After an extended break, your correspondent is delighted to return to pontificate on the Australian electronics industry. After nearly four months away on a backward and remote South Pacific island with limited modern communications (New Zealand) your correspondent was looking forward to a slew of significant developments to discuss.
But looking at this week’s news - put together by Electronics News’ intrepid reporters - it’s as if nothing’s changed.
In his last column, all those months ago, The Saint spoke about the Commonwealth Government’s feeble efforts to position the country to withstand the shock from the inevitable drop in commodity prices that will put a large dent in our mining-based economy’s export earnings.
As then, a Euro-debt crisis and a weak U.S. recovery continue to weigh heavily on a global economy that’s still trying to get off its knees after the financial crisis. Meanwhile, Australia continues on the same path of basing its future on digging holes in the ground and scraping the contents thereof into ships bound for China.
Booming raw material exports underpin a dollar that’s reached a value against the other major currencies not seen since the Aussie was floated in 1983. Meanwhile that same overvalued dollar undermines every other sector’s competitiveness as the prices of Australian products become too steep for impoverished overseas buyers. Even employment rates appear to have reached a plateau.
Car manufacturing has been hit particularly hard. For example, Toyota confirmed this week that 350 jobs would go at its Altona plant in Victoria, citing the high dollar as a major influence on its decision. The Commonwealth Government has responded by promising to continue supporting the company with further handouts on top of the $100 million of tax payers’ money it has poured in during the last four years.
But, according to climate and energy security think-tank, Beyond Zero Emissions, the Australian car manufacturing industry is doomed to failure if it continues to rely on internal combustion engines.
In a story published in Electronics News this week, Beyond Zero Emissions’ Executive Director Matthew Wright says Australian governments have continued to prop up “an unsustainable auto-manufacturing sector”. He urged companies like Ford, Holden and Toyota to retool and transition to production lines for electric vehicles (EV).
The Saint has been somewhat scathing in the past about the likely uptake in EVs, and their actual environmental benefits when the production of electricity to recharge batteries is done by coal-fired electricity capacity, but, this time, he does think Mr Wright has a point.
The car industry here has been in slow decline since well before the latest recession. For example, in 1998, 350,000 cars were assembled in Australia, dropping to 344,063 by 2002. In 2006 the figure was down to 326,960 vehicles, declining to just 219,376 last year. That’s not an industry that’s in rude health.
But it’s not that Australians have stopped spending. 2011 was only the fourth time in history that over one million new cars were purchased. That means we are buying vehicles, but fewer of the ones being made here. The top selling vehicle in 2011 was the compact Mazda 3 (with 41,429 sales), while perennial favourite, the Holden Commodore, was edged into second place (40,617).
Locally made Holden and Ford products failed to inspire with the companies’ respective market shares dropping by 5.1 and 4.2 percent compared to 2010. Meanwhile, importers Hyundai, Mazda and Volkswagen boosted their market shares by 8.7, 4.2 and 17.7 percent respectively.
But while the traditional industry is on a downward trajectory, automotive manufacturing is not something that should be surrendered without a fight. Australia is one of the few countries that have the capability to go from a blank sheet of paper to a showroom vehicle. And the industry employs hundreds of thousands of skilled workers.
That’s why Mr Wright’s suggestion has merit. As your correspondent proved in the previous column referenced above, the market for hybrids and EV remains virtually untapped. Despite their drawbacks, escalating fuel prices, the carbon tax and increasingly stringent exhaust emissions regulations will ensure sales gradually pick up. And a growing product sector is one that should be grasped with both hands.
Conventional vehicles are a commodity product and Australia’s relatively expensive manufacturing capability has no chance of paring down costs such that it is competitive. But EV vehicles are a new technology and can justify a premium price. There’s a chance that the extra cost of this country’s labour could be more readily absorbed into this higher-end product that requires specialised knowledge to put together.
Will it happen? Let’s hope so, or the unlucky 350 at Toyota will be just the start as thousands of jobs evaporate even as the government pumps in millions more of those overpriced Australian dollars.
Growth event or last hurrah?
Electronics News reports this week that the organisers of the Electronex trade show say the electronics design and manufacturing sector is “weathering the storm despite the glooming economic forecasts”.
That’s good to hear, but upon what evidence is this optimistic conclusion based? Your correspondent is unconvinced that the trade show organisers have access to information that’s beyond the rest of the industry. But if they do, it’s at odds to his sources.
The Saint’s own – admittedly unscientific – straw poll of senior contacts in the industry concludes current trading conditions (including those imposed by the high dollar) are undermining electronics design and manufacturing.
Comments of the current state of the industry range from “it’s in intensive care” to “it’s hard to visualise a strategy whereby the industry will survive without a major restructure and change of focus – and that takes time and money that we don’t have”.
Reader ‘Peter Sosin’ expresses similar sentiments in his own inimitable fashion, saying “What a bulls**t! (pardon me for the expression). Australian electronics industry in complete meltdown, practicaly does not exist mainly because of govermants industry policy [sic]”.
The organisers of Electronex note that their own event is thriving, expanding by nearly 40 percent in 2012 compared to the previous event a year before. Let’s hope that this is evidence of a healthy sector and not an event expanding from very small to not quite so small in last throw of the dice for beleaguered electronics firms.