Automotive Industry in Australia Industry Report IBIS

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
Industry Definition
15 International Trade
27 Capital Intensity
Main Activities
17 Business Locations
28 Technology & Systems
Similar Industries
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
Executive Summary
21 Barriers to Entry
30 Annual Change
Key External Drivers
22 Industry Globalisation
30 KeyRatios
Current Performance
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
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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
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%
80
75
Index
% change
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
7.3%
Consumer
sentiment index
SA
1.9% 1.0%
NT
TAS
0.9%
ACT
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:
SOURCE:
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
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.
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.
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

continued
purchase new vehicles, particularly more

expensive vehicles, and are likely to
postpone servicing vehicles they already
own. Disposable income is expected to
risein 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 vehicles 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
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
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
Current Performance
continued
growth of 0.3%. The industrys 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 establishments 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
disadvantagein economies of scale
compared with parts and accessories
importers, many local manufacturers of
these goods have gone into administration
over the past five years.
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
madeimports 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 industrys
major players. With wholesaling revenue
Import
penetration has
increased as local motor
vehicle manufacturing
hasdeclined
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
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
nextfive years.
10
Life Cycle Stage
The future exit of motor vehicle manufacturers

will restrict industry growth
The industrys 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
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
10
15
20
% Growth in number of establishments

11
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 industrys contribution to the overall
economy. IVA is forecast to remain
unchanged over the 10 years through
2019-20. Therefore, the industrys
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.
12
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.
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.
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%
14.9%
54.7%
16.2%
Total $162.0bn
13
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.

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,

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 industrys 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.
14
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
15
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.
Australias 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
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
16
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 Holdens 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
17
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 (<10)
<25
<50
Hot Zone (<100)
Not applicable
TAS
1.9
18
Products & Markets
Distribution of enterprises vs. population

40
30
20
10
WA
VIC
TAS
SA
QLD
NT
NSW
0
ACT
Companies in the Automotive industry

are located in population hubs. This is
particularly true for car repairers and
retailers, because they need to be close to
their market. As a result, the majority of
establishments are located in Victoria
and New South Wales.
A significant over-representation
compared with the population occurs in
Victoria as many parts manufacturers are
located close to their largest markets, as
Toyota and Fords manufacturing
facilities are located in Victoria. A similar
situation occurs in South Australia, due
to GM Holdens manufacturing plant
being located in the state. Many parts
suppliers are located in South Australia
in order to be close to GM Holdens
manufacturing facilities. The
centralisation of manufacturing in these
two states is expected to dissipate upon
the exit of the three major players during
2016 and 2017.
Queensland and Western Australia are
over-represented in the industry. Motor
vehicle registrations have been growing
rapidly in Queensland the past five years,
quicker than other states. There has also
Percentage
Business Locations
Enterprises
Population
been strong expansion in the state due to

the mining and commodities sectors,
which drive demand for vehicles. The
same can be said for Western Australia,
where there has been a boom in the
demand for utility vehicles due to the
explosion of mining activity. IBISWorld
expects that these trends will continue.
19
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalisation
Market Share
Concentration
Level
Concentration
in
this industry is L ow
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
The Automotive industry has a low level

of concentration as it covers the entire
automotive supply chain, which spans
from parts manufacturers to car
dealerships. As a result, there is a wide
range of companies operating at various
level of the automotive supply chain.
Concentration differs across each level of
the supply chain.
Most companies in the industry are
small or medium-sized enterprises that
only account for a small percentage of
revenue. The smallest ones are
mechanics, which are often owneroperators. At the other end of the scale,
there are three passenger motor vehicle
manufacturers in Australia and they each

account for a large part of the Motor
Vehicle Manufacturing industry.
Market share concentration decreased
over the past five years as the large
automotive manufacturers
underperformed the high number of
smaller service-oriented firms. The large
manufacturers faced strong competition
from imports. Meanwhile, the smaller
service-based firms, such as repairers and
retailers, benefited from geographic
protection against international
competition. Market share concentration
will continue to dissipate with import
competition expected to remain strong.
Ability to achieve economies of scale

Large-scale production is very important
for success as it helps to minimise costs
and lower prices.
Ability to obtain finance

Car dealers cannot operate without floor
plan financing. Obtaining finance, in
particular during downturns, is a key
success factor.
Flexibility when it comes to

adopting new technology
Car producers must be able to adapt
production lines to new technology (in
particular, green technology) in order to
meet consumer preferences.
Ability to operate a global platform
Globalisation keeps on rising in this
industry. Furthermore, the Australian
market is relatively small. Companies
need to make and market products that
can be sold across the globe in order to
remain on the competitive edge.
Cost Structure
Benchmarks
Companies within the industry have

varying cost structures, which depend on
their products and services.
Manufacturers tend to have slimmer profit
margins because they are subject to
import competition. Wholesalers and
dealers also work off slim profit margins
because as resellers, their purchase costs
are extremely high. Meanwhile, the
companies focused on services tend to
have wider margins due to inherent
barriers against international competition.
Developing strong supply chain links

