What really killed the Australian automotive industry?
FactCheck do other countries subsidize their auto industry more than us.
Honorary Senior Research Laboratory of Political Economy, University of Sydney.
The President of Remy Davison is funded by the European Commission.
Phillip Toner does not work, check, own shares or receive funds from the company or organization that would benefit from this article, and has not revealed beyond the relevant affiliations academic appointment above.
Monash University provides funds as a founding partner of the AU conversation.
The government of Victoria state provides funding as a strategic partner of the AU conversation.
The conversation in the UK receives funding from HEFCE, HEFCW, SAGE, SFC, RCUK, the Nuffield Foundation, Ogden Trust, the Royal Society, the Wellcome Trust, Esmée Fairbairn Foundation and the Alliance for helpful evidence, and sixty five academic members.
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The Australian automotive industry is in trouble, but the government provides less support than other countries the car manufacturing image.
According to international standards our support of the automotive industry is modest, so we must work hard to attract new Minister of Investment Industry Senator Kim Carr, Lateline July 22.
The idea that the future of the automotive industry in Australia is on shaky ground is nothing new, but Carr's comments come at a time when the two major parties are trying to convince the sector and voters that their policies keep the industry alive.
Prime Minister Kevin Rudd met with Premier of South Australia Jay Weatherill last night, with reports suggesting more government help could be on the way for Holden So when it comes to support automotive manufacturing, how to compare internationally in Australia.
The answer depends a little on how you define support Direct subsidies generally include cash injections But there are also indirect subsidies, which are more opaque and more widespread These can include fiscal incentives such as tax deductions research and development and export subsidies such as tax deductions or other direct financial contribution to an export industry.
Tariff protection also provides a form of subsidy, import tax tariffs, which means more products are less competitive prices Similarly, taxing luxury cars can offer locally produced vehicles a competitive advantage .
If we only look at the direct subsidies and tariff support in Australia, under the current plan Labor government car A5 4 billion will be extended in subsidies over 13 years from 2008 to 2020 industry, a total of approximately A415 million per year.
Over the past 10 years, Holden received A1 8 billion - A150 million each year from A2 potential of 17 billion pool - while Ford got an A1 estimated 1 billion.
Toyota does not comment officially on subsidies, but it is estimated that the Japanese company has received about 2 billion A1 in the last decade.
So, in per capita terms see Table 1, Carr is correct government funding is modest compared to other developed countries, such as Germany and the United States.
When you look at the cost of government funding for each vehicle produced, Australia lies between the two countries every Australian unit costs taxpayers about 1 5 times higher than that of a German vehicle, but only about 67 that a vehicle the US product, despite the economies of scale available in the US auto industry.
When you compare Australia with some other key markets, our direct subsidies are dwarfed by those of overseas territories.
For example, the United States, the Bush and Obama administrations allocated US80 billion in direct aid in the automotive industry financing program This included succor auto corporate finance transactions, such as General Motors Acceptance Corporation GMAC There was also a commercial paper loan guarantees that recovered nearly US51 billion US80 billion allocated to the program.
An extensive survey New York Times revealed that Chrysler has received at least 4 US1 billion since 2007 14 grants in 3 GM states received 77 billion US 1 208 subsidies, while Ford has received more than 58 billion US 1 119 grants.
The Canadian auto industry, which has some similarities to Australia's, also received CA4 billion in loans in 2008, alongside many existing federal and state subsidies to GM Canada and Chrysler Canada These loans were also extended beyond the 2008 financial crisis.
The European Union also heavily subsidizes its industry.
More recently, considerable French subsidies were announced for green or electric vehicles and in 2009, Germany introduced a 5 billion cash for clunkers program.
EU countries have also used state aid greatly in the 1980s as investment aid, export credits and insurance, corporate bailouts, contract research and development, and direct capital injections in public-private sector and national governments of the companies also offer loans openly or not updated or sometimes illegal subsidies to businesses.
The European automotive industry is the recipient of considerable direct and indirect subsidies as a result of these complex national and European policies but must wade through thousands of pages and years of reporting on state aid to even win a notion approximate level of support provided to the automotive industry and other manufacturing sectors in Europe.
In Australia, domestic manufacturers in 2012 produced about 140,000 vehicles 150,000, representing a tiny proportion of global automotive production, which accounted for 63 million units in 2012 Australia 29th among domestic vehicle manufacturers in 2011, with 148,000 units which is only about 10 total sales of domestic vehicles see table 2 below.
Table 2 2012 figures based on key statistics of the industry estimates the automobile from 2001 to 2011 in 2012 figures based on industry estimates.
But it is important to note that the unit cost of Australian models made is four times that of Asia and Europe more than twice as comparisons of Ford Australia with international manufacturing costs.
Therefore, the absence of scale, costs of importing key components and labor costs resulting in higher unit costs for taxpayers against more heavily subsidized, but the most efficient producers, such as Germany however, the Australian industry is more efficient and cheaper to maintain both per capita and unit costs that vehicles produced, for example, the United States and elsewhere.
Carr is correct by international standards, using the annual Australian automotive industry is relatively modest in raw dollars and per capita.
This is a balanced assessment of the application It clearly defines direct assistance that cash transfers to car companies and tariffs on imported motor vehicles What are both transparent, easy to quantify and selective, as they are not directly applicable to the local automotive industry.
On this measure, support for the local automotive industry is indeed modest compared to what other nations often provide international comparisons help to industry, the measure is an aid divided by the population this figure is often cited by Carr as the basis for the request regarding the modest nature of the local aid.
If this measure of direct aid is applied on a per-vehicle production unit, government support going to be modest in the middle ranking This is because Australia produces far fewer cars than other nations - Phillip toner.
FactCheck do other countries subsidize their auto industry more than we, factcheck, other countries.