Comparing the Motor Vehicle Industry in Japan and Australia - Case Study Example

Running Head: Comparing the motor vehicle industry in Japan and Australia Comparing the motor vehicle industry in Japan and Australia Customer’s Name Customer’s Course: Tutor’s Name: August 11th, 2012 Introduction The motor vehicle industry is one of the main manufacturing industries in both Japan and Australia. Moreover, in both Australia and Japan, this industry employs a large number of people. The Japanese motor vehicle industry is one of the leading and most popular industries in the world; while Australia’s automotive industry is steadily growing as well. Thus, the motor vehicle industry in both countries is well supported by the respective governments through various policies. In addition to this, both countries have powerful interest groups in this industry. Comparison of the automotive industry in Australia and Japan According to ACEA (2011), the Japanese motor vehicle industry is one of largest and most popular industry in the world. The Japanese auto industry is home to many companies which assemble cars, motorcycles, engines and other motor vehicle parts. Some of these automotive manufacturers include “Toyota Japan, Honda, Daihatsu, Nissan, Suzuki, Mazda, Mitsubishi, Subaru, Isuzu, Kawasaki, Yamaha, Mitsuoka as well as Lexus” (Batfa, 2012). Japanese new cars as well as second hand continued to control the automotive industry worldwide, until recently when the country was hard hit by the tsunami and earthquakes (Taylor, 2011). According to Batfa Japan (2012), majority of the motor vehicle customers worldwide choose to buy Japanese manufactured vehicles citing the reasons of consistency, performance as well as resilience of these cars. Toyota Japan in particular, is the world’s biggest car maker as well as one of the most successful companies in world history. According to Batfa Japan inc. (2012), Toyota sold over 8.4 million cars worldwide in 2010, retaining its position as the planet’s leading car manufacturer for three years, with the recall misery in the North America market notwithstanding. In total, the sale of new Japanese vehicles increased by 46.7% in 2010: demonstrating the dominance of the Japanese automobile industry (Batfa 2012). Despite the fact that the Japanese automotive industry has been struggling in the recent past due to the earthquake and tsunami devastations in 2011, the Japanese car manufacturing industry has not lost its stature and reputation as the one of the world’s best (Taylor, 2011). Australia too is one of the few countries globally that have the capability to build a vehicle from scratch (FCAI, 2011). According to the Australian Bureau of Statistics (2005), the Australian automotive industry comprises of four automobile manufacturers which are Ford, Holden, Mitsubishi as well as Toyota. These four automotive companies manufacture large numbers of passenger motor, station wagons, variant vehicles, sports utility vehicles as well as heavy and light commercial vehicles, from the raw materials in Australia (FCAI, 2011). In addition to this, Australia has specialized manufacturing capacity in various vehicle parts including engines transmission and rear axles as well as wheels and tyres since there are over two hundred automobile spare parts manufacturers situated in Australia (Australian Bureau of Statistics, 2005). Just like the Japanese automotive industry, the Australian car manufacturing industry has achieved great success in the past too. For example in 2003, domestically manufactured cars contributed more than of 99% of large passenger motor vehicle domestic sales in Australia. In the same year, the Australian automotive industry recorded sales of over 909,000 domestically produced cars (Australian Bureau of Statistics, 2005). In 2010, the Australian automotive industry exported cars and car parts worth over $3.6 billion. Though Japan is doing significantly better than Australia in terms of the number of vehicles produced and sold annually, it is clear that the automotive industry contributes significantly to the GDP of the respective countries. The automotive industry employs a large number of people in both Australia and Japan. According to JAMA (2011), the number of people currently employed directly and indirectly by the automotive industry currently stands at 5.32 million. Out of these, 787,000 are involved in automobile production. In Australia, this industry employs well over 400,000 people directly and indirectly through the more than 100,000 businesses across a range of sectors including manufacturing, retail, servicing, repair and logistics (FCAA, 2011). How the respective governments develop industry policies in the industry Japan The automotive industry in Japan has been fairing well as a result of the industrial policies that have been put in place by the Japanese government. According to IDE (2007), industrial policies have helped the Japanese motor vehicle companies to compete in an almost equal footing with other multinational corporations by cushioning the dynamic inefficiencies of Japanese market through the protection of infant industries. Before 1950, Japan’s industrial policy protected Japanese companies by imposing high tariffs on imports (JAMA, 2006). During this period, Japan implemented the priority production method, whereby the government was directly in charge of production, raw materials provision, price determination, financing, provision of price support subsidies as well as the rationing of imported products. During the 1950s however, manufacturing was “rationalized” through the government’s indirect control of raw materials, production as well as distribution (Kuchiki, 2007). The policy then concentrated on supporting domestic industries through capital financing (Kuchiki, 2007). In the 1960’s the industrial policy of Japan shifted its focus to government coordination of the private sector (JAMA, 2006). The industrial policy aimed at ‘liberalizing’ the Japanese economy. Cooperation and coordination between the government and the private sector enabled the motor vehicle industry as well as other industries in Japan to become more competitive. Today, Japan’s industrial policy measures are indirect and inductive in nature (Kuchiki, 2007). Japan’s industrial policy is intended to facilitate competitive firms by optimizing initiative and entrepreneurship. In addition to this, Japan’s industrial policy has helped many industries including the motor vehicle industry by providing a framework that enables the market forces to operate