The Automotive industry is strongly
dependent on the smooth running of the
supply chain. Strong relationships can
minimise distribution disruptions and
preserve dealer contracts.
Complying with emission regulations
Emission regulations will become more
important in the next five years.
Companies in the industry will need to
develop engines that are compliant in
order to be able to sell them.
Profit
Overall, the industrys profit margins
have expanded over the past five years as
Australias economy has moved away
from the global financial crisis. The
economic downturn forced companies to
sell at lower prices to retain customers,
with many operating at a loss during the
worst of the crisis. Since then, the exit of
inefficient organisations from the
industry has boosted profitability,
although manufacturers are still affected
20
by weak market conditions. High input

prices for manufacturers and low
production volumes have weakened
profit margins, while price competition
among wholesalers and dealers has
stifled greater profit margin growth.
Purchases
Purchases make up the largest cost item
for the industry. Vehicle and parts
manufacturers require raw inputs into
their final items and ready-made parts
for assembly. Moving down the supply
chain, wholesalers and dealers purchase
complete vehicles to resell to the end
user. Purchases are a less significant cost
item for repair and maintenance
businesses, but parts are still required for
these services. Purchases have increased
as a percentage of revenue over the past
five years, as the wholesaling and
retailing arms of the supply chain, which
have inherently high purchase costs, have
significantly grown in size.
Wages
Total industry wage costs are relatively
low due to the high value of the products

made and sold. Wage costs as a
percentage of industry revenue have
increased marginally over the past five
years, as wage costs for large wholesaling
and retailing industries have grown. The
exit of passenger vehicle manufacturing
over the next five years is expected to
result in industry wage costs falling as a
percentage of revenue, despite growth in
vehicle service industries.
Depreciation and other expenses
All companies across the industry incur
depreciation, rent and utilities costs.
Depreciation differs widely across
businesses. Motor vehicle manufacturers
have relatively high depreciation due to
the use of sophisticated machinery and
plant ownership. In contrast, retailers
have far lower depreciation costs.
Mechanics and retailers pay more rent as
a percentage of their revenue, as they are
more likely to rent buildings. Car
manufacturers typically own their own
plant and do not pay rent.
Businesses in the industry also incur
Sector vs. Industry Costs

Average Costs
Across the Economy
(2014-15)
100
4.1
80
9.2
2.6
1.7
Industry Costs
(2014-15)
1.7
1.2
3.7
7.4
11.2
21.6
Percentage of revenue
Cost Structure
Benchmarks
continued
60
n Profit
n Rent
n Utilities
n Depreciation
n Other
n Wages
n Purchases
13.8
40
20
0.9
73.9
47.0
0
21
Cost Structure
Benchmarks
continued
other costs, including research and

development (R&D), advertising,
logistics, and administration and public
relations expenses. Within the industry,
car manufacturers and parts
manufacturers generally carry out R&D.
These expenses are expected to fall over

the next five years as motor vehicle
manufacturers leave the industry, taking
with them many parts manufacturers
that cannot achieve economies of scale
without their local markets.
Basis of Competition
Companies in the industry mainly

compete on the basis of price, quality,
value and branding. Import competition
is also very significant and has been rising
over the past decade. The appreciation of
the Australian dollar and increasing
standardisation of components globally
contributed to this trend.
bases of price and location. Other areas of

the supply chain compete on varied
factors. Parts manufacturers have to build
relationships with motor vehicle
manufacturers in order to gain supply
contracts. In the business-to-business
environment, sound relationships, a
reputation for quality and competitive
tendering will provide a competitive edge
to suppliers.
Level & Trend

ompetition
C
in
this industry is
Highand the trend
is I ncreasing
Internal competition
The majority of revenue generated by
the industry depends on demand from
the final user: consumers. Motor vehicle
manufacturers and wholesalers supply
their vehicles downstream to dealers,
which then on-sell them to consumers.
Consumers generally decide to purchase
a vehicle within a specific segment, like
a small car, large car or SUV. Within
these segments, price is an important
factor as consumers are likely to seek
value for money. The real and perceived
quality of vehicles will also sway
purchasing decisions. Build quality and
added features can attract consumers,
while strong vehicle brands that build
loyalty and showcase the perception of
superior quality make for more enticing
vehicles for consumers.
Vehicle service operators also deal with
consumers, and compete on the similar
Barriers to Entry
Level & Trend
arriers to Entry
B
in this industry
are M
ediumand
Increasing
Barriers to entry vary significantly

depending on the type of firm.
Manufacturers (of vehicles and parts)
have very high barriers to entry. Car
producers require a very significant level
of investment into large-scale production
and machinery to support this. They also
need to invest into costly R&D projects.
New entrants could struggle to carry out
such a level of investment and have
External competition
Different parts of the industry face
different sources of external competition.
Motor vehicle manufacturers are up
against strong import competition,
which is ultimately forcing the exit of
Toyota, GM Holden and Ford from
localmanufacturing operations. While
foreign manufacturing operations
present competition, their success will
generate greater revenue for vehicle
wholesalers in Australia, which the
major players are set to become. Parts
manufacturers also face competition
from imports as the local manufacturers
and parts retailers can source parts
lessexpensively from overseas, due to
greater economies of scale and lower
wage costs for manufacturing workers in
foreign countries.
trouble having access to the latest

