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Australian Financial Review: Napthine backs big as better

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05.12.13 - Australian Financial Review: Napthine backs big as better

"Big car makers should be preferred in government assistance over small, niche export players because the former provide the broad-based industry that other automotive companies need, Victorian Premier Denis Napthine says.

The Victorian government's submission to the Productivity Commission inquiry into public assistance for ­automotive manufacturing says taxpayer funding for at least another 10 years is needed to save 25,000 jobs across the state.

In return, car companies such as Toyota and GM Holden would have to pledge to using Australian parts makers in their global supply chains, and would not be allowed to ask for extra government grants.

Smaller, innovative car companies such as Melbourne start-up Tomcar Australia are unable to get government assistance as Holden and Ford do because they outsource manufacturing, which is not viewed as direct capital expenditure. But Tomcar is making a plea to the inquiry for niche operators.

Tomcar, which produces what was originally an Israeli military vehicle now adapted for the Australian market and other countries for recreational use, is already exporting overseas. The company has made $2.75 million in sales revenue by pre-selling 100 of its cars at about $27,500 each, and is aiming to sell 5,000 within the next three to four years.

It accesses research and development tax concessions, but chief executive David Brim said this benefit was small, compared with the hundreds of millions of dollars that went to big manufacturers.

"Future policies should ensure that the automotive industry is not hollowed out to become only an assembly industry," Mr Brim says in a submission to the Productivity Commission.

Mr Brim says Australia will not be able to compete with Asian countries including Thailand on general car manufacturing. "We need to create and nurture a new-age automotive ‘ecosystem' where smaller local car manufacturers get a chance to grow, utilising the current world-class domestic automotive supplier network," he says.

Explaining why continued assistance to big manufacturers was justified, Mr Napthine said on Wednesday the small companies depended on the skills and expertise of the broader industry to survive. "So we need a strong, viable car industry, a strong, viable components industry," the Premier told The Australian Financial Review.

"Niche operators can't be developed and have a long-term future if they don't have a broad-based industry from which they can get their supply-base skills and expertise."

With Ford set to close its Geelong and Broadmeadows sites and leaving Australia by 2016, Mr Napthine said it was important to help Toyota and Holden with ongoing grants.

"Our argument quite strongly is this a massive industry employing 45,000 people [around Australia] and it's fundamental to our skills retention and skills development in manufacturing," he said.

If Australia wanted more flexibility in manufacturing it was "absolutely vital that we have the car industry which provides a base of employment and base of skills development for Australia," he said.

Asked how long successive governments would have to continue bailing out car makers, he said a "genuine partnership" was needed."

Read complete article here.

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