efficiently. The government through the Ministry of Economy, Trade and Tourism, continually listens to the views of the industry and experts in view of formulating, revising and implementing policies and strategies (JAMA, 2012). Moreover, the Government of Japan set up the Japan Automobile Manufacturers Association, JAMA, to provide a bridge between the industry and the government. The Ministry of Economy, Trade and Industry closely works with JAMA to collect information and formulate policies on the Motor Vehicle industry (JAMA, 2012). Australia The Australian Government ensures a stable macroeconomic environment of relatively low interest rates and low inflation as well as microeconomic reforms such as labor market reforms in a bid to promote innovation, investment and global competitiveness (Bracks, 2008). The automotive industry in Australia is subject to two major policies which are the Automotive Tariff Arrangement and the Automotive Competitiveness and Investment Scheme, ACIS (Bracks, 2008). The industry is also supported by the Australian government through policies such as tradex, duty draw back arrangements, LPG vehicle scheme, specific company level assistance, government purchasing practices and the specific tariff arrangements for second hand vehicles (Bopage, 2010). The Australian automotive industry is also subject to several other commonwealth, state and territory taxes including company tax and payroll tax (Bopage, 2010). However, tariff reforms have been taking place in the Australian car industry and tariffs have been reducing. Moreover, the Australian government has introduced a policy environment which facilitates viable automotive production. Some of the features of this industrial policy environment include: provision of skilled labor, easy access to raw materials, developed infrastructure, a “modern economic base” as well as a secure political environment (APEC, 2006). According to APEC (2006), this policy environment has enabled the motor vehicle industry in Australia to improve its competitiveness. The Automotive competitiveness and investment scheme is a transitional assistance scheme directed towards encouraging new investment and innovation in the Australian automotive industry in the context of trade liberalization (APEC, 2006). The main aim of the ACIS is to reward strategic investment, R & D, and the production of eligible motor vehicles through the issue of import duty credits to registered participants (Bracks, 2008). These credits can be used to discharge customs duty on eligible automotive imports or alternatively, can be sold or otherwise transferred. ACIS began in 2001 after the closure of the export facilitation scheme in 2000 and under the current policy settings will terminate at the end of 2015 (APEC, 2006). Interest groups Japan has more powerful interest groups than Australia in the motor vehicle industry. This is because the auto industry lobby, Japan Automobile Manufacturers Association has been very active the past on matters pertaining to the automotive industry in Japan (Kyodo News, 2012). For example, the Japanese government has to consult the Japan Automobile Manufacturers Association on industrial policy, tax and subsidy issues (Kyodo News, 2012). JAMA has also been on the forefront in ensuring that production in the automotive industry continues even after the tsunami and earthquake setbacks (Taylor, 2011). Apart from JAMA there are also other influential lobby groups in this industry, a good example is the Japan Auto Parts Industry Association. Conclusion Although both Japan and Australia are one of the few countries with the capabilities to build motor vehicles from scratch, it is quite clear that Japan’s automotive industry is ahead of Australia’s. It is also evident that the automotive industry is a key industry in both countries and the respective governments support this industry through various policies (Bopage, 2010). However, the Australian government should employ more effective measures such as providing a framework that will enables the market forces to operate efficiently (Indian Herald, 2012). The Australian government and lobby groups should also work together in order to achieve success in the auto industry, just as Japan. References ACEA. (2011). The Automobile Industry Pocket Guide. Retrieved August 10, 2012 from http://www.acea.be/images/uploads/files/20110921_Pocket_Guide_3rd_edition.pdf APEC. (2006). Automotive Profile Australia. Retrieved August 10, 2012, from http://www.apec.org/Groups/Committee-on-Trade-and-Investment/~/media/Files/Groups/AD/06_ad_au_autoprofile.ashx Australia Bureau of Statistics. (2005). Australia's Automotive Industry. Retrieved August 10, 2012 from http://www.abs.gov.au/ausstats/abs@.nsf/94713ad445ff1425ca25682000192af2/22e7da19382d4bb2ca256f7200833044!OpenDocument Batfa Japan Inc. (2012). Japan Car Industry News. Retrieved August 11, 2012 from http://www.batfa.com/japan_car_industry_news.htm Bopage, L. (2010). Trade Liberalization and Structural Change in the Australian Motor Vehicle Industry. Retrieved August 11, 2012, from http://researchoutput.csu.edu.au/R/?func=dbin-jump-full&object_id=21557&local_base=GEN01-CSU01 Bracks, S., (2008). Review of Australia’s Automotive Industry. Retrieved August 11, 2012 from http://www.mskills.com.au/DownloadManager/Downloads/Bracks%20report%20on%20auto%20industry.pdf FCAI. (2011). Australian Automotive Industry. Retrieved August 10, 2012 from http://www.fcai.com.au/publications/all/2011/8/26/australian-automotive-industry-report-%28fcai%29 http://indianherald.com.au/featured/for-gods-sake-stop-protecting-australian-car-industry/1078/ Indian Herald. (2012). For God’s sake stop protecting Australian Car industry. Retrieved August 11, 2012 from JAMA. (2006). Japan’s Auto Industry. Retrieved August 11, 2012 from http://njkk.com/about/industry5.htm JAMA. (2011). The Motor Industry of Japan 2011. Retrieved August 11, 2012, from http://www.jama-english.jp/publications/MIJ2011.pdf JAMA. (2012). Japan Automobile Manufacturers Inc. Retrieved August 11, 2012, from http://www.jama-english.jp/ Kuchiki, A. (2007). Industrial Policy in Asia. Retrieved August 10, 2012 from http://www.ide.go.jp/English/Publish/Download/Dp/pdf/128.pdf Kyodo News (2012). New head of auto industry lobby pledges to keep production in Japan. Retrieved August 11, 2012 from http://english.kyodonews.jp/news/2012/05/158566.html Taylor, A. (2011). Aftershocks shake Japan's Auto Industry. Retrieved August 11, 2012 from http://money.cnn.com/2011/03/14/autos/japan_autos_earthquake.fortune/index.htm Read More