Idling: Wholesaler activity to offset manufacturer exits, keeping industry revenue stable
IBISWorld Industry Report X0014
Automotive Industry in Australia April 2015
David Whytcross
2 About this Industry
14 Major Markets
27 Operating Conditions
2
Industry Definition
15 International Trade
27 Capital Intensity
2
Main Activities
17 Business Locations
28 Technology & Systems
2
Similar Industries
2
Additional Resources
3 Industry at a Glance
28 Revenue Volatility
19 Competitive Landscape
29 Regulation & Policy
19 Market Share Concentration
29 Industry Assistance
19 Key Success Factors 19 Cost Structure Benchmarks
30 Key Statistics
4 Industry Performance
21 Basis of Competition
30 Industry Data
4
Executive Summary
21 Barriers to Entry
30 Annual Change
4
Key External Drivers
22 Industry Globalisation
30 KeyRatios
5
Current Performance
7
Industry Outlook
23 Major Companies
31 Jargon & Glossary
10 Industry Life Cycle
23 Toyota Motor Corporation Australia Limited
12 Products & Markets
24 GM Holden Ltd
12 Supply Chains 12 Products & Services
25 Ford Motor Company of Australia Limited
13 Demand Determinants
www.ibisworld.com.au | (03) 9655 3881 |
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Automotive Industry in Australia April 2015
About this Industry Industry Definition
The industry includes car manufacturers, parts suppliers, car dealers and mechanics. These companies are generally engaged in the design, research, development, manufacture, sale and maintenance of motor vehicles and parts.
Main Activities
The primary activities of this industry are
Motor vehicles refer to cars, utes, station wagons, SUVs and people movers sold to the public, businesses or the government. The report does not cover vans, motorcycles, buses or heavy commercial vehicles such as trucks.
Designing motor vehicles Motor vehicle research and development Manufacturing motor vehicles Selling motor vehicles Maintaining and repairing motor vehicles
The major products and services in this industry are Imported motor vehicles Locally manufactured motor vehicles Parts and accessories Repair and maintenance
Similar Industries
C2311 Motor Vehicle Manufacturing in Australia Businesses in this industry design, develop and produce motor vehicles. C2319 Motor Vehicle Parts and Accessories Manufacturing in Australia Companies in this industry manufacture automotive parts such as mufflers. F3504 Motor Vehicle New Parts Wholesaling in Australia Firms in this industry sell parts to downstream industries such as auto mechanics. G3911 Motor Vehicle Dealers in Australia Businesses in this industry sell new and used cars. S9419 Motor Vehicle Engine and Parts Repair and Maintenance in Australia Companies in this industry repair and maintain cars.
Additional Resources
For additional information on this industry www.amif.com.au Australian Motor Industry Federation www.industry.gov.au Department of Industry and Science www.fcai.com.au Federal Chamber of Automotive Industries www.fapm.com.au Federation of Automotive Products Manufacturers
2
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Industry at a Glance Automotive Industry in 2014-15
Key Statistics Snapshot
Revenue
Annual Growth 10-15
Annual Growth 15-20
Profit
Exports
Businesses
$162.0bn 0.3% $6.0bn
$3.1bn
Trade-weighted index
Revenue vs. employment growth
Market Share
Toyota Motor Corporation Australia Limited 5.4%
5
80 75
Index
% change
0
GM Holden Ltd 2.4%
-5 -10
Ford Motor Company of Australia Limited 1.7%
-15
Year 07
-0.2% 50,181
70 65 60
09
Revenue
11
13
15
17
19
55
Year 07
21
09
11
13
15
17
19
21
Employment SOURCE: WWW.IBISWORLD.COM.AU
p. 23
Enterprises
Key External Drivers
7.3%
Consumer sentiment index
SA
1.9% 1.0% NT TAS
0.9% ACT
Trade-weighted index
10.8% WA
Real household disposable income
