishingly badly the Australian-manufacturing car companies predicted car buying habits, one wonders if they should be rewarded by being given even more of our money…..

25 Responses to 'Blowing money out the exhaust?'

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  1. Julian Edgar said,

    on November 11th, 2008 at 8:12 am

  2. Richard said,

    on November 11th, 2008 at 8:55 am

    If they want to stimulate sales why dont they just give the buyer a rebate on any Australian built car? Even better if the size of the rebate is related to the efficiency of the car being purchased.

  3. Jason said,

    on November 11th, 2008 at 6:47 pm

    Richard: “why dont they just give the buyer a rebate”

    Because rebates affect the demand side of the equation, and don’t do much to improve the supply side.

    The problem here is that the manufacturers aren’t building the right sort of cars that appeal to enough buyers to keep their businesses going. Bribing customers to buy cars isn’t a viable long-term strategy. What is needed is the manufacturers to build stuff people want to buy. From what I’ve read, the assistance package is trying to do this by helping fund some of the R&D work required to change what’s on offer.

    Another problem with rebates is that they don’t do anything to stimulate an export market, which you’d think would have to be a part of any long-term survival strategy of manufacturers, given that Australia isn’t a very big market in itself.

    And finally, rebates tend to distort the market, encouraging sellers to simply raise their prices to claw back the rebate. Examples: First Home Buyer’s Grant, LPG conversion subsidy, 30% health insurance rebate, etc.

  4. TST said,

    on November 11th, 2008 at 8:19 pm

    I think there are a few separate questions here:
    1.) Would Australia really be better off without a car industry?
    -I think the industry is still a positive contributor, also there is the effect of the ‘brain drain’ of highly skilled engineers that may leave if there was no high tech work for them.

    2.) How much is it worth? Value to the economy – value of subsidies = Real value.
    -I think this is still a positive number even with the current $6.2b.

    3.) In the long term (10+ years) is it possible for the industry to survive?
    -This is difficult to answer, I would say it’s possible but only if we are building AND designing versatile, space and fuel efficient cars within that timeframe. Note: The cars may also be built and sold overseas.

  5. Julian Edgar said,

    on November 12th, 2008 at 8:29 am

    Being played for suckers –,25197,24639217-601,00.html

  6. BG said,

    on November 12th, 2008 at 10:53 am

    “Senator Carr says the industry must reinvent itself, move towards creating greener cars and expand research and development.”
    Sounds good.. but it would depend on an innovative corporate culture. From what I’ve heard this isn’t really the case, and unionised labour traditionally doesn’t lend itself to workplace innovation. I bet that local suppliers to the auto companies could embrace the goals much more – and if the auto business folds their suppliers will be better equipped to service other sectors [such as renewables!!]

  7. Julian Edgar said,

    on November 12th, 2008 at 5:47 pm,25197,24633298-21147,00.html


  8. Julian Edgar said,

    on November 12th, 2008 at 7:00 pm,25197,24641016-601,00.html


  9. Bob Jay said,

    on November 13th, 2008 at 11:25 pm

    YEs but also no!
    I am really concerned with how tax payers $$$ are used but I do favor support for our two unique Australian cars and in particular their many related component suppliers.
    That is where I would direct any money, eg maybe resurecting Borg Warner’s Albury plant or keeping Commodore Air Bags etc made in Australia (now made in China).
    To hell with Ford trying to assemble European econo boxes here or paying Toyota to bung existing hybrid running gear into Camry.
    Other countries have small cars sown up and the Australian history of small car manafacture is so crook that everone will avoid one made here, so don’t waste money there.
    Instead look at what we do well and then get behind our two unique local cars and support them at all levels short of enriching their dull witted US parents.
    Maybe Mr Rudd could buy their Australin operations for a song right now!
    Remember what we were good at. Ford and Holden have expertise in building larger RWD vehicles suitable for poorer road conditions and requiring less perfect maintence than most FWD European and Asian cars.
    Here we are in SE Asia with just such conditions in neighboring countries where Ford in particular has provided engineering input (Indian Lazer) or a complete vehicle (little pickup truck).
    Government could perhaps channel support in indirect ways such as :
    maintaining Government fleet purchases to keep volumes up;
    the directing of financial assistance to the component manafacturers rather than to Ford,GM and Toyota themselves;
    keeping the tarrif at the present 10% for the time being;
    maybe relaxing or at least delaying Euro 4 emissions compliance to allow the 450 potentially redundent Ford Geelong workers to keep on building the (really very effective) L6 engine, at least till the financial crisis/forthcoming recession is over.
    Mitsubishi is gone, Toyota contributes only the generic Camry but the two real Australian cars provide us something different and that is worth supporting.
    Bob Jay

