Professional Engineering Practice: The Fall of the Car Industry in Australia - Case Study Example

Name: Course: Instructor: Date: Professional Engineering Practice The fall of the Car Industry in Australia Introduction The car industry in Australia is effective, with a ready market base. The problem has been caused by many factors where the trade unions have played a significant role. The trade unions have influenced the fall of the local ca manufacturing industries, by giving the foreign importers more bargaining power in the country. The tariffs that have been employed have been negatively brutal to the industries since they agreed to a zero tariff from Thailand cars among other foreign vehicles, which led to the high demand for international vehicles compared to the local vehicles. The report analyzes the car industry in Australia, how the workers are paid, the international and domestic demand for vehicles and the reasons why the car industry has failed in the market. The Car Industry in Australia The car manufacturing industry in Australia has been occurring over a period of years. The fall of the industry will depict the loss of jobs, sources of income for the government and other factors that occur when an industry is eliminated from the market [1]. This stipulates that the Australian economy will be importing cars from other countries. As a result, almost 2300 jobs of people working in the car industry will be eliminates, including car manufacturing supplies and suppliers among many others that will be perceived in the general economy. According to [1], many people will lose their jobs. For instance, 45,000 people are about to lose their jobs while others who work in the supporting industries will also be eliminated. Thus, the unemployment levels in the country will increase, while other employment conditions worsen. Toyota Car Company will be the last to close, which is expected to close by October of this year [2]. Toyota was considered to be the main vehicle manufacturer in Australia, which also manufactures cars to be exported. The Pay of Workers in Car Industry in Australia The car industry workers in Australia are paid very well. That is; on hourly basis, one who is working in the car assembly line is paid $6 dollars, which translates to about $12,500 dollars in a year. However, the pay is not so attractive when compared to the average wages of those working in the manufacturing line since they are paid about $69 dollars hourly [2]. Domestic and International Demand of Cars The domestic demand of cars in Australia is high. The problem is that the vehicles that the market demands and purchases are of foreign vehicles not the local vehicles. This is highly related to the high differences in price. Liberalisation has been the main cause of the fall of the industry where power was given to the imports into the market of Australia. The decline of tariffs in the country increased the imports in the country, leading to intense competitive platforms for local and foreign cars despite the fact that local cars were highly expensive to the imported vehicles. Thus, the cost was a key driver in the decline in the demand of local manufactured vehicles. On the other hand, the international demand of Australian vehicles is significantly low. That is; other countries such as Japan, Thailand, and South Korea among others are better international importers given that the price and quality of the vehicles they import are better compared to Australia. For instance, Australia imported only 100 vehicles to Thailand, while Thailand imported 2million Vehicles into Thailand [2]. The demand for vehicles in Australia is growing steadily; only that the demand does not include local manufactured vehicles as presented below. Figure 1: Vehicle Sales in Australia in 2014 and 2015 The difference was a 3.8% increase in the sales between 2014 and 2015. While between 2015 and 2016, the difference was two percent. Despite the fallen domestic market, the demand for vehicles in the market is still very high. Figure 2: Vehicle sales in 2015 and 2016 in Australia Australian made cars demand has been falling over the years, and this trend has continued to the end of the industry in the country. While other countries imports in the country increase, the country’s products decline. However, through it all, Toyota has remained the dominant domestic supplier in Australia [3]. The main local players in the markets sold alltogether 87,000 vehicles. When the companies started, some of them like Toyota individually, sold 148,000, Holden about 165thousand and ford about 155thousand vehicles [4]. This, shows how the demand of the local vehicles as declined, despite the increasing demand, which can be linked to the 2million vehicles imported in the country [2]. Reasons for the Collapse of the Car Industry Trade unions have not been so positive to the car industry in Australia and have influenced and led to its fall. For instance, when Free Trade agreements between Australia and Thailand were made, where import tariffs from Thailand were zero, the car industry market in Australia was threatened. The trade unions should never have allowed such an agreement, since it would be negatively brutal to the local manufactures in the country. The free tariff of Thailand has led to the purchases of numerous cars from Asia about 2million. On the other hand, Australia only shipped 100 cars [2]. That is; the free agreement trade