29.7%
World price of crude oil Motor vehicle tariff
NSW
Motor vehicle price index
22.2% QLD
26.2%
p. 4
VIC
SOURCE: WWW.IBISWORLD.COM.AU SOURCE: WWW.IBISWORLD.COM.AU
Industry Structure
Life Cycle Stage Revenue Volatility
Mature
Regulation Level
Heavy
Low
Technology Change
Capital Intensity
Low
Barriers to Entry
Industry Assistance
High
Industry Globalisation
High
Concentration Level
Low
Competition Level
High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30
High Medium
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Industry Performance
Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive Summary
The Automotive industry encompasses a range of smaller industries that have performed variably over the five years through 2014-15. New car sales spiked in 2009-10, as the pent-up demand stemming from delayed purchases during the global financial crisis was released. Although falling since then, the continued strength of new car sales has led to growth for motor vehicle wholesalers and service agents, as they have been servicing an increasing number of vehicles on the road. However, local motor vehicle manufacturers have struggled, as consumers have looked to more affordable, fuel-efficient imported vehicles rather than petrol-guzzling locally manufactured cars. Due to these contrasting effects, industry revenue is expected to rise by an annualised 0.3% over the five years through 2014-15, to reach $162.0 billion. Driven by soaring fuel prices over much of the period, consumers have increasingly purchased smaller imported cars and compact SUVs. This shift, together with a high Australian dollar and a reduction in import tariffs, has boosted import penetration. Car wholesalers, and to a lesser extent dealerships, have thus achieved some growth over the past five years, to the ultimate detriment of local manufacturers. Falling sales of locally
manufactured vehicles have led to lower production volumes, reducing economies of scale. These factors have culminated in Toyota, GM Holden and Ford each announcing their intention to exit Australian manufacturing over the next five years. These announcements and a slowdown in new car sales as the Australian dollar depreciates are projected to result in a 1.3% industry revenue decline in 2014-15. The end of local motor vehicle manufacturing will transform the industry over the next five years. As consumers will no longer be able to purchase locally manufactured vehicles, motor vehicle wholesalers that import vehicles will benefit and are expected to grow strongly. Parts manufacturers are projected to decline in number as they will be unable to replace revenue from transactions with local motor vehicle manufacturers. This trend will also extend to parts wholesalers that distributed products to local motor vehicle manufacturers. The exit of motor vehicle manufacturers is likely to be partly offset by improved vehicle affordability leading to moderate growth in new car sales. Overall, industry revenue is forecast to decline at an annualised 0.2% over the five years through 2019-20, to total $160.6 billion.
Key External Drivers
Consumer sentiment index Higher consumer sentiment leads to greater confidence in the purchase of high-value items such as cars. As consumer sentiment increases, consumers spend on more expensive vehicles, driving industry sales growth and boosting profit margins. Consumer sentiment is expected to fall in 2014-15.
imported motor vehicles, it also makes Australian-made vehicles and parts less price-competitive on the global market. With the industry becoming importfocused, an expected trade-weighted index decline in 2014-15 is likely to weaken demand over the next five years, as consumers will have to pay higher prices for imported vehicles.
