Australia's Car Industry Out Of Gas After Billions In Subsidies That Were 'Always Going To Lead To A Dead End'

Australia has wasted billions of taxpayer dollars to prop up an industry that has been unsustainable for decades, former ACCC chairman Graeme Samuel says.

The car industry is estimated to have received a total of $12 billion in direct subsidies and protections over the past 20 years, including $1.8 billion to Holden in the 11 years to 2012.

Treasury has committed to spending $1 billion on assistance to car manufacturers as part of the existing Automotive Transformation Scheme, with a further $1 billion on the table between 2015 and 2020.

Still, the Government was unable to convince Holden to continue building and assembling cars in Australia, with Holden MD Mike Devereux announcing today that its manufacturing operations in South Australia and Victoria were “no longer viable”.

Samuel, currently a private sector consultant and Monash University professor, told Business Insider Australia today that money the government had spent on car manufacturing subsidies had been wasted.

“What we’ve seen today is the inexorable, inevitable consequence of the globalisation of the economy,” he said. “I think, unfortunately, [money used for subsidies] has been wasted.

“It was a fruitless task that was always going to lead to a dead end … instead of turning around and saying, ‘let’s face the inevitable’ and using the funds to assist Australian workers to retrain and reskill.”

Australian manufacturing costs have risen far above costs in nearby Asian nations in recent decades, prompting successive governments to attempt to pay to keep factories on-shore.

Samuel highlighted the footwear manufacturing industry as an example of how subsidies eventually failed.

He argued that governments had known about the inevitability of an import-heavy car industry for decades but chose to ignore successive Productivity Commission recommendations to cut assistance.

Holden’s Devereux has been lobbying the Coalition Government for more money in the lead up to today’s decision. He would not reveal exactly how much Holden would have needed to keep manufacturing cars on shore.

“We obviously have had detailed conversations with the previous government and the government,” he said. “General Motors has nothing but gratitude and praise for the very strong partnership we’ve had with successive governments over the decades.

“We have looked at every possible option … but no matter which way we apply the numbers, our long-term business case to make and assemble cars in Australia is no longer viable,” he said.

“As painful as it is to say it, building cars in this country is just not sustainable.”

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