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Car makers: $30b over 15 years not enough to save industry

About $30 billion of assistance was provided to Australian car makers between 1997 and 2012 but failed to secure the industry's future, a new report has found.

Australia's global share of car manufacturing is just 0.25 per cent and the nation's car makers are struggling to compete with the lower labour costs of developing countries, the Productivity Commission has found.

With 1.1 million new cars sold last year, Australia was ''a very small player in a global context'' where 82 million passenger and commercial vehicles were sold in 2012, the commission's initial car manufacturing review said.

Treasurer Joe Hockey asked the commission to undertake the review, and its inquiry follows the decision by both Ford and Holden to quit local car production in Australia.

Both will be gone by 2017, and Toyota may follow them.

On Friday, the commission released the first of three reports on the auto sector and said the local industry was being hit by factors largely beyond the control of local car and parts makers.


Of the 1.1 million vehicles sold in Australia, nearly 90 per cent were imported, the report said.

It found car assembly plants in the developed world have stalled since 2008's financial meltdown, while growth had boomed in developing countries, especially China, where demand for new cars has exploded.

In China in 2005 almost 6 million cars were sold; last year the figure was more than 19 million.

An increasing amount of the world's cars are now built in countries such as Brazil, China, India, Mexico and Thailand, while countries such as Australia, the US, Britain and Belgium have shed workers since the global financial crisis.

The report finds labour costs in Australia ''relatively high'', although not substantially different to Germany or Japan.

''But [they] are four times or more those of China, Thailand and other developing countries where motor vehicle production is expanding,'' it found.

The production capacity of the world's car factories also far outweighs the consumer demand for new vehicles, with many assembly plants making fewer cars than they are capable of since the global financial crisis.