Market Vigilance And A Gas Starter Industry Will Help Fuel An Automotive Renaissance
The Age
Tuesday April 1, 2008
THE two factors that have caused the local car industry's sudden fall from grace are all too apparent. The problem is that the Government has no power over either.
The appreciation of the Australian dollar and the sharp rise in oil prices have transformed the Australian car industry from a success story in the early years of this century to a basket case now. The dollar has made imported cars much cheaper - and Australian exports more expensive - exerting pressure on the local producers and their financial results, which are running red. Simultaneously, the oil price has undermined the industry by making Australian cars less popular in their crucial domestic market. Even when the currency is favourable, it is difficult to build an export business when you do not have a secure domestic market. The Government will have to look elsewhere for solutions. Some things it can control, tariffs being one; but so strong is Australia's free trade stance that the best that can be done is to put off the scheduled drop from a 10% tariff to 5% in 2010. And that won't make a blind bit of difference, so great has been the currency realignment. Government can also act in access to markets. Free access to markets in the region is a must and, even where there is a free trade agreement in place, the Government must be diligent in policing unfair internal policies such as selective sales taxes that make Australian cars uncompetitive even when they can gain access to markets. Federal Industry Minister Kim Carr has clearly indicated he wants to ensure the future of the industry by encouraging car makers to make cars powered by alternative drive trains. He has put $500 million on the table for any manufacturer that wants to develop a "greener" engine or drive train, such as a hybrid system. If local factories could secure such technologies - which are still in their developmental phase - that could pave the way for a successful car-making future. The problem is that international companies like to control that sort of expensive research and development back at head office. They have to tailor their developments to their biggest markets, and legislation in Europe or the US may have a big bearing on which way they will go. One uncomfortable aspect of developing hybrid power trains is that the local car makers - those that export, that is - will have to find new markets. At present, GM Holden and Toyota ship the vast majority of Australia's car exports to the Middle East. In many markets there, petrol is cheap and there is little or no demand for fuel-sipping hybrid cars, or even diesels, for that matter. One asset Australia has not yet harnessed for the good of its car industry is its wealth of natural gas. Natural gas is almost as good a transport fuel as petrol, would not require the car makers to retool, and could be adapted to use the existing fuel distribution infrastructure. Development of Australia's natural gas reserves as a transport fuel would be a major industry development project in itself, of course, although the gas industry may be willing to give it a go given the huge difference between the low export prices now achieved and the more lucrative price of gas as a transport fuel. Promoting gas as a transport fuel would not rule out hybrids as gas can also be used in fuel cells. Although it would not be as attractive a fuel as hydrogen - there would still be some carbon dioxide emissions - at least it would be available and affordable, something that cannot be said of hydrogen. The gas on the North-West Shelf is a long way from the east coast markets, but by encouraging gas as an alternative automotive fuel, we could develop a useful technological niche and also deal with one of the hidden problems of the automotive industry. Importing 800,000 new cars and trucks each year adds many billions of dollars to our trade deficit. When new sources of commodities such as iron ore, copper and coal come on stream, the dollar will come off its highs and the automotive trade deficit will force its way on to the political agenda.
© 2008 The Age