Australia Autos Report Q1 2013

In November 2012, the Australian auto industry was shocked by the news that leading local auto partsmaker Autodom had been placed into voluntary administration as it sought a drastic restructuring of itsloss-making business. At the same time, Autodom announced the indefinite closure of its two plants inMelbourne and Adelaide, which employ a combined total of 400 workers.

This raised the prospect of immediate production stoppages at the car assembly plants of Ford Australiaand GM Holden, which are both Autodom customers. In response, Ford and GM announced they wouldunderwrite Autodom's debts of US$6.5mn to keep the business going. Without this move, many localmedia analysts were speculating that Ford and GM would have had to suspend production for anything upto 18 months as they sought alternate suppliers.

BMI is not surprised that Autodom has found itself in severe financial difficulties. The company's fixedand raw material costs have been rising rapidly in recent years. Its revenues could not increasecorrespondingly owing to local carmakers cutting their production volumes in half over the past fouryears. Furthermore, the strong Australian dollar, which has been hurting exporters in the auto industry forsome time already, made Autodom's exports uncompetitive, thus sealing the fate of the company.

Even before the news of Autodom's near collapse, the Australian auto industry was presenting a mixedpicture. Domestic production was up 5.7% over the first 10 months of 2012, but Australian consumerscontinue to turn away from locally produced larger sedan models towards cheaper, more fuel-efficientimports. As an indication of the waning popularity of Australian-made vehicles, the Federal Chamber ofAutomotive Industries (FCAI) reported that sales of locally manufactured fell 4.7% over the same period,at just over 115,000 units. Both Ford Australia and GM Holden also announced job losses in November2012

However, overall new car sales remain strong, with the country on course to post a new record figure forthe year. Over the first 10 months of 2012, new car sales were up by 9.7%, at 918,258 units, with marketgrowth being driven by strong demand for sports utility vehicles (SUVs), according to the FCAI. Thereremain upside risks to BMI's current sales forecast of 1,074,232 units for 2012 as a whole.

Toyota Motor's HiLux was Australia's most popular car in October 2012, on 3,403 sales, followed bythe Mazda3 on 3,342 units and long-time favourite the Toyota Corolla on 2,977 units. Toyota remainedthe top-selling brand overall in October, selling 18,584 vehicles, followed by Holden with 10,239 andthen Mazda Motor with 7,738, according to the FCAI.