  10. Julian Edgar said,

    on November 14th, 2008 at 6:40 pm

    “Toyota contributes only the generic Camry”


    The Aurion is a far better car than the Falcon (just look at power/weight/fuel economy), and arguably better than the Commodore.

    For me, driving the Aurion and then the FG Falcon made it as clear as night and day – one company got it right and one got it wrong.

    And it’s not Ford that got it right.

  11. Wave said,

    on November 16th, 2008 at 12:30 pm

    Whilst some may love the Aurion, and for all I know it may be an excellent car, who actually buys them? The Aurion is largely irrelevant as they are hardly ever seen on the roads! Based on VFACTS August 2008 figures, the Aurion sells less than a quarter as many units as Commodore and barely more than a third of Falcon sales! In a large car market as small as Australia’s, that’s close to not existing. Although, the winner of barely existing in the marketplace would have to be the Hyundai Grandeur with 2 August sales!

  12. Shane T. said,

    on November 19th, 2008 at 4:58 pm

    Actually – in recent years Toyota Australia has been contributing quite abit to the local industry and it doesn’t just start by the fact that have retained (todate) all of thier current positions unlike Holden and Ford who continue to retrench in numbers.

    Over the past couple of years Toyota Australia has also completed a modernisation of Altona, commissioned a R&D and Design facility, is now a hub for TMC in dust control prodedures, designed the Sportivo suspension which is now used in overseas markets including the US and ofcourse were involved with the suspension design / calibration of the LC200.

    Also … Toyota Australia recently introduced the Aurion to the local market to supplement the Camry and will expand on that presance with the local manufactuering of the Hybrid Camry from 2010 and lets not forget about the ramping up of TRD in Australia in recent times aswell which not only includes some red hot fettled Toyota’s but various forms of motorsport.

    Not only was the TRD Aurion and Hilux engineered here in Australia but now TRD is heavily involved in various forms of motorsport (as mentioned) which include :

    * The Australian Rally Championship (ARC) which they co-incidentally just won thier 3rd consecative Manufactuers Title.

    * Various forms of street meets and targa competitions with the modified Road RacingTRD Aurion as featured at Targa Tasmania

    * Drag Racing (Tony Wedlock’s Aurion) powered by the 1300kw / 1800 hp twin turbo charged 3.2 L6 Supra engine imported from TRD US with an official time of 6.46sec

    * Drift Racing with Beau Yates at the wheel of the specifically modified AE86 and finish 3rd overall this sesson

    * The Aussie Racing Car Series

    and …

    * the Australian Off-Road Championship were Peter Kittles Off-road Buggy is powered by a twin-turbo charged version of the 3.5 V6 (2GR-FE) and lessons gained here has lead to TRD Australia considering the possibility of developing a drag racing derivative to replace the current supra engine in Tony Wedlocks car. Worth mentioning they finished 2nd overall for the 2008 season.

    Infact, TRD Australia has been resonsible for the ongoing development of the 3.5 V6 (2GR-FE) which they now race in 2 different forms as i mentioned above which includes the Road Racing Aurion (supercharged) and the Australian Off-Road Championship (twin turbo charged) and each derivative was developed here in Oz by the talents of the local TRD boys.

    And before i forget, not only has Toyota Australia been the only local manufactuer to return a profit in recent years which is not only good for the industry but certainly helps with the stability of local positions but increase that year-on-year

    * 2005 / 2006 … $56 million
    * 2006 / 2007 … $186 million
    * 2007 / 2008 … $ 232 million

    Inconclusion, it is evident that Toyota Australia has been contributing thier healthy share to the local industry in not just local projects but motorsport all while spending considering amount of $$$’s locally and returning profit at the same time.