technology. Component manufacturers
require strong relationships and
contracts with car producers, something
that a new entrant will not have.
Retailers have medium barriers to
entry. Their main hurdle is being able to
enter into franchises with manufacturers
to carry brands that consumers want to
buy. They also need to obtain floor plan
22
Level & Trend

lobalisation
G
in
this industry is
Highand the trend
is I ncreasing
International trade is a
major determinant of
an industrys level of
globalisation.Exports offer
growth opportunities
for firms. However there
are legal, economic and
political risks associated
with dealing in foreign
countries.Import
competition can bring a
greater risk for companies
as foreign producers satisfy
domestic demand that
local firms would otherwise
supply.
Manufacturing and selling cars is a highly

global event. The three car manufacturers
in Australia are domestic subsidiaries of
global car companies. GM Holden is a
subsidiary of General Motors, which is
based in the United States. Fords parent
is also based in the United States, while
Toyotas parent is a Japanese-owned
company. The impending exit of the
manufacturers over the next five years is
expected to increase globalisation as
demand for locally manufactured vehicles
transfers to imported vehicles, increasing
international trade.
Import brands have become more
popular with Australians over the past
five years. Imported vehicles go through
the Vehicle Wholesaling industry before
Trade Globalisation
200
100
Automotive Industry
40
High
Low
Mature
Low
High
Heavy
High
reaching dealers and finally consumers.

Vehicle wholesalers are generally foreignowned, with Japans Mazda and Koreas
Hyundai significant import players
alongside the local manufacturers. The
dealers these vehicles are sold to are
generally owned domestically, but are
licenced to use the manufacturers brand.
Imports are prominent in the parts
market. Imported parts are becoming
more or more popular, particularly
cheaper generic brands. However,
globalisation is low in the car retail and
repair industries due to the nature of the
businesses. Most companies in those
industries are domestically owned firms,
although car retailers have franchises
with major global car companies.
Global
150
0 Local
0
Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
Going Global: Automotive Industry 2003-2015
Export
50
Barriers to Entry checklist
200 Export
Exports/Revenue
Industry
Globalisation
financing, which has been a difficult step

since the global financial crisis. At the
other end of the spectrum, new mechanics
face very few hurdles when trying to enter
the industry. The only major requirement
is a local government permit to operate
the business. Consumers tend to prefer
qualified mechanics rather than
backyardoperators. However, becoming a
licensed mechanic is not considered a
major hurdle.
Exports/Revenue
Barriers to Entry
continued
80
120
Imports/Domestic Demand
Import
160
Global
150
100
50
2003
0 Local
0
2015
40
Import
80
120
160
Imports/Domestic Demand
23
Major Companies
Toyota Motor Corporation Australia Limited | GM Holden Ltd

Ford Motor Company of Australia Limited | Other Companies
Major players
(Market share)
GM Holden Ltd 2.4%
90.5%
Other
Toyota Motor Corporation Australia Limited 5.4%

Ford Motor Company of Australia Limited 1.7%
Player Performance
Toyota Motor
Corporation
Australia Limited
Market share: 5.4%
Toyota Motor Corporation Australia

Limited is a wholly owned subsidiary of
Toyota Motor Corporation of Japan.
Toyota Australia is involved in the
manufacturing, assembling, importing
and distribution of motor vehicles and
replacement parts for the Australian and
overseas markets. The companys
Australian head office is in Port
Melbourne, VIC, and its manufacturing
facilities are in Altona, VIC. Locally
manufactured models include the
Aurion, Camry and Camry Hybrid.
Popular imported models include the
Corolla and Hilux.
Toyotas Aurion model, launched in
October 2006, was geared to compete
with Holden and Ford by creating a
robust presence in the large-car market.
Sales were strong, since the Aurion was
pitched as the most fuel-efficient large
passenger vehicle made in Australia.
Toyotas superior financial performance
compared to GM Holden and Ford is the
result of Toyotas faster response to the
shift in consumer preference towards
fuel-efficient vehicles.
In February 2014, Toyota announced

its intention to exit from Australian
manufacturing operations during 2017.
The company stated that manufacturing
in the Australian market had become an
unviable business operation, due to the
far lower overseas production costs and
more affordable imported vehicles.
Toyotas exit from the industry will not
dramatically affect its market share, as
vehicles currently manufactured in
Australia will be imported at lower cost
from countries such as Japan and
Thailand, with lower prices flowing
down to consumers.
Financial performance
Although Toyota has rebounded
following the global financial crisis,
there have been hiccups in its
performance from events such as the
March 2011 tsunami in Japan. The
tsunami compounded the impact of
falling consumer sentiment and
business confidence and affected the
companys supply chain, resulting in a
large loss in 2011-12. The tsunami
Toyota Motor Corporation Australia Limited - financial performance

Revenue
($ billion)
(% change)
EBIT
($ million)
2009-10
8.59
-3.8
178.2
2010-11
8.39
-2.3
112.9
2011-12
7.39
-11.9
-40.8
2012-13
9.01
21.9
223.9
2013-14
8.52
-5.4
-631.0
2014-15**
8.74
2.6
N/A
Year*
*Year end March **Estimate