had non-tariff barriers that restricted the exporting of cars from Australia, while Australia opened free doors completely without any barriers. As such, the Australia market could not compete with the foreign cars, which inherently stipulated the coming fall of the local market. For instance, Thailand had the power to impose high fee in regards to registration, while Australia could not impose any tariff. The local manufactures have attempted to survive despite the challenges, which is why years down the line, the industry is closing [5]. The Australian local manufacturers lost their Australian car market to the foreign imports. The prices of the foreign imports were way much lower compared to the local prices. The local businesses had to substitute for the lost productions through exports [2]. However, there were many barriers closing their doors to exporting, leading to the need of production declining despite the high costs of labor. Thus, since the import developed a competition level that the local market could not maintain, the life cycle of the industry since them has been that of a deteriorating product. Now, the product (car industry) has come to the end of its life cycle [1]. Trade unions today play significant roles in the success or failure of a business. Global competition, and outsourcing is one of the main roles of the trade unions. In regard to the car industry in Australia, the trade unions help increase global and foreign vehicles in the country, which hindered the success of the local vehicles, leading to its apparent downfall. The trade unions should ensure the market does not become fragmented, where in Australia, the trade unions led to the fragmentation of the car industry and failure of the industry. The entire economy will experience the losses as perceived in the graph below. Figure 3: The equivalence of the full-time jobs that will be lost due to the car manufacturing industry collapse in other industries [5] The import tariffs of the cars in the country have been very low, which stipulated the industry would soon fail as the end perceived today has shown. The import tariffs have always been low or none, which led to the increase of foreign cars in the Australian market. Worse, the foreign vehicles had better and attractive prices (cheaper) when compared against the local models that existed [6]. The cheaper cars are linked to the cheap costs of labor in other surrounding countries. Thus, over time as the foreign vehicles linger to increase in the market, the car local car factories were struggling to stay in the market [2]. The car factories in Australia have then been making low sales, which do not support the long existence of the businesses, unless the cars sold were supercars where the price of one car is high and can help the business survive [4]. The availability of the numerous car brands in the market has led to the car industry been fragmented, where the local car manufacturers could not rely on domestic sales to survive the market. Considering exportation was a challenge, this stipulated the car industry in this market (local car industry) was falling as it has fallen [2]. Conclusion The car industry in the market has failed completely. Some of the main manufacturers of the vehicles such as Toyota and General Motors are expected to close their businesses by the end of the year. The closure of these businesses stipulates that the local manufacturing car industry in Australia has failed. The workers in the industry have always been paid attractively, which is perceived in their tax remunerations and the economy as well. The fall of the industry stipulates that most of the workers in this industry will become unemployed in the long term, which will be depicted in the economic stability of Australia. The Manufacturing industry has not failed due to the lack of a market, but due to the trade unions and the government not protecting it from foreign businesses. The market has been easy for numerous foreign markets, and the cheap prices they offered while creating tariff barriers to avoid the Australia market from importing has been a major cause of the fall of the industry, which is linked to the trade unions. References [1] J. Dowling, "Who Killed the Car Industry," The Sydney Morning Herald, pp. 1-1 Retrieved from: http://www.smh.com.au/business/the-economy/who-killed-the-car-industry-20151112-gkx1c8.html, 2015. [2] J. Dowling, "Why Australian car manufacturing died — and what it means for our motoring future," Herald Sun, pp. 1-1 Retrieved from:http://www.heraldsun.com.au/technology/why-australian-car-manufacturing-died-and-what-it-means-for-our-motoring-future/news-story/0428dc235d1b44639459959f5a3bbf9b, 2017. [3] N. Steve, "News and Views: Stay upto date with your industry," 19 2 2016. [Online]. Available: http://www.acaresearch.com.au/australian-market-research-blog/2015-vehicle-sales-trends-in-the-australian-automotive-market. [4] Autocar, "The End of Car Production in Australia," 5 3 2017. [Online]. Available: https://www.autocar.co.uk/car-news/industry/end-car-production-australia. [5] A. Valadkhani, "Collapse of Australian car Manufacturing Industry," 21 10 2016. [Online]. Available: http://www.swinburne.edu.au/news/latest-news/2016/10/collapse-of-australian-car-manufacturing-industry-.php. [6] P. Toner, "News," 14 8 2013. [Online]. Available: http://www.abc.net.au/news/2013-08-14/toner---car-manufacturing-in-australia/4886462. Read More