    Well Done Toyota … !!!

  13. Shane T. said,

    on November 19th, 2008 at 5:15 pm

    Wave – correct, the Aurion is an excellant car and you can be assured it will only get better with subsequent facelifts and new models.

    The Commodore and Falcon name plate has been around for many years and even generations were the Falcon is concerned whereas the Aurion is only in it’s first carnation and what a good job Toyota done at that.

    However, i can only see the Aurion becoming more relavent over the years while the Falcon and Commodore continue to loose thier shine has they have been doing for a couple of years now.

    Apart from that – the Falcon and Commodore over the years have undoubtedly proven to be amoung the poorest quality, most unreliable and troublesome cars to own and judging by the ordinary quality / reliability of the VE todate, nothing has changed yet Hlden and Ford like us to believe they are biult for Australian conditions.

    Truth be told, i haven’t witnessed a Folcodore model yet that has had the dignity to age with grace while most European and Japanese models simply put them to shame were relibility / dependability is concerned and even in this challenging environment of ours.

    For those who are simply not interested in Falcon’s and Commodores because of their less then favourable and shady past, the Aurion is a genuine alternative that is defantly worth considering while the TRD model is an absloute gem despite being FWD.

  14. Ford Man said,

    on November 19th, 2008 at 5:54 pm

    Shane, I’m not sure about that fabled “european reliability / dependability”. Maybe 20+ years ago.

    Commodores and Falcons do tow very well. Unfortunately many buyers are now going for 4x4s instead.

    The performance variants are staggeringly quick, and good value too.

    I’m sure a dose of Japanese build quality could have saved the market share of the Ford and Holden local cars.

  15. Julian Edgar said,

    on November 20th, 2008 at 6:37 am

    More money wanted –

  16. Julian Edgar said,

    on November 20th, 2008 at 3:29 pm

    And now Ford is going to keep the inline six in the Falcon, and not adopt the imported V6 engines. The local engine plant will stay open.

  17. Rob Lawrence said,

    on November 21st, 2008 at 11:20 am

    As a lad, I used to be in awe of big, fast cars.
    I well remember in 1968 when the GTS Monaro arrived, and I can recall begging a copy of “wheels” when the XY Falcon GT was announced. I was captivated.

    Much more recently, the latest Aussie car that I have been interested in would be the last Monaro, but even so, I would not consider owning one. Too large, and 1800-odd kilos to me is simply not sporting, uses too much fuel and litterally a bit gross.

    The Australian industry is still locked into bigger/heavier/faster at a time when the drawbacks of such thinking have never been more immediately apparent.

    When I look at all the glossy covers of magazines from all over the world, and they describe the “flagship” variant of a new car as the heaviest, most thirsty, least efficient version of a new car, I feel an increasing sense of dislocation from the excitement that used to be.

    Such a shame!

    I might slope off and try to get my hands on an 1800cc Integra Type R..

  18. Julian Edgar said,

    on November 21st, 2008 at 7:24 pm

    And the parents….–in–three-private-jets-20081120-6cvm.html

    cutting journalism but an element of truth

  19. James said,

    on November 22nd, 2008 at 10:08 am

    Julian, I think it’s pretty lazy for you to rely on quoting… actually more like referencing articles to articulate your point of view.

    Especially when those articles are all pretty crappy. Especially when Australian journalism is pretty crappy.

    So it leaves me sitting here, thinking “Hmmmm… Why is Julian so hell bent on having a go about these subsidies.”

    After all, having a local car industry couldn’t be so bad? And historically, the government has thrown money at plenty of less worthwhile measures… Howard’s [and now Rudd’s] churning of dollars through middle class welfare, spending millions on elite sports to buy gold medals and basically throwing money any cause that will score a vote.

    What I’m getting at, is there are plenty of other things the government spends our tax money on that just… are… for lack of better wording… bullshit. Absolute populist waste of my tax dollar. But hey, that’s the way things work, and I’m not going to lose any sleep about it.

    Purely seeing this exercise as subsidising jobs (which it isn’t, and I’m not saying that it is), I don’t think it is that bad. If the car industry closes, a lot of people will be out of a job. Simple as that. The companies themselves, and then the component suppliers. A fair proportion will go on the dole, and what is the cost of that?

