Australia could have an unexpected opportunity to revive its long-lost car manufacturing industry as a major European crackdown pushes Chinese electric vehicle giants to establish factories overseas.
Almost a decade after Holden and Toyota shut their Australian production lines, experts believe the growing international expansion of companies such as BYD and Chery could reopen the door to local manufacturing, potentially creating thousands of jobs.
The opportunity comes as France and Germany push for tougher rules that would favour locally manufactured vehicles for government contracts and subsidies, potentially encouraging Chinese carmakers to establish more factories within the region.
The proposed measures would add to existing European Union tariffs of up to 35.3 per cent on Chinese-made electric vehicles, increasing pressure on manufacturers to shift production to Europe.
In a separate development, the European Union has reached an agreement with Beijing to restrict imports of Chinese-made hybrid vehicles, including plug-in hybrids, to 350,000 a year from as early as December.
However, unlike Europe, Australia does not impose comparable tariffs on Chinese vehicles, meaning manufacturers would need a compelling commercial reason to establish production Down Under.
A leading economist who has previously outlined a plan to revive Australia’s car manufacturing industry, Dr Liwen Guo, believes the overseas expansion of Chinese electric vehicle giants presents a rare opportunity to bring production back to Australia.
“I believe there is an opportunity, but Australia would need to make a convincing commercial case,” she told Yahoo News Australia.
“The central question for any manufacturer would be whether producing in Australia offers a stronger business case than supplying Australian customers from existing overseas factories.”
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A twist on Holden, Ford and Toyota’s Australian legacy
Rather than immediately attempting to rebuild the large-scale manufacturing operations once operated by Holden, Ford and Toyota, Guo believes the plan would have to be focused on smaller assembly facilities to start.
“We could explore a focused, staged approach to local EV assembly, with investment decisions based on specific models, customers and export opportunities,” she said.
“The objective should be a commercially sustainable industry that develops Australian skills and capabilities, with public support justified by clear economic benefits.”
Guo said government assistance should be tied to measurable investment, training and local value creation.
“Government policy can help reduce uncertainty and establishment costs, but it cannot substitute for a
“Employment would depend on production volumes, automation and how much work is undertaken locally,.”
Is Australia at risk of missing an opportunity?
The prospect of reviving Australia’s car manufacturing industry has already been raised by some of the world’s biggest automotive players.
In June, BYD vice president Liu Xueliang revealed the Chinese car giant was open to manufacturing vehicles or components in Australia, although he stressed there were no immediate plans to do so.
Speaking at a media event in Melbourne, Liu said the company‘s immediate priority was growing sales and meeting customer demand, but insisted “anything is possible”.
BYD is already expanding its manufacturing operations internationally, with facilities in Thailand, Brazil and Uzbekistan, alongside plans to establish production in Europe.
Rival Chinese manufacturer Chery has also considered the possibility of bringing car production back to Australia.
Speaking at the Beijing motor show in May, Chery International president Zhang Guibing revealed the company’s chairman had previously asked him to explore whether Australian manufacturing could be revived.
Guo believes Australia risks missing a major opportunity if it fails to explore potential investment, but warned against rushing into costly agreements simply to bring manufacturing back.
“There is a risk in failing to seriously assess the opportunity,” she said.
“However, that does not mean Australia should secure a factory at any cost.”
Guo warned that Australia’s relatively small domestic market and high manufacturing costs could deter Chinese carmakers from establishing local factories, particularly without strong export demand to make production commercially
“Productivity, automation, supplier availability, energy, logistics and factory utilisation all affect the cost of each vehicle,” she said.
“A proposed plant would need sufficient domestic and export demand to justify its investment.”
When did Australia stop making cars?
Australia’s mass-produced passenger car industry came to an end on October 20, 2017, when the final Holden Commodore rolled off the production line at Elizabeth in South Australia, ending nearly 70 years of local car manufacturing.
The historic closure followed Ford’s decision to shut its Broadmeadows and Geelong factories in October 2016, while Toyota ended production at its Altona plant in Melbourne on October 3, 2017.
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The departures were driven by a combination of high production costs, Australia’s relatively small domestic market and growing competition from cheaper overseas imports.
While Australia continues to manufacture automotive components and specialist vehicles, the closures marked the end of large-scale passenger car production.
A move resulting in thousands of job losses and leaving the country increasingly reliant on imported vehicles.
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