SOURCE: ANNUAL REPORT AND IBISWORLD
24
Major Companies
Player Performance
continued
caused backorders for imported vehicles

and reduced local production capacity,
as the supply of parts required to
assemble vehicles was limited. Although
Toyota has lost market share over the
past five years, it has bounced back from
2011-12 through strong sales of the
imported Corolla and Hilux. It is
expected to achieve 0.3% annualised

revenue growth in nominal terms over
the five years through March 2014-15.
However, the slowing mining boom has
the potential to decrease demand for the
Hilux over the next five years as its sales
have been driven by strong mining
activity over the past five years.
Player Performance
GM Holden Ltd is a wholly owned

subsidiary of the US-based General
Motors Company, which is
headquartered in Detroit in the United
States. GM Holden manufactures,
imports and distributes motor vehicles,
engine components and related parts
throughout Australia. GM Holdens
Australian head office is located in Port
Melbourne, VIC, as are its design,
engineering and engine manufacturing
facilities. The companys vehicle
assembly, body tool design, stamping,
plastic moulding, paint and body
hardware facilities are located in
Elizabeth, SA. Distribution and
marketing facilities for Holden service
parts and accessories are located in
Dandenong, VIC.
GM Holden manufactures the
Commodore, Caprice and Cruze models at
its Elizabeth plant. The Commodore is an
iconic Australian large car, while the
Caprice is its long wheelbase variant. In
response to consumers shifting demand
toward fuel-efficient small cars, GM
Holden began manufacturing the small

Cruze model in Elizabeth in 2011. Other
vehicles in GM Holdens model line-up
are manufactured in different parts of
Asia. For example, the Barina and Captiva
are manufactured in Korea, while the
Colorado is manufactured in Thailand.
GM Holdens persistence with largecar production has gone against market
trends over the past decade, as the
market share of large cars has been in
steady decline. The company attempted
to change this and introduced a dual-fuel
version of its VE range in 2007 to attract
consumers wanting fuel-efficient
vehicles. With reduced production
volumes and the uncompetitive nature of
Australian manufacturing on a global
stage, GM Holden announced in
December 2013 that it would exit local
manufacturing operations during 2017.
The company will become a pure
wholesaler in the Australian market,
while aiming to at least partly retain its
engineering and design teams to work on
global vehicle platforms.
GM Holden Ltd
Market share: 2.4%
GM Holden Ltd - financial performance

Year*
Revenue
($ billion)
(% change)
EBIT
($ million)
2010
4.55
9.9
160.3
2011
4.41
-3.1
84.4
2012
4.11
-6.8
-236.2
2013
4.15
1.0
-696.1
2014**
3.99
-3.9
N/A
2015**
3.88
-2.8
N/A
*Year end December **Estimate

25
Major Companies
Player Performance
continued
GM Holden has underperformed the
industry over the past five years, losing
significant market share. Company
revenue is expected to decline by an
annualised 3.1% in nominal terms to
$3.9 billion over the five years through
December 2015. The consumer shift
toward smaller cars has diminished
GM Holdens ability to sell its flagship
large car, the Commodore. Declining
export sales have also contributed to
the companys downfall, particularly as
GM Holden lost a significant export

market when its parent company
retired the Pontiac brand in the United
States. Operating losses have also
occurred, offset in some years due to
significant government subsidies in an
ultimately unsuccessful attempt to
retain GM Holdens manufacturing in
Australia. Losses began to worsen
despite government subsidies, and GM
Holden incurred sizeable losses of
$236.2 million in 2012 and $696.1
million in 2013.
Player Performance
Ford Motor Company of Australia

Limited is a wholly owned subsidiary of
the US-based Ford Motor Company.
The company manufactures, imports
and distributes Ford-branded motor
vehicles and parts. Ford sells vehicles in
three general divisions: passenger,
recreational and commercial vehicles.
Ford commenced operations in
Australia in Geelong, VIC, in 1925. The
company maintains a manufacturing
facility in Geelong, with its head office
and another manufacturing facility in
Campbellfield, VIC.
The Ford Falcon and Territory are the
only models that Ford currently
manufactures in Australia. Both models
are exported in small quantities. Due to
shifting consumer preferences towards
fuel-efficient small cars and small SUVs,
Ford introduced a more environmentally
friendly turbo diesel engine into the

Territory in 2011. The success of the
Territory has been offset by rapidly
declining sales volumes for the flagship
Falcon model. New car sales of the
Falcon reached only 10,610 units in 2013,
in contrast to 73,220 units sold in 2003.
In May 2013, Ford announced that it
will close down its Australian
manufacturing operations in October
2016, citing concerns that its local
manufacturing operations have become
unviable due to the high Australian
dollar and the strong shift away from
large cars. While it is unlikely that the
Falcon will be manufactured overseas,
Ford will remain an importer of models
such as the Territory, Mondeo, Focus
and Fiesta. Ford also intends to retain
its research and development
operations, acting as a global design and
Ford Motor
Company of
Australia Limited
Market share: 1.7%
Ford Motor Company of Australia Limited - financial performance