Trade-weighted index Fluctuations in the exchange rate create volatility in the Automotive industry. While an appreciation of the Australian dollar is positive for importers and consumers as it decreases the price of
Real household disposable income Consumers’ disposable income determines the available funds they have to spend on new motor vehicles, and the repair and maintenance of vehicles. Consumers with lower disposable incomes are less likely to
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Industry Performance
Key External Drivers continued
purchase new vehicles, particularly more expensive vehicles, and are likely to postpone servicing vehicles they already own. Disposable income is expected to rise in 2014-15. World price of crude oil Petrol prices affect every part of the supply chain, as fuel accounts for a large proportion of a vehicle’s running costs. Petrol prices have skyrocketed over the past five years, decreasing vehicle use. Dramatic changes in the price of fuel affect the driving habits of households and the type of vehicle driven. In 2014-15, the world price of crude oil is expected to fall significantly as global production exceeds demand. Motor vehicle tariff Taxes on imports increase the price of imported motor vehicles, which makes
domestic products more competitive on the market. The Federal Government reduced tariffs on vehicles and parts to 5.0% in January 2010. Tariffs are scheduled to remain stable in 2014-15, although the announced exits of major motor vehicle manufacturers could result in further tariff reductions. This would present an opportunity for the industry, as lower prices for imported vehicles can prompt an uptick in demand. Motor vehicle price index The price of motor vehicles directly affects demand. Lower prices increase vehicle affordability, which makes consumers more likely to purchase new vehicles. The price of vehicles has been falling over the past five years, but is expected to increase in 2014-15, which poses a threat to industry revenue as demand for vehicles typically weakens in response to reduced affordability. Consumer sentiment index
Trade-weighted index 80
120 110
70
Index
Index
75
65
90
60 55
Year 07
100
09
11
13
15
17
19
21
80
Year 07
09
11
13
15
17
19
21
SOURCE: WWW.IBISWORLD.COM.AU
Current Performance
The Automotive industry encompasses each level of the passenger vehicle supply chain, from manufacturing through to wholesaling and retailing. The industry also takes into account repair and maintenance operators. Local manufacturers have struggled over the past five years due to the high Australian dollar for much of the period, lowered import protections and consumers’
shifting demand towards smaller imported cars. This has not been detrimental to all segments of the industry though, as sales growth for imported vehicles has enabled wholesalers and some dealers to offset much of the manufacturing decline. Over the five years through 2014-15, overall industry revenue is forecast to reach $162.0 billion, following annualised
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Industry Performance
Current Performance continued
growth of 0.3%. The industry’s steady growth comes after a significant decline at the onset of the global financial crisis.
Sluggish car sales in 2014-15 as the Australian dollar falls are expected to result in a 1.3% revenue drop for the year.
Participation and profit
All entities within each automotiverelated industry contribute towards overall industry revenue. While this can result in double-counting due to the high value of purchases by dealers from other motor vehicle manufacturing and wholesaling entities, it reflects the sum of every single establishment’s revenue. The number of establishments has fallen slightly over the past five years as many parts manufacturers have been forced to close, while wholesalers have often consolidated their operations into a single location. However, growth in demand for repair and maintenance services, along with sustained high demand for new cars, has resulted in a slight uptick in industry employment. Over the past five years,
manufacturers have had to cut highly paid engineering workers and have been unable to provide more working hours to production line employees. However, this has been offset by dealership sales staff earning higher commissions, which has helped to stabilise the average industry wage. Profit margins have expanded over the past five years, although they have varied significantly within different industries. Reduced economies of scale have hurt motor vehicle manufacturers and parts manufacturers. However, strong growth in demand for new vehicles from wholesalers and dealers and a high Australian dollar that reduced the price of imported vehicles and parts has driven overall industry profit margin growth.
Breaking down
New car sales have fallen slightly over the past five years, but this has largely been due to a significant spike in the 2009-10 base year, when the industry benefited from pent-up demand for vehicles following the global financial crisis. Overall, largely positive consumer sentiment and business confidence have resulted in new car sales remaining relatively strong. However, the strength of new car sales has not extended to locally manufactured vehicles. Local motor vehicle manufacturers Toyota, GM Holden and Ford have all struggled over the period. Consumers have increasingly opted to purchase imported fuel-efficient vehicles, which have additional cost benefits with the high Australian dollar for much of the period and the reduction in the motor vehicle tariff in 2010. Despite heavy government subsidisation, these conditions have caused large drops in revenue and profitability for the manufacturing operations of the major players. Consequently, Toyota, GM
Holden and Ford have all announced their intention to exit manufacturing operations over the next five years, becoming strictly importers. The struggles of motor vehicle manufacturers have been transferred upstream in the supply chain. While retailers have turned to vehicles sold by wholesalers, upstream parts manufacturers have traditionally relied on local motor vehicle manufacturers for supply contracts. Weakened demand for locally manufactured vehicles has resulted in dampened demand for motor vehicle parts and accessories manufactured in Australia. The lack of demand flowing upstream has resulted in low production volumes for parts manufacturers, and the reduced economies of scale has increased per-unit costs. With a severe disadvantage in economies of scale compared with parts and accessories importers, many local manufacturers of these goods have gone into administration over the past five years.
