Automotive Fact Pack

1
THE AUTOMOTIVE INDUSTRY AUSTRALIAFact Pack

• Swedish Trade Council in Australia
• 2006

2
CONTENT

• Overview Australian Manufacturing Industry
• Australian Automotive Industry
• Australian Construction Equipment Industry
• Recommendations
• References

3
THE MANUFACTURING INDUSTRY IN AUSTRALIA IS
SOMEWHAT LARGER THAN THE SWEDISH MANUFACTURING
INDUSTRY- manufacturing in general is a very
fragmented industry
5 largest manufacturing industries in Australia

• The total turnover of the Australian
  manufacturing industry is SEK 1,701 billion
• the Swedish manufacturing industrys turnover is
  SEK 1,357 billion
• There are approximately 140,000 companies within
  the manufacturing industry in Australia
• 1 million employees
• The machine and equipment manufacturing is the
  second largest industry within manufacturing
• The average cost for an industry worker in
  Australia is SEK 152 per hour

Billion SEK
The automotive industry amounts 8 of the total
manufacturing industry
Source Australian Bureau of Statistics
4
CONTENT

• Overview Australian Manufacturing Industry
• Australian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Australian Construction Equipment Industry
• Recommendations
• References

5
THE AUSTRALIAN PRODUCTION OF CARS AND COMMERCIAL
VEHICLES TOTALS SEK 150 BILLION- relatively
constant over the last 5 years
Production cars and commercial vehicles industry
in Australia
billion SEK
Components and accessories SEK 47 billion
Vehicles and engines SEK 90 billion
Motor vehicle body SEK 13 billion
Export share of production 15 in 2005
Source IBIS industry reports Key Automotive
Statistics 2004 (Dept of Industry Tourism and
Resources)
6
ALMOST 400,000 VEHICLES ARE PRODUCED IN
AUSTRALIA- over 75 of these are passenger cars
VEHICLE MANUFACTURERS
COMMERCIAL VEHICLES (48 700 vehicles)
LIGHT TRUCKS (41 000 vehicles)
BUSES (900 vehicles)
HEAVY TRUCKS (6 800 vehicles)
PASSENGER CARS (340 000 vehicles)

• 2 manufacturers
• GM Holden
• Ford

• 8-9 manufacturers
• Custom Coaches
• Volgren Australia
• 6-7 minor body manufacturers

• 3 manufacturers
• Volvo Truck / Mack
• Kenworth
• Iveco / International
• Trailer manufacturers
• Maxitrans
• Barker
• Krueger
• Vawdrey
• SX Trailers
• Haulmark

• 4 manufacturers
• GM Holden
• Ford
• Toyota
• Mitsubishi

excl. Trailers (6000) incl. SUVs, excl. Utes
Source Internet Interviews
7
CONTENT

• Overview Australian Manufacturing Industry
• Australian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Australian Construction Equipment Industry
• Recommendations
• References

8
AROUND 340 000 CARS ARE PRODUCED IN AUSTRALIA
EACH YEAR - Majority are larger cars
Passenger Car Production in Australia
Development the last 5 years

• The Australian car production is concentrated on
  larger cars
• A strong economy led to an increase in 2003-2004,
  but recently there has been a slight drop in
  production due to
• Strong Australian dollar favouring import
• Higher petrol prices favouring smaller imported
  cars
• New free-trade agreements with Thailand and the
  US, making import tariff free from these markets
• General tariffs on imported cars has dropped from
  15 to 10 in 2005 and are scheduled to drop
  from 10 to 5 in 2010.

Vehicles
9
THERE ARE FOUR PASSENGER CAR PRODUCERS IN
AUSTRALIA- Purchase decisions are dominantly
made at country headquarters
Passenger Cars
Source Internet Interviews
10
VICTORIA AND SOUTH AUSTRALIA MAIN HUBS FOR CAR
PRODUCTION

• Adelaide (SA)
• GM Holden
• Mitsubishi

Bold Country head office
round off real production
Source Internet Interviews
11
THE PASSENGER CAR INDUSTRY IS SUPPORTED BY THE
AUSTRALIAN GOVERNMENT
Trends within the Australian passenger car
industry

• 5-7 years ago, the Australian OEMs sourced almost
  exclusively within Australia
• Since then, especially Ford and GM-Holden have
  increased their global sourcing dramatically
• Currently 80 of content are sourced locally,
  this is expected to decrease even further to 55
  over the coming five years
• Toyota and Mitsubishi are still more focused on
  working with local suppliers

Increased global sourcing

• A stronger Australian dollar, free trade
  agreements as well as general reduction of
  tariffs on cars (from 15 to 10 in 2005 and down
  to 5 in 2010) has led to more competition from
  imported cars
• As a response, Australian OEMs have significantly
  increase its export, from 5 bn SEK in 1996 to
  almost 20 bn SEK in 2005

Increased import and export
Strong government support

• To support the domestic industry, the Australian
  automotive producers has received more than 10 bn
  SEK of assistance from the government over the
  past three financial years

