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The Production of Large Vehicles in Australia

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Australia is best known for the production of large vehicles and is one of the most open automotive markets in the world. The industry plays a vital role in employment, exports, and innovation in the economy of Australia. It is a self-contained ‘full-service’ industry that operates the full range of activities from design to manufacture of vehicles even though the industry is small by global standards (Singh, Smith, & Sohal, 2004). The three major companies that dominate the industry in Australia are the Toyota Motor Corporation Australia, Ford Motor Company of Australia, and GM Holden. However, over the recent years, the industry has undergone major structural reforms and these reforms have mainly focused on the removal of quotas and the lowering of protection which led to some rationalisation of the industry, made imports more accessible to consumers, and thus made the industry more internationally competitive (Review of Australia’s, 2008). As a result, Australian automotive industry suffered as a wave of manufacturers comprising Ford, Holden, and most recently Toyota have ceased their operations in the country.
Comparative advantage is defined as the ability of a business entity, in this case, a country to specialise in those products that it can produce relatively more efficiently than other countries (Krugman & Obstfeld, 2003, as cited in Smit, 2010). Hence, it is the comparative advantage which will conclude whether it is beneficial to produce a product or rather just import it (Jaravaza, Mzumara, & Nyengerai, 2013). With the intense competition in the global market, the comparative advantage of a country’s exports is the primary influence on that country’s export volume (Chunming & Wei, 2012). Australia does not have a co...

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...nfluencing investment decisions such as broad R&D support, education and training support (Allen Consulting Group [ACG], 2013). However, it is noticed that the government support for the automotive industry has reduced in Australia this recent years and the level of government support and policy certainty is not on the similar scale in Australia as compared in other countries (ACG, 2013). If globally competitive incentives are not provided, there is a more serious risk that the manufacturers will halt production. For example, the recent case whereby Abbott declaring that he will no longer be providing extra government assistance which led to the major manufacturers ceasing production one after another. The government proclaimed that “better governance is not the same as more government” in light of the government pressure to intervene in the industry (Baker, 2014).
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