Auto: An industry with a future
australian automotive national summit
hotel realm, canberra
THURSDAY, 20 august 2015
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Mr Neville Gibb, President of the MTAA and members of the MTAA Board.
Richard Dudley, CEO of the MTAA and his team for their hard work in coordinating this event.
Speakers and panellists, ladies and gentleman.
The prevailing view in the Abbott Government is that automotive manufacturing has passed its use-by date.
Some would have us forget the circumstances that led to the decisions by Holden and Toyota to pull up manufacturing stumps.
Coming so soon after the Abbott Government’s election – and following the remarks of the Treasurer Joe Hockey and the Deputy Prime Minister Warren Truss – there is no doubt that the government’s attitude played a huge part in those decisions.
The Productivity Commission’s review highlighted that without government co-investment, Australia would not be able to attract the investment needed to sustain new models for the industry.
But the new government abandoned any pretence of working with the manufacturers - before the Productivity Commission review had even finished.
For the government to now say that nothing needs to change within the Automotive Transformation Scheme is a ruse. A cynical ruse.
As the Government Senators on the Senate Committee inquiry into the automotive industry reiterated yesterday, they believe the ATS comes to a “natural conclusion” in 2017.
I reject that view in its entirety.
The automotive industry has an important role in the future of Australia’s economy.
Even after 2017, when the motor vehicle companies are likely to have departed, there will be an automotive industry in Australia – and it will involve manufacturing.
The question is not whether there will be an industry, but what kind of industry there will be.
Mr Hockey in his address to this conference yesterday made much of the new technologies in automotive.
He was not particularly strong on Australia’s role in the development of those technologies, by Australian companies and workers.
Where he did refer to local success stories – such as carbon revolution in Geelong – he neglected to point out that the success of this company was very much a product of co-investment by government under the New Car Plan.
The advantage of a conference like this, which brings different parts of the industry together, is that we can ask that question from the broadest possible perspective.
Policy makers need to redefine what we understand the automotive industry to be, because the old rationale for new investment can no longer apply.
The sheer number of reviews and policy changes this industry has undergone in the past few years is a clear indication that governments must have smarter automotive policies – whether in taxation, motor vehicle standards, motoring regulations, competition and consumer law or manufacturing.
I use the word “automotive” as a broad concept because it’s not just about making passenger motor vehicles.
Accordingly, new automotive policies must address:
research and development;
supply chain capabilities;
fuel efficiency and environmental standards;
sales and retail services;
aftermarket manufacturing and services;
warranties and consumer protections;
parallel imports; and
regulations that affect the cost of motoring.
We have to look at the whole industry and open up possibilities for new sources of investment and growth.
The Automotive Australia 2020 Roadmap project, commissioned by the Automotive Innovation Council and undertaken by the AutoCRC, is an excellent piece of research.
It highlights the enormous potential of Australia’s automotive industry to remain at the cutting edge of global advances in technology and product design, including electrification, light-weighting, gaseous fuels and data, communications and telematics.
What the conservative side of politics fails to appreciate is that securing investment in these areas relies on our ability to maintain the world-class automotive skills and capabilities that Australia has developed over generations.
That is a huge problem, because the future of the industry will depend in considerable part on the policies followed by the government of the day.
And, no doubt, it will depend on the voters’ verdict in the election that must be held by the end of next year.
I can only speculate on when the Prime Minister will call the next election.
But I do know that the automotive industry matters to voters.
We saw that in last year’s Victorian election.
Industry commissioned polling undertaken by Newspoll after that election found that 17 per cent of voters in the crucial sand-belt electorates in Melbourne’s south-east had switched from the Coalition because of cuts to the Automotive Transformation Scheme.
Component manufacturers are heavily concentrated in those seats.
In January this year, another industry poll recorded swings of 10 per cent against the Coalition in Liberal-held federal electorates in South Australia.
A change in government at the next federal election will change the policy settings for the automotive industry.
Voters understand the importance of this industry, even if the present government does not.
The automotive industry has always been Australia’s great repository of industrial capability.
The industry is a powerhouse of innovation: of engineering talent, and research and development activity.
It is the main conduit for Australia’s capabilities in engineering, technology and advanced manufacturing.
The announced closures in motor vehicle production are by no means the end of the road for the automotive industry – but we can’t avoid the dire economic consequences and the job losses that will ensue.
Modelling by the University of Adelaide suggests that 200,000 people will lose their jobs as a result of closures in motor vehicle production between now and 2017.
The shutdowns will rip $29 billion from the economy – about 2 per cent of GDP.
The biggest impact will be in Victoria and South Australia, but the damage will not be limited to these states.
It will ripple across the economy.
We cannot pretend that hard times are not ahead.
But still I say: I am confident that there is a future for Australia’s automotive industry.
I know of companies that want to expand and invest. So does the government.
If new investment can be attracted while existing capabilities are preserved, there is no reason why the industry can’t rebuild and survive.
There is a precedent for such a revival.
In the UK at the end of the 1980s, many people predicted the demise of the country’s auto industry in much the same way as the doomsayers here do now.
But the industry didn’t die in the UK.
In fact, it is now thriving.
Because new investment was found, and the industry focused on areas in which it had a competitive advantage, such as engine production.
Both sides of British politics now support co-investment in the auto industry, because they recognise the boost to advanced manufacturing capabilities that an automotive industry provides.
I don’t offer this example simply to encourage you.