Source Internet Interviews
12
CONTENT

• Overview Australian Manufacturing Industry
• Australian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Australian Construction Equipment Industry
• Recommendations
• References

13
STRONG INCREASE IN PRODUCTION OF COMMERCIAL
VEHICLES OVER LAST FIVE YEARS
Commercial Vehicle Production in Australia
Development the last 5 years

• The commercial vehicle production in Australia is
  dominated by light trucks (mainly so called utes)
• Often purchased by smaller business owners due to
  versatility and favorable tax treatment
• A strong economy has led to a substantial
  increase in demand over the last five years for
  these
• Demand for heavy trucks have also increased
  significantly due to the strong economy and high
  levels of business investments
• All local manufacturers of heavy trucks have
  increased production as a result

Vehicles
Source Internet Interviews
14
PURCHASE DECISIONS ARE MADE AT COUNTRY
HEADQUARTERS ALSO FOR COMMERCIAL VEHICLES
MANUFACTURERS
Commercial vehicles
Source Internet Interviews
15
THERE ARE 10 COMMERCIAL VEHICLE MANUFACTURING
PLANTS IN AUSTRALIA-Victoria main hub for
commercial vehicle production

• Melbourne (VIC)
• Ford
• IVECO
• Kenwoth
• Volgren

Bold Country head office
round off real production
Source Internet Interviews
16
COMMERCIAL VEHICLE INDUSTRY IN AUSTRALIA EXPECTED
TO CONTINUE TO BE STRONG
Trends within the Australian commercial vehicle
industry

• Australias demand for freight is predicted to
  double over the coming 15 years
• Road transport expected to account for majority
  of this increase
• The domestic production (as well as import) of
  light and heavy commercial vehicles is expected
  to see stable volumes as a result

High freight transport demand

• The strong trend of global sourcing is affecting
  also the commercial vehicle industry in Australia
  and is significantly reducing local content in
  these vehicles

Increased global sourcing

• Commercial vehicles in Australia are subject to
  high levels of customisation
• The Australian market has unique applications,
  and some of the harshest conditions in the world
  for commercial vehicles

High level of customization
Source Internet Interviews
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CONTENT

• Overview Australian Manufacturing Industry
• Australian Automotive Industry
• Passenger Cars and Commercial Vehicles
• Commercial Vehicles
• Suppliers
• Australian Construction Equipment Industry
• Recommendations
• References

18
THERE ARE ABOUT 200 TIER 1 AND TIER 2 AUTOMOTIVE
SUPPLIERS IN AUSTRALIA
Geographical concentration of automotive
suppliers
Australian automotive suppliers

• There are over 200 companies focusing on
  supplying the automotive industry in Australia
• In addition there are several hundred companies
  that have automotive companies as customers, but
  are not focused on this group
• There is a very high concentration of automotive
  suppliers in Victoria, followed by South
  Australia
• Mirroring the location of the OEMs
• Most companies have less than 100 employees and
  are family owned

Brisbane
Sydney
Perth
Adelaide
Melbourne
Source Internet Interviews
19
80 OF THE PARTS IN AN AUSTRALIAN MADE CAR ARE
MANUFACTURED LOCALLY
T1 SUPPLIERS
Electrical systems
Interior equipment
Propulsion
Body
Running gear

• Cables, bus systems, embedded systems
• Australian Arrow
• Bosch
• SiemensVDO

• Power train, exhaust systems, engine parts
• Automotive Components Limited
• ION Automotive
• Nylex

• Cockpit, seats, dash-board, air conditioning
• Air International Group
• Nylex
• SiemensVDO
• Autoliv

• Body, glass, lighting
• Hella
• Pilkington
• Schefenacker

• Suspension, brakes, axles, steering, tyres
• Air International Group
• Arrowcrest Group
• Bridgestone
• Dana
• FMP Group
• ION Automotive
• PBR Australia

Source FAPM, IBIS industry report
20
AMONG T1 SUPPLIERS MOST PURCHASE DECISIONS ARE
MADE IN AUSTRALIA
Top 15 T1 Suppliers
Source FAPM
21
THE T1 SUPPLIERS ARE LOCATED NEAR THE VEHICLE
OEMs-main hub in Victoria

• Sydney (NSW)
• Dana

• Melbourne (VIC)
• FMP Group
• Australian Arrow
• Bosch
• Automotive Components Ltd
• PBR Australia
• Siemens VDO
• Hella
• Pilkington
• ION Automotive
• Nylex
• Autoliv

• Adelaide (SA)
• Bridgestone
• Air International Group
• Schefenacker
• Arrowcrest Group

Bold Head office
Source FAPM
22
RELATIVELY SMALL NUMBER OF LARGER T2 SUPPLIERS
IN AUSTRALIA
T2 SUPPLIERS
Electrical systems
Interior equipment
Propulsion
Body
Running gear

• Cables, bus systems, embedded systems
• Tyco Electronics
• Forgecast Australia

• Power train, exhaust systems, engines
• Forgecast Australia
• OneSteel
• Orrcon Operations
• Diver Consolidated Industries
• GUD Automotive
• Numetric Manufacturing
• Arrowcrest Group

