Australia’s Shift: Car Maker to Importer

Business, Cars
May 16, 2025

Australia’s Shift: Car Maker to Importer

By Henry Tilman

Australia’s Automotive Industry: From Manufacturing Powerhouse to Import-Only Market

Australia’s car manufacturing industry, once a symbol of national pride and economic strength, has ceased operations. The closures of Ford, Holden, and Toyota plants between 2016 and 2017 marked the end of an era, leaving Australia without any mass vehicle assembly—a unique situation among major industrialised nations.

A Legacy of Innovation and Identity

Post-World War II, Australia developed a robust automotive sector, supported by active industrial policies. The industry not only provided employment but also contributed significantly to the nation’s GDP. Iconic models like the Holden Commodore became ingrained in Australian culture.

Factors Leading to the Decline

Several interrelated factors contributed to the industry’s downfall:

High Production Costs: Australian manufacturing faced challenges due to high labour and production costs, making it difficult to compete with countries like Thailand, where labour costs are significantly lower.

Economies of Scale: The relatively small domestic market limited the industry’s ability to achieve economies of scale, essential for cost-effective production.

International Trade Liberalisation

The gradual reduction of import tariffs, particularly following the 2005 free trade agreement with Thailand, exposed local manufacturers to stiff competition from imported vehicles.

Policy Shifts

A move away from protectionist policies towards neoliberal economic approaches led to reduced government support for the industry.

Economic and Social Impacts

The industry’s closure had far-reaching effects:

Job Losses: Thousands of workers lost their jobs, affecting not only those directly employed in manufacturing but also those in the supply chain and related sectors .

Regional Economies: Areas like Victoria and South Australia, heavily reliant on automotive manufacturing, faced economic downturns and increased unemployment rates.

The Current Landscape

With the absence of local manufacturing, Australia has become a significant importer of vehicles. Notably, Chinese electric vehicles (EVs), especially from automaker BYD, have gained substantial market share, accounting for a significant portion of EV sales in the country .

Looking Ahead

The Australian government has initiated efforts to rejuvenate the manufacturing sector, focusing on areas like renewable energy and advanced technologies. However, challenges persist, including high production costs and the need for coherent industrial policies .

The story of Australia’s automotive industry serves as a poignant example of the complexities involved in balancing global economic integration with the preservation of domestic industries.