I offer it because what happened in the UK is a model for what can happen here, because we too have great engineering and design skills we can build on.
The motor vehicle producers know that, of course. That is why Ford and Holden will both retain substantial design centres in Australia after they shut down their manufacturing operations.
But the capabilities I am talking about can be found throughout the industry – in the component makers, in aftermarket manufacturers, and in retail services too.
I visit firms as often as I can, so I see this all the time.
Recently, for instance, I visited Unidrive, in Clayton in outer Melbourne, and Harrop Engineering in Preston.
Harrop makes brake fittings and superchargers, and supplies to original equipment manufacturers.
But it also has a substantial export market in its own right.
They provide engineering and R&D services to produce specialist products for niche markets.
They customise brakes for Toyota Landcruisers, for example, refitting vehicles for mining operations in remote Australia where brakes wear out every week.
They provide a service to the mining industry that demonstrates the creative engineering skills of Australian manufacturers.
As for Unidrive, 50 per cent of their product, using carbon fibre for drivetrain componentry, is supplied direct to the US under existing contracts.
I mention these examples, but there are many others that showcase Australia’s deep reservoir of technological talent.
Cohda Wireless in South Australia has become a world leader in Cooperative Intelligent Transport Systems and telematics.
Its vehicle-to-vehicle software applications are used in more than 60 per cent of C-ITS trials being undertaken around the world.
The Internet of Things is the new buzzword in advanced manufacturing, and Cohda is at the heart of it.
Companies like Cohda, Harrop and Unidrive are expanding the already formidable talents and capabilities that exist in Australia’s automotive industry.
Those capabilities are also being extended in other ways that are at the technological forefront, such as research into alternative propulsion systems – electric motors, for example, and gaseous fuels.
Australian firms and Australian researchers can do these things because the industry that we built up here for almost 100 years has sufficient critical mass to sustain the capacity for innovation.
That is the most important reason why a new automotive policy is required, which includes redefining the Automotive Transformation Scheme.
The ATS is not only needed to avoid an earlier than planned departure by the motor vehicle producers.
It is needed because it is vital to ensure that firms like Harrop and Unidrive and Cohda can keep doing what they do.
That is what will attract new investment to the industry – and I emphasise again, if we can do that the industry has an assured future.
This needs to be done with government support.
The events of late 2013 and early 2014 with Holden and Toyota highlight just how crucial government policy is when it comes to determining the size and scope of the industry.
As most of you will know, the Senate is conducting an inquiry into the future of the automotive industry.
The Committee tabled its interim report yesterday, and the final report is due in November.
The interim report is focused more particularly on the ATS, because of the urgent need to maintain existing skills, jobs and industrial capabilities.
The report recommends that the government work with all stakeholders in the industry to develop policies that will sustain an internationally competitive automotive industry in this country.
It also recommends that government departments coordinate their efforts – rather than work in isolation at cross purposes – to attract new automotive investment and maintain existing skills and capabilities, using the AutoCRC’s 2020 Roadmap as a guide.
It calls for the current level of ATS funding to be maintained through to 2021, as provided for in the ATS Act, which includes reallocating any underspends from phase 1 of the scheme, which ends in 2016, through to phase 2 of the scheme, which ends in 2021.
In other words, the report insists that the government adopt a strategic perspective based on the needs of the industry, rather than the short-term political perspective it has followed so far.
The report also recommends redefining the ATS.
It should still be automotive-centred, but the aim would be to preserve skills and industrial capabilities, and to mitigate the loss of jobs, by encouraging diversification in supply-chain firms.
Consistent with that aim, the object of the ATS Act should be amended to redefine the scheme’s stated objective.
A new object would specify that the ATS is intended for the promotion and growth of advanced automotive industries in Australia, including:
Manufacturing components and materials;
Developing and commercialising new technologies;
And engineering and design for both domestic and offshore customers – when that work is performed in Australia.
Finally, the interim report recommends a number of significant changes to the ATS rules and eligibility criteria, which are governed by regulation.
These changes need to be carried out in consultation with industry to avoid any unforeseen consequences, and include:
Allowing firms to claim for R&D relating to non-automotive industry sectors, to help facilitate the transition out of motor vehicle production.
Amending the rules so that all firms registered under the ATS can claim R&D and engineering services, for both domestic and offshore automotive customers – when that work is performed in Australia.
Eligibility should be broadened so that it encompasses all types of vehicles, not just passenger cars and light commercial vehicles.
The once-a-year registration requirement should also be removed, to allow ease of movement between registration categories.
Motor vehicle producers should remain eligible for the scheme through to their shutdown dates, even as production volumes decline, in order to maintain as orderly a transition as possible.
And the requirement that a participant must not be granted registration under National Interest provisions for more than two successive years should be removed.
These recommendations are by no means the totality of a new automotive policy. Rather, they are just the beginning.
I am confident that the recommendations in this report will help Australia attract the new investment that is vital to securing the future of the automotive industry in Australia.
I urge you to commend them to the government.
The final report in November will consider the industry from the broadest possible perspective.
I hope that the discussions at this Summit will help inform the final report and future policy development for the entire industry – in the aftermarket, retail sales and service, insurance – the whole lot.
Be assured that I shall continue doing everything I can to help the industry make a successful transition to a future beyond the 2017 shutdowns.
I have never wavered in my belief that there can be a prosperous future for the automotive industry in this country.
I maintain that view and I look forward to working with you on Labor’s future automotive policy.