Year*
Revenue
($ billion)
(% change)
EBIT
($ million)
2010
3.45
4.9
71.2
2011
2.85
-17.4
-88.2
2012
3.21
12.6
-119.0
2013
2.92
-9.0
-258.2
2014**
2.83
-3.1
N/A
2015**
2.75
-2.8
N/A
*Year end December **Estimate

26
Major Companies
Player Performance
continued
engineering centre for the parent

companys global vehicle platforms.
Ford has been struggling to maintain sales
of its Falcon model, resulting in a forecast
nominal revenue decline of 4.4%
annualised over the five years through
December 2015. With strong new car sales
of other brands generating overall industry
Other Companies
While Toyota, GM Holden and Ford have

fairly low market shares, their revenue for
locally manufactured vehicles is counted at
the manufacturing and retail levels. Their
imported vehicles are accounted for at the
wholesale and retail levels. Consequently,
their revenue totals understate their
complete effect on the industry.
The Automotive industry is made up
of car manufacturers, retailers, parts
manufacturers, dealers and mechanics.
The sheer size and diversity of the
industry means that while most
companies only compose a small
segment of overall market share, there
are many significant players that operate
primarily within specific segments of the
industry. Mazda Australia is a dominant
wholesaler, Automotive Holdings Group
is a major dealer network and Robert
Bosch is a powerful electrical
components manufacturer.
Automotive Holdings Group
Estimated market share: 2.4%

Automotive Holdings Group (AHG) is the
industrys largest retailer. AHG has over
150 passenger and commercial dealership
franchise sites across Australia. AHGs
dealership franchise sites are primarily
located in Western Australia,
Queensland, Victoria and New South
Wales. The company also has franchises
in New Zealand. AHGs automotive
retailing revenue amounted to $3.9
billion in 2013-14, up from $2.9 billion in
2009-10. With further revenue growth
projected in 2014-15, AHG is expected to
significantly increase its market share
over the five years through 2014-15.
revenue growth, Ford has lost significant

market share. Company profitability has
declined over the past five years, as Ford
has struggled with the lack of production
volumes in manufacturing the Falcon.
Losses were incurred in 2011, 2012 and
2013 despite government assistance. These
ongoing and worsening losses ultimately
led to the companys decision to close its
manufacturing operations in Australia.
Mazda Australia Pty Limited
Estimated market share: 1.5%

Mazda Australia Pty Limited is an
importer and distributor of Mazda
vehicles and parts. It is headquartered in
Melbourne and has offices in most states
in Australia. The company employs about
250 people and sells a wide range of
vehicles including compact cars, SUVs,
people movers and light commercial
vehicles. Company revenue reached $2.4
billion in the year through 2013-2014
(year end March). Mazda is expected to
have gained market share over the past
five years due to the strength of its
product offerings. Its vehicle range
strongly matched consumer demand over
the period. In 2011, the companys small
model Mazda3 ended the Holden
Commodores 15-year reign as the
top-selling new car in Australia.
Robert Bosch (Australia) Proprietary

Limited
Estimated market share: Less than 1.0%

The largest automotive component
manufacturer in Australia is Robert Bosch
(Australia) Pty Ltd. The company is a
manufacturer and importer of automotive
electrical and electronic components
(automotive technology segment). Its
product specialisation includes systems
involving diesel applications, braking,
ignitions, energy, DC electric motors,
wiper systems, filtration, electronic fuel
injection and lighting systems. The
company posted revenue of $412.8
million in 2013, although this also
includes sales of products that fall outside
of the Automotive industry.
Automotive Industry in AustraliaApril 2015 27
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is L ow
The Automotive industry exhibits low

capital intensity, although it varies
significantly between different industries.
Overall, the industry is estimated to
spend $9.33 on wages for every dollar
invested in capital. Capital intensity is
much higher in manufacturing industries,
such as the Motor Vehicle Manufacturing
industry and the Automotive Electrical
Component Manufacturing industry.
These industries use sophisticated
equipment to manufacture their products,
with motor vehicle manufacturing
particularly requiring strong capital
investment in automation and large-scale
production facilities. Other industries that
contribute to low capital intensity are
primarily service-based, involved in either
selling ready-made vehicles or providing
repair and maintenance services for
vehicles. Capital intensity is expected to
Capital intensity
Capital units per labour unit

0.5
0.4
0.3
0.2
0.1
0.0
Economy
Automotive
Industry
Dotted line shows a high level of capital intensity

fall further over the next five years as the

manufacturing industries, with higher
capital intensity, downsize tremendously
due to the exit of major players Toyota,
GM Holden and Ford.
Tools of the Trade: Growth Strategies for Success

Investment Economy
Recreation, Personal Services,

Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labour skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Motor Vehicle New

Parts Wholesaling
Traditional Service Economy
Capital Intensive
Labour Intensive
New Age Economy
Automotive
Plastic Injection Moulded
Industry
Product Manufacturing
Wholesale and Retail. Reliant Motor Vehicle Parts

on labour rather than capital and Accessories
to sell goods. Functions cannot Manufacturing
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Old Economy
Motor Vehicle Manufacturing

Glass and Glass Product
Manufacturing
Change in Share of the Economy
Agriculture and Manufacturing.