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Industry Performance
Import growth
The severe decline in manufacturing over the past five years has largely been due to increasing import penetration. Consumers have been shifting their demand toward fuel-efficient small cars due to high petrol prices for much of the period. These vehicles come into the market at lower price points than the large cars traditionally produced by Australian manufacturers, reducing the price paid per vehicle sold. Revenue increases due to strong demand growth have outstripped the revenue losses caused by selling cheaper vehicles, particularly for importing wholesalers. Strong import growth is evident in the strong sales performance of imported small cars such as the Mazda3, which in 2011 ended the 15-year reign of the Holden Commodore as the top-selling new car in Australia. The Mazda3 and other small cars, like the Toyota Corolla, have continued to perform strongly in terms of sales. Growth in demand for imported vehicles has been strengthened by a high Australian dollar for most of the past five
years and a reduction in motor vehicle import tariffs. The high Australian dollar made imported vehicles comparatively cheaper in the domestic market, as did the tariff reduction on imported vehicles from 10.0% to 5.0% in January 2010. In addition, overseas manufacturers tend to have significantly lower wage costs in countries such as Thailand, and greater economies of scale in countries such as Japan and Germany. While the low price of imports has been to the ultimate detriment of local automotive manufacturing industries, it has made imports highly attractive to consumers. Wholesalers and dealers have been the primary beneficiaries of this growth in demand.
Repair and maintenance
Demand for repair and maintenance industries has grown steadily over the past five years. While strong new car sales have meant that demand for expensive repair work performed by mechanics and auto electricians has softened, these service agents have typically increased their business activity as consumers have been buying their new vehicles with included service and paying
for vehicle add-ons. This has also meant that consumers have been more likely to purchase vehicle accessories, benefiting parts wholesalers and parts retailers. Furthermore, despite the increased safety features and reliability afforded by new vehicles, demand for smash repairers has remained fairly stable as a higher number of vehicles on the road typically leads to a greater volume of vehicle accidents.
Industry Outlook
The Automotive industry largely depends on new car sales to generate revenue. The exit of Toyota, GM Holden and Ford from local manufacturing operations will have a strong effect on automotive manufacturing industries. Passenger motor vehicle manufacturing in Australia will cease to exist as these companies become pure importers. Local parts
manufacturers will subsequently find it difficult to achieve viable economies of scale as they lose their main source of demand. Downstream in the supply chain, wholesaling and retailing are projected to improve as the level of imports increases, partly making up for the production lost from the industry’s major players. With wholesaling revenue
Import
penetration has increased as local motor vehicle manufacturing has declined
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Industry Performance
derived from imported products offsetting much of the manufacturing decline, industry revenue is projected to
Industry participation The Automotive industry will be heavily
Industry exits
fall by a compound annual 0.2% over the five years through 2019-20, to be worth $160.6 billion.
Industry revenue
disrupted in the period around the manufacturing exits of Toyota, GM Holden and Ford over the next five years. Ford has announced that it will conclude manufacturing in October 2016, while Toyota and GM Holden will cease production during 2017. With their exits expected to render many parts manufacturers unviable, industry employment losses will be heavy during 2016-17 and 2017-18. The average wage is expected to fall marginally. The number of highly paid research and development jobs within manufacturing industries is expected to contract significantly, which will push down the average wage. However, this is expected to be counteracted by major players cutting down the numbers of production line workers already working a low number of hours due to a lack of
downstream demand. Establishment numbers are expected to continue falling, although the decline is expected to be tempered by growth in the automotive wholesale, retail and service industries as demand for new cars continues to rise.