    And what will happen if protectist tendancies abroad resume (which there is potential for abroad) and global trade ceases? And what happens when we have exchange rate shocks? And what happens if there is another global war… wouldn’t it be handy to have a car industry that could be adapted into making tanks or something along those lines? And what… and what… and what? Is it not prudent… if not sensible… for a government to encourage a small industry propped up by the taxpayer?

    And besides that, the government needs to act now to provide some stimulus to the economy, and needs to do it quickly. I think ensuring that as many Australian’s stay in jobs now helps keep the cash flowing around, providing some stimulus.

    And back to my initial point. Why is Julian so hell bent on this issue? I assume because he wants a cheaper car. Perhaps you want a greener car, but this package supposedly addresses that.

    Sometimes you need to take a step back, look at the bigger picture, and do a bit of crystal ball gazing.

    There are more important things here at stake, especially right now with the world economy as it is, than complaining about paying too much for imported cars.

    Well, thats my opinion anyway.

  20. Julian Edgar said,

    on November 22nd, 2008 at 4:10 pm

    “Julian, I think it’s pretty lazy for you to rely on quoting… actually more like referencing articles to articulate your point of view.”

    1) I don’t think you understand the concept of a blog

    2) My agreement with Web Pubs require that I contribute just two blogs a MONTH – the same as for when I wrote the ‘Driving Emotion’ column.

  21. James said,

    on November 25th, 2008 at 10:50 pm

    I think I understand the concept of a blog. I just think linking other articles without actually commenting or providing your analysis or some opinion is lazy.

    And, you still haven’t articulated your point of view.

    (Why you bring up what you are paid to do, I do not know…)

  22. Ben said,

    on November 26th, 2008 at 7:20 am

    I think he brought it up as a thinly vieled threat of what might happen if he gets sick of people insisting that he describe what he thinks about it, when he might not have an opinion on it at all.

    That said his opinion was in the main post if you read the first sentence (He doubts that they have the right to taxpayers money when they very clearly have spent large amounts of money on the wrong things a fair bit in the past).

  23. Julian Edgar said,

    on November 26th, 2008 at 9:05 am


    As has been described here before, it is perfectly acceptable in a blog to put just a link and nothing else. If you don’t like that, go read something else.

    ‘Lazy’ needs a context – I am a bit puzzled how producing 3-4 times the amount of work in the blog that I am required to do so can be considered lazy. So, to give you the benefit of the doubt, I thought you’d better know what I am actually required to do. Perhaps you could apply the same standards to your own job and see if you feel lazy?

  24. James said,

    on November 26th, 2008 at 10:17 pm

    I have always been a firm believer that blogging isn’t an excuse to check one’s journalistic or writing standards at the door.

    Specifically, the reason why I am critical of you quoting these articles is that the authors and newscompanies all have their own agenda, and I am sure that you would be aware of this.

    Forgetting that – and seriously, lets forget that – I’m still interested to see exactly why you have this point of view.

    Personally, being an economist by trade, I can see merit in giving money to car companies to enable them to stay in business for the moment, providing the funds are used in Australia and not shipped abroad. Add to this the strategic merits of having our own manufacturing capabilities in such uncertain times, I find it difficult to mount a convincing argument against protecting our car industry, at least in the short term.

  25. Shane T. said,

    on November 29th, 2008 at 1:30 pm

    James – i understand your arguement but at the same time Holden, Ford and Toyota as the remaining local automotive manufactuers must all be able stand on thier on two feet without assistance which effectively costs the tax payer money.

    As it stands, not only is Toyota Australia currently the only profitable outfit of the 3 but has been able (todate) retain all current positions while Holden and Ford contine to retrench by the hundreds while mounting constant debts / losses.

    As far as i am concerned, Toyota Australia has an efficent and sustainable operation in Australia while Holden and Ford must seriuosly re-evaluate thier structure if they are to survive in the future so why should tax payers continue to support the corporate decisions (incompetance) from Holden and Ford (via America of course) that positions these companies as unprofitable outfits.

    I support Julian Edgar on the topic !!