Traded goods can be produced
using cheap labour abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialise
in niche, high-value products.
Technology & Systems Every single level of the industrys supply

of
Technology
Change is H
igh
Revenue Volatility
Level
The level
of
Volatility is L ow
tend to maintain a computerised parts and

accessories inventory management system.
Component manufacturers are also
developing technology that will improve
fuel-efficiency and create greener parts.
Direct fuel injection technology has made
engines more fuel-efficient than they
were before. Further development of
electronic braking and steering systems is
expected to reduce the amount of product
testing required. This will also work to
increase fuel efficiency, eliminate
hydraulic fluid use, improve safety and
allow for more standardisation of parts.
Regenerative braking, popular in hybrid
cars and electric cars, is also a technology
aimed at improved power consumption
and by extension, fuel economy.
Due to the wide range of services provided

in the Automotive industry, the industry is
subject to low revenue volatility. Any drop
in demand for one industry is generally
replaced by greater demand for another
industry. Motor vehicle manufacturers
have struggled over the past five years,
largely due to there being far greater
demand for vehicles imported by motor
vehicle wholesalers. While big economic

shocks can affect multiple levels of the
supply chain, events similar in nature to
the global financial crisis have not
occurred over the past five years. The
industrys low volatility is also supported
by service industries, as demand for
mechanics and panel beaters does not
tend to vary significantly.
A higher level of revenue

volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilised
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
Volatility vs Growth
1000
Revenue volatility* (%)
Level
The level
chain relies on technological systems for

the smooth running of operations.
Computer use has increased throughout
the industry over the past five years.
Mechanics use computers to store motor
vehicle history and time between services.
Computers are also used in account
preparation and inventory control, while
centralised, web-based booking services
are provided in support of franchisees. Car
retailers use computer systems for
management information to process sales
and expenditure information. If the
dealership is involved in motor vehicle
servicing, then the latest electronic
diagnostic equipment is used to isolate
mechanical or electrical faults. Retailers
Hazardous
Rollercoaster
100
10
Automotive Industry
1
0.1
Stagnant
30
10
Blue Chip
10
30
50
70
Five year annualised revenue growth (%)

* Axis is in logarithmic scale
Regulation & Policy

Level & Trend
he level of
T
Regulation is H
eavy
and the trend
is I ncreasing
Industry Assistance
Level & Trend
he level of Industry
T
Assistance is H
igh
and the trend is
Decreasing
Regulations vary from sector to sector.

Mechanics mostly operate legislation
free, while manufacturers tend to bear
the brunt of climate change related
policies. Mechanics are regulated through
the apprentice system that provides
qualified personnel to the industry.
Motor trade associations such as the
VACC in Victoria tend to administer and
regulate the apprentice system.
All states impose a motor vehicle
trading licence on car retailers and these
vary from state to state. In each state and
territory, licensing and registration of
used motor vehicle dealers is now
compulsory, provided the dealers sell
more than five vehicles per annum. This
registration procedure means that an
automatic vehicle warranty period applies
based on the age of the vehicle and the
number of kilometres on the odometer.
According to the Federal Chamber of
Automotive Industries (FCAI), the
Automotive industry in Australia is
committed to making a strong
contribution to reduce the impact of
global climate change. The industry has
adopted a voluntary target to reduce
average carbon dioxide (CO2) emissions
from new light vehicles. The result came
about mainly thanks to improvements in
engine technology brought about by

intense import competition. Automotive
activity is global and engine
manufacturers typically sell engines all
over the world. Europe has a strict and
enforceable engine standard, which
implies that manufacturers must develop
more fuel-efficient engines. As a result, it
is easier for any manufacturer to meet
the less strict Australian targets as the
technology already exists.
In June 2011, the government
announced a new set of emission
standards that will be mandatory. The
standards will follow that of the European
Union. Euro standards are generally
based in terms of nitrogen oxide (NOx),
particulate matter (PM), and
hydrocarbons (HC) emitted by a vehicle.
Emissions are measured in grams per
kilowatt hour (g/kWh) or gram/kilometre
(g/km). Standards for light duty vehicles
(petrol and diesel) are generally named
Euro 1 to 6. Euro 5 standards will be
phased in as from November 2013 to
November 2016. Euro 6 standards will
then be phased it from July 2017 to July
2018. The government expects to reduce
PM by 90.0%, HC by 50.0% and NOx by
70.0% once all vehicles comply with Euro
6 standards by 2016.
The industry has traditionally benefited

from very high levels of assistance, with
this assistance reaching many operators
within the industry. Assistance has
decreased for local motor vehicle
manufacturers though, with import
competition boosted by a reduction in
import tariffs from 10.0% to 5.0% in
January 2010. While the remaining tariff
remains a form of assistance, it has not
prevented imported vehicles from being
far less expensive for consumers to
purchase, particularly with a strong
Australian dollar. The impending exits of
Australias three motor vehicle
manufacturers have the potential to
result in the abolition of tariffs. Various
free trade agreements with countries
such as Thailand have already
diminished assistance to the industry.