Motor vehicle manufacturing in Australia has increasingly become a loss-making business, propped up by heavy government subsidisation. Cheaper imports have flooded the market as a result of the high Australian dollar and lower wage costs and larger economies of scale overseas. Foreign manufacturers have also been more successful in producing vehicles that appeal to the shifting preferences among Australian consumers for smaller, more fuel-efficient vehicles. Local manufacturers’ lack of competitiveness has resulted in falling sales domestically and overseas, with the high Australian dollar making exports more expensive on the global market. The end of local manufacturing by Toyota, GM Holden and Ford in 2016 and 2017 will lead to these companies becoming strictly
importers over the next five years. While the loss of manufacturing revenue is expected to be replaced by wholesaling revenue as consumers choose to purchase imported new cars, the exit of local manufacturing operations will have a damaging effect on upstream suppliers. Parts manufacturers rely on local motor vehicle manufacturers for demand, with many companies supplying parts specifically either to Toyota, GM Holden or Ford, or to all three companies. Parts manufacturers’ economies of scale will fall as the demand for their parts dissipates, resulting in per-unit part costs rising, and making their products less price competitive globally. All parts manufacturing industries will take a hit to revenue and profit margins, with many businesses expected to close as a result.
5 0
% change
Industry Outlook continued
-5 -10 -15
Year 07
09
11
13
15
17
19
21
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Industry Performance
Import penetration
Motor vehicle wholesaling will benefit greatly from the loss of local manufacturers. While local manufacturers supply their vehicles straight to dealers, imported vehicles go through local wholesalers before moving to dealers. Local wholesalers are generally Australian subsidiaries of international brands, such as Toyota, Mazda and Hyundai. With demand for imported vehicles expected to increase due to the lack of any locally manufactured alternatives, wholesaling revenue will surge. The retail arm of the Automotive industry will also be boosted. The loss of
local manufacturing is expected to result in the abolition of motor vehicle import tariffs over the next five years. Tariff abolition will make imported vehicles cheaper, widening profit margins for both dealers and wholesalers as cost savings are accrued throughout the supply chain. Each level of the supply chain is expected to pass on some of the cost savings, driving demand for new cars as prices fall. While the Australian dollar is expected to depreciate over the next five years, the benefits of offshore production are expected to outweigh the falling dollar in terms of affordability.
Repair and maintenance
Demand for repair and maintenance services is expected to remain consistent. It is negatively correlated with new car sales, as when consumers delay purchasing a new vehicle they generally have to spend more on maintaining their current one. With demand for new cars expected to remain fairly steady, there is projected to be little change in the repair and maintenance segments. Parts retailers and wholesalers have a similar
relationship with new car sales. These businesses are expected to be further integrated into the global market and could be affected by growth in online retailing. While the technical nature of vehicles will still require many consumers to seek advice from store employees, simple items can be purchased less expensively online and this could erode local sales over the next five years.
