LPG facility could help fill void

As the Abbott government stumbles towards the end of the year with a deteriorating budget deficit of $47 billion and a slump in the opinion polls, it is looking for some easy wins to help boost its field of woes.

Given the dramatic dive in the government's popularity that followed Holden's shock decision to withdraw from manufacturing in Australia, a proposal by peak body Gas Energy Australia and the Victorian Automobile Chamber of Commerce to fill some of the void is getting a lot of political attention, both state and federally.

The proposal, estimated to cost $50 million, would include creating a world class production line of LPG manufacturing capable of producing the next generation of LPG vehicles.

According to the proposal, it would set up a national LPG vehicle centre of excellence, which would include "gas vehicle and component research [new product development], development and application of conformity of production protocols to ensure product quality, conduct of emissions validation to Australian Design Rule requirements, the provision of conversion facility accreditation and product certification, and industry training". The centre would be based in Melbourne and could provide research and development assistance to overseas motor vehicle producers importing into Australia.

The proposal would generate 500 jobs and be funded by the federal government's Automotive Transformation Scheme.

The ATS is a 10-year, $3 billion scheme set up in 2011 to "encourage competitive investment and innovation in the automotive industry". There is still $2 billion left in the kitty and with Ford and Holden exiting in 2016 and 2017 respectively, Toyota is shaping up as the main recipient of the funds - unless other proposals come forward.

In the scheme of things, a $50 million investment to reinvent the Australian LPG industry is a drop in the ocean compared with the amount of money the government has sunk into the car industry. Over the past 12 years, Toyota and Ford have received more than $1 billion in state and federal assistance, and Holden has received more than $2 billion.

The proposal looks like a no-brainer as it not only helps fill a void created by Holden and Ford by using some of the labour and facilities, but Australia has oodles of LPG reserves. According to VACC, there are more than 490,000 light vehicles in the Australian LPG fleet, which could balloon to almost 800,000 by 2020.

"Given that there is an abundant supply of indigenous LPG available in Australia, the achievement of this objective would reduce Australia's demand for imported finished fuel product by 218 million litres a year, or 7.1 million barrels a year," the paper says.

Put another way, if the government lets Ford and Holden exit the market without plugging the hole, the knock-on effect for the Australian LPG auto industry is certain death. If it gives it a kick-start, it will not only help a new industry to thrive but help reduce emissions as LPG is relatively cleaner than petrol.

The VACC and Gas Energy Australia have been working on the proposal for more than a year and started lobbying it hard in the past couple of weeks. They plan to raise the stakes on Wednesday at an automotive industry round table that will be headed by Victorian Premier Denis Napthine.

The proposal is particularly attractive to the Victorian government as it is to have two of the three factory-scale LPG production facilities based in Melbourne and Geelong. The third is planned for Adelaide.

The proposal highlights a facility operated by BRC Gas Equipment in Italy, which produces 1800 LPG vehicles a month. The three facilities in Australia would initially produce 15,000 vehicles a year, with a view to that figure rising along with demand.

It comes as Prime Minister Tony Abbott and Dr Napthine continue their discussions with Toyota to keep the car maker operating at Altona, where it employs 2500 people. According to media reports, Dr Napthine ranked the survival of Toyota as the top discussion point when he met Mr Abbott last week.

With politics dictating most decisions, the development of a world class LPG automotive industry might tick all the boxes.