The Automotive Transformation
Scheme, which was originally scheduled
to run from 2011 to 2020, was projected
to include $3.4 billion in aid to local
manufacturers. The ultimate prerogative
of the scheme for the Federal
Government has been to make local
manufacturers viable against import
competition, allowing the major players
to keep the manufacturing operations
within Australia and to keep the resulting
jobs that come with such operations. The
announced manufacturing exits of
Toyota, GM Holden and Ford over the
next five years will result in the effective
rate of assistance to the industry
declining significantly, with the scheme
now set to conclude in December 2017.
30
Key Statistics
Industry Data
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
Revenue
($m)
173,338.6
174,750.4
174,411.2
158,001.3
159,931.0
158,213.8
160,275.2
161,996.0
164,217.7
162,018.3
162,609.5
160,087.0
155,956.9
158,254.4
160,638.1
Annual Change
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
Revenue
(%)
0.8
-0.2
-9.4
1.2
-1.1
1.3
1.1
1.4
-1.3
0.4
-1.6
-2.6
1.5
1.5
Industry
Value Added
($m)
Establishments Enterprises
27,234.5
76,907
54,200
27,918.6
77,591
54,342
27,475.1
77,601
53,810
22,519.6
75,563
51,963
24,237.8
76,725
52,896
24,720.6
76,824
52,514
25,690.3
77,140
51,973
26,386.7
75,492
50,514
26,564.1
75,889
50,407
26,162.8
75,857
50,181
25,893.6
75,505
49,819
24,807.5
75,244
49,441
23,598.3
74,438
48,855
23,714.5
74,020
48,443
24,330.7
74,126
48,418
Employment
316,504
321,324
322,950
308,443
305,385
308,704
311,417
311,049
312,583
312,691
312,096
302,351
288,548
290,404
294,054
Exports
($m)
6,019.6
4,974.4
5,641.2
4,221.8
3,239.6
2,853.5
2,774.0
3,055.5
3,163.7
3,146.4
3,038.4
2,060.3
1,022.5
982.9
967.1
Imports
($m)
25,630.0
27,446.3
29,620.9
22,711.6
27,504.1
24,639.2
27,326.7
29,325.0
30,526.1
31,062.0
31,674.6
34,690.5
36,095.8
38,080.5
38,576.4
Wages
($m)
18,169.6
18,726.0
18,594.5
17,417.9
17,469.5
17,380.7
17,873.6
18,133.3
18,319.4
18,164.6
18,006.3
17,326.9
16,322.6
16,605.6
16,824.6
Domestic
Demand
($m)
192,949.0
197,222.3
198,390.9
176,491.1
184,195.5
179,999.5
184,827.9
188,265.5
191,580.1
189,933.9
191,245.7
192,717.2
191,030.2
195,352.0
198,247.4
Industry
Value Added Establishments Enterprises
(%)
(%)
(%)
2.5
0.9
0.3
-1.6
0.0
-1.0
-18.0
-2.6
-3.4
7.6
1.5
1.8
2.0
0.1
-0.7
3.9
0.4
-1.0
2.7
-2.1
-2.8
0.7
0.5
-0.2
-1.5
0.0
-0.4
-1.0
-0.5
-0.7
-4.2
-0.3
-0.8
-4.9
-1.1
-1.2
0.5
-0.6
-0.8
2.6
0.1
-0.1
Employment
(%)
1.5
0.5
-4.5
-1.0
1.1
0.9
-0.1
0.5
0.0
-0.2
-3.1
-4.6
0.6
1.3
Exports
(%)
-17.4
13.4
-25.2
-23.3
-11.9
-2.8
10.1
3.5
-0.5
-3.4
-32.2
-50.4
-3.9
-1.6
Imports
(%)
7.1
7.9
-23.3
21.1
-10.4
10.9
7.3
4.1
1.8
2.0
9.5
4.1
5.5
1.3
Wages
(%)
3.1
-0.7
-6.3
0.3
-0.5
2.8
1.5
1.0
-0.8
-0.9
-3.8
-5.8
1.7
1.3
Domestic
Demand
(%)
2.2
0.6
-11.0
4.4
-2.3
2.7
1.9
1.8
-0.9
0.7
0.8
-0.9
2.3
1.5
Key Ratios
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
IVA/Revenue
(%)
15.71
15.98
15.75
14.25
15.16
15.62
16.03
16.29
16.18
16.15
15.92
15.50
15.13
14.99
15.15
Imports/Demand Exports/Revenue
(%)
(%)
13.28
3.47
13.92
2.85
14.93
3.23
12.87
2.67
14.93
2.03
13.69
1.80
14.78
1.73
15.58
1.89
15.93
1.93
16.35
1.94
16.56
1.87
18.00
1.29
18.90
0.66
19.49
0.62
19.46
0.60
Figures are in inflation-adjusted 2015 dollars.
Revenue per
Employee
($000)
547.67
543.84
540.06
512.25
523.70
512.51
514.66
520.81
525.36
518.14
521.02
529.47
540.49
544.95
546.29
Wages/Revenue
(%)
10.48
10.72
10.66
11.02
10.92
10.99
11.15
11.19
11.16
11.21
11.07
10.82
10.47
10.49
10.47
Employees
per Est.
4.12
4.14
4.16
4.08
3.98
4.02
4.04
4.12
4.12
4.12
4.13
4.02
3.88
3.92
3.97
Average Wage
($)
57,407.17
58,277.63
57,577.02
56,470.40
57,204.84
56,302.15
57,394.43
58,297.25
58,606.51
58,091.21
57,694.75
57,307.24
56,568.06
57,181.03
57,216.02
Share of the
Economy
(%)
2.17
2.15
2.04
1.64
1.73
1.73
1.73
1.73
1.70
1.64
1.58
1.47
1.38
1.35
1.34
31
Jargon & Glossary
Industry Jargon
IBISWorld Glossary
EFFECTIVE RATE OF ASSISTANCEThis takes into