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Industry Performance Life Cycle Stage
The future exit of motor vehicle manufacturers will restrict industry growth The industry’s contribution to the economy is shrinking
% Growth in share of economy
Demand for new vehicles and repairs and maintenance remains strong
20
Maturity
Quality Growth
Company consolidation; level of economic importance stable
High growth in economic importance; weaker companies close down; developed technology and markets
15
Key Features of a Mature Industry Revenue grows at same pace as economy Company numbers stabilise; M&A stage Established technology & processes Total market acceptance of product & brand Rationalisation of low margin products & brands
10
Quantity Growth
Many new companies; minor growth in economic importance; substantial technology change
5
0
Automotive Industry Glass and Glass Product Manufacturing Plastic Injection Moulded Product Manufacturing
-5
Decline
Shrinking economic importance
Motor Vehicle New Parts Wholesaling
-10 -10
-5
0
5
10
15
20
% Growth in number of establishments SOURCE: WWW.IBISWORLD.COM.AU
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Industry Performance
Industry Life Cycle This
industry is M ature
The Automotive industry is in the mature phase of its life cycle, although different areas within the industry are performing at different levels. Motor vehicle manufacturers and parts manufacturers are projected to decline over the 10 years through 2019-20. The strong Australian dollar and a lack of economies of scale in the domestic market have pushed Toyota, GM Holden and Ford to announce that they will cease local manufacturing operations over the next five years. In contrast, demand for aftermarket parts is retaining its strength, while high consumer demand for cheaper imported vehicles has led to growth for motor vehicle wholesalers and dealerships. Further, motor vehicle service industries made up by mechanics, smash repairers and auto electricians are projected to benefit from steadily rising demand as the number of vehicles on Australian
roads continues to increase. When combining these different facets of the Automotive industry, it is neither growing nor declining despite a significant transformation, and is hence considered to be mature. Industry value added (IVA) measures the industry’s contribution to the overall economy. IVA is forecast to remain unchanged over the 10 years through 2019-20. Therefore, the industry’s contribution to the overall economy is shrinking as real GDP is forecast to grow by a compound annual 2.7% over the same period. A decline in some parts of the industry due to the scheduled removal of demand from motor vehicle manufacturers for parts from local manufacturers and wholesalers is projected to be offset by greater consumer demand for new vehicles and repairs and maintenance.
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Products & Markets
Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES Z Consumers The major users of cars in Australia are consumers for private ownership purposes, as well as businesses and the government. Companies and government entities often purchase vehicles as fleets.
KEY SELLING INDUSTRIES
Products & Services
C1912b
Plastic Injection Moulded Product Manufacturing in Australia Plastic injection moulded products are used in parts manufacturing and motor vehicle assembly.
C2010
Glass and Glass Product Manufacturing in Australia Glass and glass products are used by car manufacturers.
C2110
Iron Smelting and Steel Manufacturing in Australia Iron and steel are major inputs used in manufacturing motor vehicles.
The Automotive industry sells three types of products or services down the supply chain: ready-made motor vehicles; parts and accessories; and repair and maintenance services. Motor vehicles include both locally manufactured and imported vehicles. Locally manufactured motor vehicles This segment includes motor vehicles manufactured in Australia by companies like Toyota, GM Holden and Ford. Locally manufactured motor vehicles are supplied to motor vehicle dealers by the manufacturers, and thus generate revenue at multiple levels of the supply chain. Over the next five years, sales of
locally manufactured passenger motor vehicles are expected to decrease substantially as Toyota, GM Holden and Ford wind up their local manufacturing operations, causing this segment to decline as a share of industry revenue. Imported motor vehicles This segment takes into account sales of imported motor vehicles from motor vehicle wholesalers and dealers. Companies like Mazda, Hyundai and Nissan import all of their motor vehicles and are considered wholesalers. Local manufacturers also wholesale some of their vehicle models. Wholesaled vehicles then reach dealers that resell
Products and services segmentation (2014-15)
14.2%
Locally manufactured motor vehicles
14.9%
54.7%
Imported motor vehicles
Repair and maintenance
16.2%
Parts and accessories
Total $162.0bn
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Products & Markets
Products & Services continued
Demand Determinants
them to end users. Imported motor vehicles are expected to significantly increase their share of revenue over the next five years as manufacturers wind up their local operations.
this segment is expected to decline as a share of industry revenue.
