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Australia Autos Report Q1 2014 - New Market Research Report


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2013-12-23 17:53:52 - Fast Market Research recommends "Australia Autos Report Q1 2014" from Business Monitor International, now available

Since our last quarterly update, the Australian people have voted in a new Liberal-National coalition government. The new Prime Minister Tony Abbott has said that his government will now look at the financial assistance pledged to the auto industry by the former Labor administration and BMI believes that the domestic auto industry is now at a crossroads. Should the Abbott government fail to provide sufficient financial assistance moving forward, we believe there could well be a withdrawal from production by one or both of the two remaining local automakers.

The arrival of the new Liberal-National coalition government certainly spells tough news for the car industry at face value. Prime Minister Abbott has been unmoved on his stance to cut the previous

Labor government's funding to the automotive industry under the automotive transformation scheme by AUD500mn (US$475mn), which will leave automakers with funds of only about AUD1bn (US$950mn) for the remaining years up to 2015. This, of course, has raised alarm bells among Victorian and South Australian state governments, given that a withdrawal by the current automakers could cause a significant spike in job losses.

Full Report Details at
- www.fastmr.com/prod/754463_australia_autos_report_q1_2014.aspx

Despite the adverse impact on jobs, some politicians from the Liberal-National coalition remain implacably opposed to further taxpayer handouts to auto manufacturers. As locally produced cars wrestle with cheaper imports, while the expensive local currency also obstructs the industry's exports from making headways in the global market, the outlook for future production looks tenuous at best, and as such, it is unsurprising that the coalition government is reassessing pledges made to original equipment manufacturers (OEMs) previously.

BMI believes there will be an intense debate in parliament in the next few months on whether the government should continue to support domestic vehicle production (and the extent of support if so) and findings of the Productivity Commission (a taskforce set up by the government to assess the viability of the local auto industry), whose final report is due sometime in March 2014, will be crucial in influencing the outcome of the debate.

It is BMI's long-held view that auto manufacturing in Australia remains uncompetitive, due to the strong Australian dollar and the country's high labour costs. Ford Australia recently decided to shutter its local manufacturing operations by 2016 as the vast gap in costs between its Australian and other overseas operations meant that maintaining its Australian production base no longer made financial sense Both GM Holden and Toyota Australia, the other two remaining locally producing carmakers, have asked the new government for some form of financial assistance for the production of some of their models. In the Company Profile section of this report, we outline our thoughts on how the operating environment for both carmakers will change, should the government decide to stop any further financial assistance to the auto industry.

According to Abbott, his plan to scrap the carbon tax would increase the competitiveness of the auto industry as he believes that the tax is adding roughly AUD400 (US$380) to the cost of every car manufactured in Australia. While it is hard to ascertain the exact increase in costs borne by firms as a result of the carbon tax, we remain sceptical that its abolition will bring about a revival in the industry's fortunes. At base, it is the high cost of labour and an uncompetitive Australian dollar which are the key problems effecting the entire supply chain of the Australian auto industry. As such, we believe that the scrapping of the carbon tax will do nothing to address these issues. Consequently, BMI is now increasingly negative on the outlook for local car production over the medium term and will report further on developments as they occur.

One step that the new government has taken to support the local car industry is the reversal of Labor's prior decision in July 2013 to make changes to the country's fringe benefit tax system for vehicles used partly for business and partly for private use. This would have required owners of company cars to fill out logbooks detailing their personal and business use of their cars. Previously, it has been accepted that owners of company cars only have to declare 20% personal use of these cars.

The Federal Chamber of Automotive Industries (FCAI) had considered that confusion among Australian business as to whether or not the FBT changes would take effect was one of the major reasons behind the 3.1% fall in new vehicle sales recorded over October 2013, despite the release of some positive economic indicators. Indeed, business sales were down by 10.5%, compared to a 4.4% increase in private sales for the month, indicating that businesses were holding back from new car purchases until there was clarity over FBT.

In November 2013, new Treasurer Joe Hockey confirmed that the government would not bring in the July 2013 changes proposed by Labor and that the car industry was 'back open in Australia'. Although BMI would not go that far, given the proposed cuts to subsidies to automakers, the removal of uncertainty around FBT will prove a support.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010

About Fast Market Research

Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.

For more information about these or related research reports, please visit our website at www.fastmr.com or call us at 1.800.844.8156.


Author:
Bill Thompson
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Web: www.fastmr.com
Phone: 18008448156

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