It's no coincidence that two of the top three vehicles sold in Australia are made in Japan, writes Richard Blackburn.
Meet the car that is slowly killing the Australian automotive industry. The Mazda3 (pictured) is not a remarkable car, but is compact, reliable and, most importantly, sharply priced.
That formula has been enough to see the Japanese hatchback and sedan rise to the top of the heap in an increasingly congested car market. The bad news for the local industry is that the Mazda3 is due for replacement by an all-new model - complete with cutting-edge engine technology - early next year.
The Mazda3 dethroned the Holden Commodore as Australia's favourite car in 2010, ending a 15-year reign for the home-grown hero which, at the height of its powers, attracted more than 90,000 buyers a year.
But the Mazda3 is not the only car that has overtaken the Commodore in the past two years. The Toyota HiLux, a rugged prospect that doubles as a work vehicle during the week and family transport at weekends, is number two, while Toyota's Corolla, which offers a similar fuss-free formula to the Mazda3, is now firmly ensconced as Australia's third favourite.
It's no coincidence that two of the three vehicles are made in Japan. The devaluation of the yen has improved the margins of the local operations and allowed them to sharpen their pencils like never before. Meanwhile the HiLux is made in Thailand and benefits from the free trade agreement.
Last month, the Commodore slid to a lowly 13th on the monthly sales charts, overtaken by three types of de facto family staples: small cars, SUVs and one-tonne utes.
The shift in the balance of power has also hurt the Commodore's stablemate, the Cruze, which has fared almost as badly, with sales down by almost a third.
The news is as bad, if not worse, for the rest of the local car industry. The Commodore's arch-rival, the Ford Falcon, is on its last legs, while sales of the Toyota Camry and Aurion, both made in Victoria, have slid by more than a quarter in the first three months of this year. The only locally made vehicle to hold its ground this year is the Ford Territory SUV, but its future is tied to the success of the Falcon.
So why are people turning their backs on locally made vehicles? It comes down to three things: choice, price and depreciation.
In 1998, when the Commodore was riding high, Holden competed with 33 brands for the hearts and wallets of buyers. Today that number has grown to 47. The brand is even facing an enemy within. Just recently, Opel, the German arm of Holden's US parent, General Motors, entered the fray, bringing with it the popular Astra nameplate that used to adorn small Holdens.
As a result it has become harder for any vehicle to dominate the sales charts. While Holden sold 94,642 Commodores to claim the number one spot in 1998, Mazda sold only 44,128 cars to take the crown last year. In 1998, the Commodore and Falcon alone made up close to 30 per cent of the total passenger car market. Last year, the Mazda3 and Toyota Corolla made up less than 15 per cent.
Volume is crucial to the success of a car line. It keeps the production line ticking over, and provides a company with the revenue to reinvest in research and development for future models.
The world's leading car makers all spin multiple body shapes off the same underpinnings - or platform, in industry-speak. Volkswagen, for example, can easily spin a dozen different vehicles off the one platform and sell them all in markets around the globe.
Ford and Toyota each sell more than 1 million versions of their respective Focus and Corolla small cars. That's a lot of profit to pump into the next model.
In contrast, Holden is aiming to produce roughly 75,000 vehicles at its Elizabeth plant this year.
The lack of scale is beginning to show in the cars the local industry produces. It's becoming a longer time between drinks for a new Commodore or Falcon, which means the current models are getting long in the tooth.
There's no doubt the new Commodore will be a big step up from the previous model, but doubts remain about whether it is the right car to share the plant with the smaller Cruze. Most pundits, including Holden dealers, believe an SUV should be rolling down the production line alongside the Cruze, giving Holden coverage of the two growth areas of the market.
Holden's managing director Mike Devereux said at the Sydney motor show last year that the fragmentation of the market made it much harder to get a volume seller. There were 80 SUV models and 40 small cars on the market alone, and the company needed to sell roughly 1800 cars a month to make local production viable.
"The more you have to compete with the more risk there is," he said. Part of that risk is the threat of rampant discounting.
Retailers believe last year's record sales result was driven by unsustainable discounting driven by aggressive sales targets set by many importers.
It's easy to see why Devereux claims the recent job cuts were out of his control.
And it's equally hard to see a way forward for the local industry without some turn around in the value of the dollar.