Federal Government Abandons Plan To Cut $500 Million Support To Australian Car Industry Photo:

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Trevor Collett | Mar, 10 2015 | 6 Comments

The Federal Government has today confirmed it will back down on plans to abandon the Automotive Transformation Scheme (ATS).

Plans to cut funding to the ATS were announced around last year’s federal budget but have now fallen by the wayside; the government backflip prompted by failing polls, a component sector in crisis and a hostile Federal Senate.

Around $500 million was to be cut from the scheme initially, and the scheme was set to be scrapped altogether in 2017 - four years earlier than originally planned, saving another $400 million.

The government has now tweaked the scheme to potentially make all of the $900 million that was originally set for the scrap heap available to the local car industry.

Reversing the plan to cut $500 million to the scheme is designed to ensure there is no early exit by the three remaining mainstream carmakers, who rely heavily on a large component supply sector. Toyota, Ford and Holden are all set to depart by 2017.

Despite the $500 million support now confirmed, the actual contribution is tied to vehicle numbers produced and will likely fall well short of the maximum allocation.

Holden VF Commodore
Holden VF Commodore

The ABC reports that, with reduced production volumes, as little as $100 million could flow to the industry.

"A decision has been made, primarily to ensure that the industry goes the full distance in terms of its already-slated closure at the end of 2017," Federal Industry Minister Ian Macfarlane said, speaking with ABC Radio.

"Whilst the decision of people like Holden to cease manufacture was a decision they made separate to anything the Government did - and they are their words not ours - we don't want anything to jeopardise the survival of the industry until Holden finally closes."

Opposition Leader Bill Shorten attacked the Government’s plans, calling them a “change of tactics” rather than a change of mind.

The decision is somewhat at odds with last year’s Productivity Commission report into the local car industry, which called for some financial assistance schemes to be scrapped as soon as possible.

Fears of an early exit for some are slowly gaining momentum, fed by slowing sales for some locally-built models.

While Holden’s Commodore was the fourth best-selling car last month and has consistently been at the pointy end of the top-ten since the release of the VF model, the smaller Cruze has not been seen in VFACTS’ top-ten for some time.

Toyota Camry RZ
Toyota Camry RZ

Toyota likewise has a strong-selling model in its midsized Camry sedan, but sales of the equivalently-sized Aurion are down 10 percent for the first two months of 2015 on figures that had already eased significantly last year.

Ford Territory sales are on par with those from last year, but the Falcon range has never been less popular in the badge’s long Australian history despite a refreshed model arriving in showrooms late last year.

And it’s these sales figures that have prompted the reinstatement of finds previously destined for the budget bottom line, provided the three remaining carmakers don’t pull up stumps and depart the scene early.

MORE: Senate Launches Inquiry Into Australian Auto Industry
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Federal Government | Budget | Productivity Commission

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