Light vehicle (LV) sales in Australia have developed steady over the past decade, from 1.04 million in 2007 to 1.16 million in 2016. The trend is expected to continue and analyst company Markit IHS expects close to 1.2 million LVs to be sold annually by 2020.
A change in the economy
When GM closes the doors on its Holden factory in Australia later this year, it brings the curtain down on 70 years of LV production. To replace this volume, the manufacturers need to look globally.
There are several reasons why auto manufactures are pulling production out of Australia: the lack of economies of scale, the change in consumer demand towards smaller and more fuel-efficient vehicles, and the high level of wages. In fact, only German car workers earn more in the global auto industry.
Japanese manufacturers have for a long time seen solid demand in Australia. Japan has been the largest production base for LVs sold in Australia, and Toyota has been the number one player in the country for several years, followed by the increasingly popular Hyundai-Kia.
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North America and Europe to fill the gap
As production ends in Australia, analyst company Markit IHS expects much of the replacement volume to come from North America, with volume more than doubling to 120,000 by 2020. They also expect volume to be sourced from US, Canada and Mexico.
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Increased exports from Europe are also expected. According to Markit HIS, annual volumes will increase from 210,000 last year to 260,000 by 2020, with Volkswagen and Daimler the largest manufacturers.
Looking forward, the Australian LV market is still expected to be solid and show annual sales well above 1.1 million. Perhaps the winners in the Australian auto market are going to be those who foresee the Australian demand and can source the right product to the market.