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When Holden closes tomorrow, Australian car manufacturing will come to an end. What happened? And now what?

In 1948, after a period of diverting production to the war effort, Holden achieved its dream of building the first all-Australian motor vehicle, the 48-215 or "FX". Despite costing A£733 - almost two years' wages at the time – the FX was a huge hit and paved the way for Holden's success in the following decades. 

This jaunty Holden ad from the 1970s had every reason to be on top of the world, loudly telling anyone who would listen that its cars were one of the four things Australians love.

By 1958 Holden sales accounted for over 40% of car sales in Australia, and by 1962, the company had sold a million vehicles. In 1964, the Australian Holden operation reached its peak, employing just under 24,000 people across seven facilities in four states. This momentum continued well into the 1970s, with the introduction of its most popular car to date, the Commodore.

Fast forward to today though, and there are just 950 employees left in Holden's last factory located in the Northern Adelaide suburb of Elizabeth. On the 20th October 2017, Holden employees watched the final car roll off the line, they switched off the lights and exited the building, heralding the end of Australian car manufacturing. The story will end where it began, with Holden having humble origins in 1856 as a saddlery business.

With Holden having an important place in Australian culture, an emotional tribute was held Sunday, 15th October when thousands of fans turned up in the suburb of Elizabeth to see a parade of every model built since 1948.

Holden's closure follows similar decisions from Toyota, Nissan and Mitsubishi, which have all ceased making cars in Australia. Holden will keep going as a brand, producing cars in Germany and elsewhere. But, Australian car manufacturing is officially dead. How and why did this happen? And does it matter?

The cause of death is commonly ascribed to foreign carmakers being able to export their cars to Australia while paying either low or non-existent tariffs. In 1984, Senator John Button introduced the Motor Industry Development Plan – or "Button plan" – reducing tariffs to give buyers a wider choice. This resulted in the walls of protectionism gradually crumbling down, and a market full of foreign cars that were either cheaper, superior or both.

More competition meant fewer sales, which was the first problem. The next hit came from consumers moving away from large cars towards ones that were smaller and more economical. Australian car makers tried exporting to make up for lost local volume, but a combination of higher labour costs, and a high Australian dollar made this unviable. 

A 2005 Free Trade Agreement with Thailand exemplifies the problem. Since Australia has lifted the import tariff on cars from Thailand, Thailand has shipped close to two million vehicles to Australia (including more than 200,000 Holdens). Australia, on the other hand, has sold Thailand 100 cars, partially, as reported in Auto Car, due to Thailand's higher registration fees on cars with larger engines.

As we wrote in the October 17 issue of Australian Automotive Aftermarket (AAA), the displacement of Australian-made car sales has been a gradual phenomenon. Between 1992 and 1999, 71% of Holdens purchased were made in Australia and between 2010-2015 that number went down to 52%. "The data demonstrates we have been purchasing and servicing millions of overseas-built Ford, Holden and Toyota vehicles for many years," we wrote. "The notion that we are suddenly being faced with unfamiliar foreign imports for these brands clearly flies in the face of facts."

Both Holden and the Federal Government have taken measures to ensure the transition for employees, and the economy, isn't too harsh.

1961-1962_Holden_EK_Special_Station_Sedan_01.jpgHolden's Human Resources director Jamie Getgood told News Corp that in the four years since announcing Holden's closure, the company has done its best to educate its employees about their options through the creation of a "transition centre" which has guest speakers and provides workers with opportunities for employment in other sectors. Meanwhile, the Government has announced a $100 million fund to support manufacturing businesses in Australia.

University of Technology Sydney professor Roy Green believes that the loss of major auto-manufacturing will lead to a serious reduction in component manufacturing too. "Our research tells us that while 50 percent of components suppliers will be out of business by the end of the year, 10-15 percent will have successfully diversified into defence electronics, aerospace, medical technologies, renewable energy, as well as alternative car industry supply chains," he told The Sydney Morning Herald.

While the loss of businesses isn't good, diversification isn't necessarily a bad thing. Australia may not be able to compete with its neighbours in Asia when it comes to mass production, but it may find its home in advanced, niche, and highly specialised components.

With the days of Internal Combustion Engine (ICE) vehicles potentially numbered, and the inevitable rise of technologies such as 3D printing and robotics, the factory of the future will look different and make different things. Australia can continue to contribute to the auto aftermarket, and if it really wants to lead the world, could focus on mining lithium, battery production and fit-for-purpose facilities related to electric vehicles (EVs).

Holden-commodore.jpgIn the near future, fully automated factories and the possibility of Transport-as-a-Service (TaaS) are other factors to consider. In a world where robots make everything, factory jobs will be the first to go, and TaaS will result in fewer cars on the road, which means smaller, more efficient factories. The concept of 24,000-person car factories making ICE vehicles is frankly very "last century", so it's time to think about what the future will look like.

The shift from manufacturing to technology and innovation is perfectly symbolised by the fate of the Mitsubishi car factory, also located in Adelaide. That factory, which closed in 2008, has been transformed into a technology park, which is attracting many start-up engineering and tech companies. In many ways, the decline in Australian manufacturing is a tragedy, but at the same time it presents an opportunity. Let's not forget, this is the country that invented Wi-Fi, Black Box flight recorders, pacemakers, and much more, so we shouldn’t sell ourselves short when it comes to innovation. Car manufacturing may be dead, but Australians aren’t out of ideas yet!

Topics: Automotive Research