account direct assistance (such as tariffs) and indirect
assistance provided by the government.
FLOOR PLAN FINANCINGA method used to finance

inventory of businesses commonly used by car retailers.
Floor plan refers to their inventory.
ELECTRIC CARAlso known as a plug-in electric-hybrid

vehicle. This hybrid vehicle has an electric battery that
can be recharged in a wall socket and does not need
petrol to run.
HYBRID CARSUsually refers to electric-hybrids that run

on an electric battery and a gasoline engine. They are
more fuel-efficient than a standard car.
BARRIERS TO ENTRYHigh barriers to entry mean that

new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
INDUSTRY REVENUEThe total sales of industry goods

and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
CAPITAL INTENSITYCompares the amount of money

spent on capital (plant, machinery and equipment) with
that spent on labour. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labour; medium is $0.125 to $0.333 of capital to
$1 of labour; low is less than $0.125 of capital for every
$1 of labour.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
Australian Bureau of Statistics implicit GDP price
deflator.
INDUSTRY VALUE ADDED (IVA)The market value of

goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%; medium is 5% to 20%; and high is more
than 20%. Imports/domestic demand: low is less than
5%; medium is 5% to 35%; and high is more than
35%.
EMPLOYMENTThe number of permanent, part-time,

temporary and casual employees, working proprietors,
partners, managers and executives within the industry.
LIFE CYCLE All industries go through periods of growth,

maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
ENTERPRISE A division that is separately managed

and keeps management accounts. Each enterprise
consists of one or more establishments that are under
common ownership or control.
NONEMPLOYING ESTABLISHMENTBusinesses with

no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
ESTABLISHMENTThe smallest type of accounting unit

within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
PROFITIBISWorld uses earnings before interest and tax

(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
DOMESTIC DEMANDSpending on industry goods and

services within Australia, regardless of their country of
origin. It is derived by adding imports to industry
revenue, and then subtracting exports.
EXPORTS Total value of industry goods and services

sold by Australian companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in Australia.
INDUSTRY CONCENTRATION An indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
VOLATILITY The level of volatility is determined by

averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all
employees in the industry. Benefits and on-costs are
included in this figure.
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Idling: Wholesaler activity to offset manufacturer

exits, keeping industry revenue stable

IBISWorld Industry Report X0014

Automotive Industry in Australia

2 About this Industry

28 Technology & Systems

29 Regulation & Policy

19 Market Share Concentration

19 Key Success Factors

Key External Drivers

31 Jargon & Glossary

10 Industry Life Cycle

23 Toyota Motor Corporation Australia

12 Products & Markets

25 Ford Motor Company of Australia

www.ibisworld.com.au | (03) 9655 3881 | info@ibisworld.com

Automotive Industry in Australia April 2015

About this Industry

The industry includes car manufacturers,

The primary activities of this industry are

Motor vehicles refer to cars, utes, station

Designing motor vehicles

The major products and services in this industry are

C2311 Motor Vehicle Manufacturing in Australia

For additional information on this industry

Automotive Industry in Australia April 2015

Annual Growth 10-15

Annual Growth 15-20

Revenue vs. employment growth

Key External Drivers

World price of crude oil

Motor vehicle price index

Life Cycle Stage

Automotive Industry in Australia April 2015

Executive Summary | Key External Drivers | Current Performance

The Automotive industry encompasses a

manufactured vehicles have led to lower

Key External Drivers

Consumer sentiment index

imported motor vehicles, it also makes

Real household disposable income

Automotive Industry in Australia April 2015

Key External Drivers

purchase new vehicles, particularly more

domestic products more competitive on

The Automotive industry encompasses

shifting demand towards smaller

Automotive Industry in Australia April 2015

growth of 0.3%. The industrys steady

Sluggish car sales in 2014-15 as the

All entities within each automotiverelated industry contribute towards

manufacturers have had to cut highly

New car sales have fallen slightly over the

Holden and Ford have all announced

Automotive Industry in Australia April 2015

The severe decline in manufacturing over

years and a reduction in motor vehicle

Demand for repair and maintenance

for vehicle add-ons. This has also meant