Effects of Holden exit on parts suppliers 'uncertain'
Following Holden's announcement that it will be exiting Australia, business information analysts at IBISWorld provide insights into the outlook for domestic car manufacturing - forecast to decline by 10.2 per cent per annum over next five years.
Impact of Holden's departure
GM Holden Ltd holds a market share of 22.2 per cent of the industry. Their exit in 2017 would reduce the size of the industry by a similar percentage.
GM's exit marks the second major exit of the last three remaining major players in the industry.
Combined with Ford's exit in October 2016, the industry is expected to be reduced by a total of 40 per cent by the end of 2017 calendar year. Holden's exit from the industry would lead to a direct reduction of 2900 employees over 2016-17 and 2017-18 (1,600 from SA and 1,300 from VIC).
While the effects of Holden's departure on parts suppliers is not certain, it is anticipated excess capacity will arise, which is expected to result in layoffs of workers and closures of some firms.
Manufacturers that supply parts to Holden and Ford are expected to see their sales significantly reduced, but falling production costs of some inputs may help surviving firms transition to manufacturing other products.
Opportunity for other operators
Toyota is currently the only remaining manufacturer with no official intentions of abandoning the Australian car manufacturing industry however the company has questioned its commitment to Australia if certain conditions are not met.
IBISWorld general manager (Australia), Karen Dobie said: "As the only remaining major player, theoretically Toyota will have greater control of the market and greater bargaining power - which could result in an overall benefit to the company if it is able to negotiate with unions for lower employee wages which could reduce labour costs for the company (and industry).
"If Toyota does exit, it would reduce the motor vehicle manufacturing industry in Australia to negligible levels," Dobie added.
Impact on industry revenue
Taking into account Ford and Holden's departures from the Australian motor vehicle manufacturing industry, over the five years through to 2018-19 IBISWorld expects revenue to decline at an annualised 10.2 per cent.
In 2013-14 the Australian car manufacturing industry is expected to generate $11.3 billion, declining to $6.6 billion by 2018-19