Parts and accessories This segment comprises all parts and accessories manufacturers, wholesalers and retailers. While some parts and accessories are sold to consumers through retailers, the majority of sales are business-to-business, going either to manufacturers or repair and maintenance operators. Parts and accessories manufacturing and wholesaling are expected to struggle significantly over the next five years. Local motor vehicle manufacturers make up the largest market for both domestic and imported parts and as they end their Australian operations over the period,
Repair and maintenance This segment includes electrical services; body, paint and interior repair services; and engine and parts repair and maintenance. The major drivers of this segment are the total number of registered vehicles on the road and the average age of the vehicle fleet. The revenue share of this segment is expected to increase over the next five years as demand for repair and maintenance services remains consistent, while manufacturing operations for motor vehicles and associated parts struggle. Repair and maintenance service agents are also expected to benefit from the increasing amount of electrical components installed into new motor vehicles, which leads to higher repair costs.
The industry’s major source of revenue is consumers that are purchasing new vehicles. Primary demand determinants therefore involve factors that influence consumers’ ability to purchase new vehicles, such as disposable income, consumer sentiment and the price of vehicles. With low consumer sentiment reflecting negative expectations of the economy and lack of certainty in current and future income, vehicle sales can plummet as they are high-value purchases. With higher income and lower interest rates, which have occurred over the past five years as the Reserve Bank of Australia has slashed the cash rate, vehicle sales have risen. Vehicle prices have fallen due to growth in imports, which has further strengthened demand in the new car market as vehicles become more affordable. High operating costs for vehicles can
also play a part in shifting demand. High petrol costs over the past five years, despite a fall in 2014-15, have caused consumers to shift demand toward more fuel-efficient small cars and compact SUVs in order to save income previously spent operating their vehicle. With small cars generally cheaper than large cars, the industry generates less revenue per vehicle but potentially more revenue in total as demand grows due to lower prices, particularly in motor vehicle wholesaling. Local motor vehicle manufacturers have traditionally built large cars, so this shift has sapped demand for their vehicles and subsequently for locally manufactured parts upstream in the supply chain. Demand for vehicle service industries largely depends on the number of registered vehicles on the road, new car sales - consumers will services newer vehicles more often - and income levels.
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Products & Markets
Major Markets
The industry undertakes a lot of business-to-business sales within itself. A high proportion of revenue is generated by motor vehicle manufacturers and wholesalers selling vehicles to dealers, as well as parts manufacturers and wholesalers selling products to retailers and repair and maintenance operators. Therefore, it is most illustrative to break down the end users for products that travel through the automotive supply chain. The end users making up major markets include households, businesses, government entities and exports. Households Households are generally the largest buyers of vehicles and vehicle parts, and they are also the major users of repair services. The type of car purchased varies with age and lifestyle. For example, younger people (aged 18 to 24 years) tend to buy used cars, which are less expensive. Four-wheel drives and SUVs are popular with families with dependent children, and large households often purchase people movers. Higher priced vehicles are popular among those close to retirement. These purchasing trends also affect repair trends. Younger people generally spend more on repairs as they drive older vehicles. However, older drivers and families spend more on car maintenance services for their more recently updated vehicles. While households were
negatively affected by the global financial crisis, they have since then increased their contribution to industry revenue through expanding their purchases of new cars over the past five years particularly of imported vehicles. Businesses Businesses normally purchase vehicles for company fleet cars or individual company vehicles. Fleet users also need mechanics, but they tend to change vehicles every two years or so, which limits their demand for maintenance and repair services. Prior to government intervention, businesses were postponing replacing existing vehicles, which was favourable to mechanics but not to car sellers. The Federal Government offered tax breaks during the first half of 2009, which was effective in stimulating demand. However, prevailing low business confidence has resulted in the industry revenue attributable to businesses declining. Government The government purchases fleet vehicles from car dealers and wholesalers. This segment is perhaps the most stable, as demand is largely inelastic. Over the next five years, this segment will continue to be a steady source of revenue. However, its effect on the industry is minimal, as the market only represents a small portion of revenue.
Major market segmentation (2014-15)
8.0%
Government
1.9%
Exports
53.6% Households
36.5%
Businesses
Total $162.0bn
SOURCE: WWW.IBISWORLD.COM.AU
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Products & Markets
Export markets Although exports generate only a small percentage of the industry revenue, they are significant to domestic motor vehicle manufacturers. Export markets have been affected by the global financial crisis and the slowly recovering global economy.
