Buckle up for more car crashes at home

Australia has one of the most competitive car markets in the world, and there are plenty of casualties, writes Sam Hall.

The car industry is bracing for more imported brands to buckle in Australia amid shrinking profit margins and ambitious price regimes from competitors.

Following Opel Australia's decision to wind down its operations this month, questions have been raised over whether the current level of sales can be rationed any further between brands.

Australian consumers have one of the widest selections of automotive brands anywhere in the world, with about 60 manufacturers (depending on whether you include sub-brands and ultra low volume makers) and more than 350 different models. That's despite a relatively modest annual demand of roughly 1.1 million new car sales (about 1.25 per cent of the global market).

While Opel's sudden exit last month came as a shock to most in the industry, there is now speculation that more casualties will follow the General Motors-owned brand, joining Daewoo, Saab, Hummer, and Daihatsu on the scrapheap of brands amassed in Australia during the past decade.

Holden also pulled back on launching the famed American Cadillac brand in Australia at the 11th hour, a victim of the US bankruptcy of General Motors combined with the dominance of German luxury brands in Australia.

Despite being part of the huge Volkswagen Group, Spanish brand Seat also found it too tough in Australia and packed-up a decade ago after a short stint being imported by the Astre group.

"If you go back to the 1980s, you had tariffs of 57.5 per cent, you had quotas and you had a floating dollar at 50 cents," one high-ranking industry official told Fairfax Media. "Put those things together today and you have an effective tariff at about 3.5 per cent, you have a dollar that's been, in recent times, over parity for the US dollar for extended periods of time ... it's very open.

"The reality is that in a purely competitive market, there's always going to be someone at the margins - that's just the nature of markets."

While the record level of competition has been a boon for bargain-savvy buyers, industry figures suggest many existing importers are floundering. Among those to endure languishing sales this year are Chery, Citroen, Dodge, Foton, Peugeot, Proton and Ssangyong. In addition, freshly revived mainstream brands such as Nissan's luxury arm Infiniti and the VW-owned Skoda have struggled to gain a foothold.

The competitiveness of the market has also spelled bad news for established brands such as Mitsubishi, which recently posted a loss of $34.7 million in the 12 months to March 31 despite posting a $23.1 m profit the previous year when it sold just 3000 more vehicles. Mitsubishi has said the loss was due to the fierce competition of the Australian car market.

Despite its standing in the wider automotive landscape, Opel lasted barely 12 months in Australia, selling only 1500 vehicles across its network of 20 dealerships. Outgoing boss Bill Mott insisted in February that the brand was in Australia "for the long haul", but despite his promise of an expanded model line-up the brand's intentions were short-lived.

Holden chief Mike Devereux said the German-bred Opel brand was caught in the crossfire of a small-car price war.

"Some of the import brands coming into this country in the last couple of months, they're losing money," Devereux said.

"They're losing money and they don't actually build cars here - it's astounding. It seems like you've got a fairly competitive market, lots of brands on sale and a couple of thousand bucks in price erosion in the small car segment.

"It just shows you how difficult it is to make a good go of it in this country with so many brands."

Devereux said the rampant level of competition stemmed from more relaxed conditions for imported products, a factor which has hurt Holden's manufacturing operations in Australia.

"The reason there is so many brands is that there are no barriers to entry - none. It's a great test market for a lot of brands and there are effectively no tariffs," Devereux said.

Despite the bleak outlook, more emerging manufacturers including ambitious Chinese marques GAC, Brilliance and FAW, continue to eye off the Australian market. Indian brand Tata has just revamped its presence in Australia.

MG (or Morris Garages) re-emerged on the Australian market earlier this year under the ownership of one of China's largest car makers, Shanghai Automotive Industry Corporation. Despite one Sydney dealership and a stockpile of 400 new cars, the local operation still officially hasn't gone "on sale", said spokesman Andrew Shaw.

The brand is being spearheaded by the manual-only MG6 small car - its only variant - with a plan to introduce several new models over the next 18 months.

Ford's global boss Alan Mulally recently said market conditions in Australia were perceived as dim by many manufacturers.

"This is the most open market in the world, one of the most competitive markets in the world," he said. "This is a really competitive marketplace, and if you're going to get a chance to participate here, then you need to really, really be competitive," Mullaly said.