• Cockpit, seats, dash-board, air conditioning
• Nylex
• Diver Consolidated Industries
• Forgecast Australia
• RMAX

• Body, roof, glass, doors, lighting etc.
• OneSteel
• BlueScope Steel
• Nylex
• Forgecast Australia
• Orrcon Operations
• RMAX
• Diver Consolidated Industries

• Suspension, brakes, axles, steering, tires
• OneSteel
• CMI Operations
• Numetric Manufacturing
• Forgecast Australia
• Diver Consolidated Industries

Source FAPM
23
ALSO AMONG T2 SUPPLIERS ALMOST ALL PURCHASE
DECISIONS ARE MADE IN AUSTRALIA
Top 12 T2 Suppliers
Source FAPM
24
THE T2 SUPPLIERS ARE LOCATED NEAR THE T1
SUPPLIERS- again, main hub is in Victoria
Bold Head office
Source FAPM
25
THE AUSTRALIAN AUTOMOTIVE SUPPLIERS ARE
CHALLENGED BY CONSTANT DEMANDS FOR PRICE
REDUCTIONS FROM THE OEMS
Trends within the Australian automotive supplier
industry

• OEMs are continually pressuring their suppliers
  for lower prices, using global suppliers as
  benchmarks
• 3-8 annual reduction in prices expected for the
  coming two years

Price reductions

• To maintain profitability, most suppliers are
  outsourcing production of basic or semi-processed
  input, mainly overseas to low cost countries
• 80 of suppliers expect to increase outsourcing
  in the coming two years

Outsourcing
Increased focus on RD and Engineering

• To compete with supplier from low cost countries,
  Australian suppliers are increasing its focus on
  value added activities like engineering and RD
  to better meet the demand of the OEMs and add
  additional value to their products

Source Internet Interviews
26
CONTENT

• Overview Australian Manufacturing Industry
• Australian Automotive Industry
• Passenger Cars and Commercial Vehicles
• Commercial Vehicles
• Suppliers
• Australian Construction Equipment Industry
• Recommendations
• References

27
THE AUSTRALIAN PRODUCTION OF MINING AND
CONSTRUCTION MACHINERY EQUIPMENT TOTALS ABOUT SEK
10,2 BILLION
Production Mining and Construction Machinery
Equipment in Australia
billion SEK
Wholesale sales SEK 2,8 billion
Earth engaging eq. SEK 3,8 billion
Services, repairs, adjustments SEK 1,3 billion
Other specialised eq. SEK 1,8 billion
Concrete asphalt mixers SEK 0,64 billion
However, no production of construction equipment
vehicles exist in Australia
Source IBIS industry reports
28
CONTENT

• Overview Australian Manufacturing Industry
• Australian Automotive Industry
• Australian Construction Equipment Industry
• Recommendations
• References

29
RECOMMENDATIONS FOR MAKING BUSINESS WITH THE
AUSTRALIAN AUTOMOTIVE INDUSTRY
Recommendations for making business with the
Australian automotive industry
Australia is an easy country to do business in
English is spoken and the business culture is
very similar to northern Europes
Respect should be have for the geographical
distance and time differenceLocal support and/or
presence in one form or another often a
prerequisite for success
Australia is more hierarchical in its decision
making than Sweden establishing contacts on
the right level is essential
Although purchasing decisions generally are made
locally, global connections with the OEM parent
companies are more or less a prerequisite for
successfully winning business with them in
Australia (e.g. GM in US, Toyota in Japan)
Given Australias geographical isolation,
although local production is no longer necessary
for local success, local engineering and
warehousing capabilities is still seen a major
advantage from the OEM and T1 suppliers
perspective
The geographical isolation also creates a need
for efficient supply chain management to be able
to compete effectively (e.g. understand long
lead time sourcing, operate HUB concepts to
reduce transport costs)
Source Internet Interviews
30
CONTENT

• Overview Australian industry
• Australian Automotive industry
• Recommendations
• References

31
STC AUSTRALIA CAN SUPPORT SWEDISH AUTOMOTIVE
SUPPLIERS IN MANY WAYS
Examples of services STC Australia provides
Market Analysis

• Tailor made market research to provide answers to
  the most important questions the Swedish company
  needs to understand when entering or expanding on
  the Australian market

Aquisition screening

• Screening of the Australian market to identify
  potential acquisition candidates and compiles
  profiles on these. STC also often assists in
  initial negotiations and operational due
  diligence.

Company establishment

• STC handles all the administrative and legal
  requirements for setting-up a local subsidiary,
  including contacts with the authorities. Once the
  company is up and running, STC can also handle
  the ongoing administrative and financial issues,
  as well as provide hands-on business support

32
STC HAS HELPED SEVERAL SWEDISH COMPANIES TO DO
BUSINESS WITH THE AUSTRALIAN AUTOMOTIVE INDUSTRY
Examples of previous STC Australia clients within
the automotive industry