International Trade
International trade varies significantly between different segments of the Automotive industry. Trade completely occurs at the manufacturing level. Wholesaler, retailers and repair and maintenance operators are not exposed to trade, although they often resell or use imported vehicles and parts. Imports and exports of manufactured motor vehicles make up the majority of trade value within the industry as they are the highest value items. Consequently, strong import markets for parts and accessories, such as Korea and China, are not major import markets for the entire Automotive industry.
Level & Trend xports in the E
industry are L ow and D ecreasing Imports
in the industry are Mediumand Increasing
Imports Although imports only account for an estimated 16.4% of domestic demand in 2014-15, this does not take into account the multiple supply chain levels that imports are sold at. While imports dominate the Motor Vehicle Manufacturing industry, they flow down to the wholesale and retail levels, with vehicle importers making up the majority of the Motor Vehicle Wholesaling industry and the sale of imported vehicles generating the majority of motor vehicle dealers’ revenue. A high percentage of motor vehicles are imported from Japan, Thailand and Germany, while many parts and accessories are imported from the United States. Australia’s best-selling vehicles - the Mazda 3 and the Toyota Corolla - are sourced from Japan. Japan has a history of producing quality vehicles at more affordable prices than locally manufactured vehicles, and have been boosted by strong demand for small,
Export markets have also been affected by the strong Australian dollar, which has made locally manufactured vehicles and parts more expensive in overseas markets and stifled demand growth. Exports have therefore declined as a percentage of revenue over the past five years.
Industry trade balance 10000 0
$ million
Major Markets continued
-10000 -20000 -30000 -40000
Year 07 Exports
09
11
13
Imports
15
17
19
21
Balance
SOURCE: WWW.IBISWORLD.COM.AU
fuel-efficient vehicles. Growth in commercial vehicle sales has grown demand for imports from Thailand, as the majority of pickup four-wheel drives - the Toyota Hilux, Holden Colorado, Ford Ranger, Nissan Navara and others - are manufactured in Thailand. Demand for European branded vehicles, such as those from Audi, BMW and Volkswagen, has driven strong growth in German imports. Exports Exports are only worth a forecast 1.9% of industry revenue. The major export markets are those that the Motor Vehicle Manufacturing industry exports to. With that industry declining over the past five years, coupled with a high Australian dollar, exports have declined. A number of strong export markets are located in the Middle East. In particular, Saudi Arabia and the United Arab Emirates exhibit strong demand for the Toyota Camry and Holden Commodore, both of which are manufactured in Australia. Kuwait also makes up a similarly strong
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Products & Markets
International Trade continued
export market within the Middle East. Neighbouring countries New Zealand and Papua New Guinea are high-value export markets. Many motor vehicles are exported to New Zealand, particularly as Australian brands are in the market but no manufacturing takes place within the country. Papua New Guinea makes up a Exports To...
strong export market for parts and accessories, particularly vehicle bodies. The United States has fallen as an export market due to GM Holden’s loss of its Pontiac deal following the US Government bailout of the parent General Motors Company in the aftermath of the global financial crisis.
Imports From...
11.1% 11.1%
Germany
36.6%
United States
10.2%
United Arab Emirates
Other
34.2% Other
15.9%
United States
16.1%
15.2%
New Zealand
Thailand
23.6%
26.0% Japan
Saudi Arabia
Year: 2014-15 SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA
Total $3.1bn
Total $31.1bn SOURCE: ABS
WWW.IBISWORLD.COM.AU
Automotive Industry in Australia April 2015
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Products & Markets Business Locations 2014-15
NT 1.0
QLD 22.2
WA 10.8
SA 7.3
NSW 29.7
ACT 0.9
VIC 26.2
Enterprises (%) Cold Zone (
