Australia’s ailing car manufacturing industry will receive a $200 million funding boost. And all cars in Commonwealth fleets will have to be Australian-made.
The policy was announced today by Kim Carr, Minister for Innovation, Industry, Science and Research.
Australia’s manufacturing industry is in trouble. But are cars really the way to go?
Cars contribute 14 per cent to Australia’s greenhouse gas emissions. Green cars and green technology might be a way to clean up the manufacturing industry and help reach our emissions reduction target.
But green manufacturing policy has struggled to achieve anything in the past. So what can we learn?
A failed attempt
Just hours after retaking the Labor leadership, Kevin Rudd reaffirmed his commitment to Australian manufacturing:
"I never want to be prime minister of a country that doesn’t make things any more. There’s a big future for Australian manufacturing under this government."
In Rudd’s first term as prime minister the industry’s 'big future' was tied to green technology. The most significant attempt at this green manufacturing policy was the New Car Plan for a Greener Future, presented as a great step forward and unleashing a decade of green revolution.
Ford, General Motors Holden and Toyota received 80 per cent of the funding between them. Unfortunately, handing over this money failed to stimulate the promised innovation, shown by average CO2 emissions from Australian-made vehicles. In 2010 Australian vehicles emitted 247g of CO2 per kilometre. The widely accepted standard for a green car is 120g of CO2 per kilometre. By this definition, no car currently manufactured in Australia qualifies as a green vehicle.
The employment outcomes were even more dismal. The industry lost 13,000 jobs over the last five years.
The failures of Rudd’s first attempt to secure the future of the Australian automotive industry via green innovation highlight the challenges of green car manufacturing in Australia.
The Australian government and the three Australian subsidiaries of General Motors, Ford and Toyota have little capacity to effect significant change within the local industry. Instead the creation of a green Australian automotive industry is primarily in the hands of the global parent companies.
Unfortunately, as the Australian automotive industry is a relatively minuscule player, producing just 0.003 per cent of cars globally in 2012, there is little incentive for these parent companies to invest in Australian manufacturing. This also limits the bargaining power of the Australian government and the local subsidiaries as they compete internally against other larger and cheaper manufacturing plants.
Ford’s decision to cease manufacturing in Australia in 2016 is set to further diminish Australia’s position in the global automotive industry.
A big future?
There are two directions the Rudd government could take to respond to the challenges facing the Australian automotive industry.
The first of these is to establish Australia as a niche green vehicle industry. Future government assistance could be dedicated to ensuring that highly efficient cars are produced at the cutting edge of global automotive production.
However, the economic realities of the global industry are likely to put the brakes on such a plan. Car manufacturing has shifted to low-cost countries such as Thailand and Indonesia. Unless the global parent companies receive substantial ongoing government assistance it’s doubtful they will maintain their operations in Australia.
This assistance would have to be largely on their terms, and would be unlikely to include rigorous environmental improvements.
The other direction the federal government could take would be to accept that the days of car manufacturing in Australia are numbered. Instead, the government could offer substantial financial incentives to the industry. This could take the form of an industrial package for a green transition.
While there are challenges for such a proposal, there are also possibilities. For a smooth transition the need to involve workers, communities, business and government in planning and developing a green industry.
Those currently working in the local car industry could adapt their skills for green technologies for transport, mining or even renewable energy.
The recent changes to the car benefits tax may accelerate the end of automotive manufacturing in Australia as it has the potential to further reduce the sales of locally produced vehicles. But lack of consultation with the industry and quick implementation do not make for a smooth or fair transition.
There could be a big future for Australian manufacturing, but it won’t be secured by handing out large amounts of money. There’s an opportunity for a fresh approach to green manufacturing.
Kevin Rudd must work closely with the automotive industry to ensure that the skills and expertise of its workers are not wasted.
Caleb Goods is a research associate at Curtin University's School of Business.
Caleb Goods does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.